Money Management

It’s a mistake that could cost you. 

There’s a reason it pays to invest money you don’t need for near-term financial goals or emergencies. When you put money into a savings account, it can earn some interest. When you invest money in a brokerage account, it can grow into a much larger sum over time.

In fact, these days, high-yield savings accounts are paying around 3% interest, which is a vast improvement from a year ago, where you were largely looking at less than 1%. But if you invest in stocks and other assets with a lot of growth potential, you might snag a 9% return or more.

But while a lot of people see the value of investing money, they tend to make a big mistake when things don’t go their way. And that’s something you’ll want to avoid.

Don’t let fear drive you to make poor decisions

While there’s the potential to make a lot of money in the stock market, unfortunately, the opposite can happen. You might put $1,000 into a brokerage account only to have your balance fall to $500 several months later. And that can be disheartening.

The problem, though, is that when market conditions change for the worse, a lot of investors respond by rushing to sell off assets in a panic. And that’s where they can run into trouble.

One big rule of investing is that you don’t lose money until you actually sell off investments at a price that’s lower than what you paid for them. So let’s go back to our example — your $1,000 investment is now only worth $500. If you succumb to fear and liquidate your portfolio, you’ll lock in a $500 loss. If you don’t sell, you won’t lose any money.

What might then happen is that the market slowly improves and the value of your portfolio increases to $700. And a few months after that, it might be worth $1,100, which is $100 more than you had when you started. But if you don’t sit tight in situations like that, you’ll risk losing money when you could instead be gaining money.

Many people, however, do give into fear. In a recent tweet, real estate and investing guru Graham Stephan said, “The problem with investing is that most people buy with excitement and then subsequently sell with panic.” And so if you’re going to invest, it’s important to remind yourself not to let nerves inform your decisions.

Take a long-term approach

One reason so many investors end up selling in a panic is that they’re not thinking long term. If your portfolio value shrinks from $1,000 to $500 in a few months’ time, you might rush to liquidate your assets and stop the bleeding. But if you remind yourself in that situation that you’re in it for the long haul, then you can avoid losing money at all. And better yet, you’ll be less likely to panic, because you’ll realize there’s plenty of time for your portfolio to recover.

All told, it’s a good idea to take a level-headed approach to investing. And that means not selling the moment things don’t go your way. If you pledge not to act out of fear, you can avoid losses and set yourself up for long-term success.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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 

The popular Ford F-150 series makes a straightforward case study. 

Electric cars don’t come cheap. At least, not the popular ones like the Tesla Models 3 and Y, or the Ford F-150 Lightning. You can shell out less than $20,000 for a cheap electric vehicle (EV) with low mileage, but most folks like being able to drive more than 100 miles before filling the tank (or charging the battery).

So we compared popular gas cars to popular, high-range electric vehicles. Electric cars are generally more expensive to purchase than their gas counterparts.

For example, a gas-powered 2022 Ford F150 Pickup 2WD costs about $31,000. An all-electric 2022 Ford F-150 Lightning 4WD Automatic (A1) costs about $40,000 to purchase. Not cheap.

However, electric cars are generally cheaper to operate. That’s because EVs demand cheaper fuel and less maintenance than gas cars.

So, what’s the better buy? Electric or gasoline?

It depends. How long do you intend to keep the car? The longer you drive it, the more time your EV has to lower your total cost of ownership. Even so, a $60,000+ Model Y might never break even with a $20,000 Toyota Corolla.

However, some EVs make up for their price premiums by being cheaper to drive. In that way, electric cars can pay for themselves.

Ford F-150 Pickup vs. Ford F-150 Lightning

The Ford F-series is one of the bestselling series among American drivers. The lineup includes the gas-powered F-150 and the all-electric F-150 Lightning.

Over three years, the Ford F-150 Lightning costs about $3,000 less to own and operate than the traditional F-150, according to a rough analysis by Car and Driver. That doesn’t consider a potential $7,500 EV tax credit, which would save drivers thousands more.

Estimates like these are rough. Costs vary by state, annual mileage, and tax credit status. It’s especially tricky to compare prices across brands — comparing a Toyota to a Ford isn’t straightforward.

The best way to compare cars may be to use the US Department of Energy (DoE) cost calculator. I directly compared F-150 costs based on how much I drive, my home state, and other things. It took me less than five minutes to figure it out.

Here’s what I learned: My Ford F-150 Lightning would pay for its premium without the EV tax credit in about seven years. My truck would pay for itself in the first two or three years with the credit. (I’ll remember that the next time I go car shopping!)

Insurance prices matter, too. The best car insurance companies offer the most bang for your buck.

So what?

If you’re the type to swap vehicles every few years, owning traditional gas versions of comparable cars is probably cheaper. But car owners who like to hang onto a car for a long time may save by purchasing electric vehicles that pay for themselves.

Here are two things to consider when comparing electric to gas-powered vehicles:

Does the electric car qualify for an EV tax credit?How long do I plan on owning the car?

If the answers to these questions are “yes” and “longer than five years,” absolutely compare prices on the U.S. Department of Energy website. You could end up saving thousands of dollars.

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 

Are you in a similar boat? 

It’s natural to feel down about the state of your finances every so often. Negative feelings can especially arise toward the end of a calendar year when you’ve realized you haven’t achieved the financial goals you set 12 months ago.

Meanwhile, if you feel like you’re worse off financially right now than you were a year ago, you’re in good company. A good 29% of Americans feel that way, according to a recent survey by Allianz Life.

And the worst part? The reasons for your financial insecurity may be completely outside your control. Here are a couple of factors that explain why Americans may be so down on their finances.

1. Inflation

Inflation has been battering consumers since mid-2021. If you’ve spent the past 12 months adding to a credit card balance in an effort to feed your family and cover your essential bills, then it’s easy to see why you might consider yourself worse off financially now than a year ago.

Now the good news is that inflation levels are starting to cool. In fact, the Consumer Price Index, which measures changes in the cost of consumer goods, has been declining steadily since the summertime. But we might still be in for a number of months of much higher than average inflation, which means consumers may not get real relief for a while.

If you want to stop adding to your debt pile, it may be time to consider boosting your income with a second job. That way, you can tackle your bills more easily and maybe even pay down the debt you’ve recently racked up. Thankfully, despite recession warnings, the gig economy is booming, so there’s plenty of opportunity to find work to do on top of your main job.

2. An underperforming stock market

The stock market has had an unquestionably tough year, and a lot of people are now looking at lower IRA and brokerage account balances than they were at the end of 2021. You may be one of them, but in that case, do try to remember that investing is a marathon, not a sprint.

If you’re not anywhere close to retirement and you weren’t planning to cash out your investments anytime soon, try not to let a lower portfolio balance mess with your head. There’s a good chance that in time, the market will recover.

In fact, now’s actually a pretty good time to invest if you have any extra money to spare. That may not be the case due to inflation, but if you happen to be sitting on some free cash, putting it into the market while stocks are down could be a savvy move.

It’s easy to see why so many people have a negative financial outlook these days and feel worse off than they did 12 months ago. But do try to remember that in time, inflation should ease and the stock market should regain the value it shed this year. If you can stay positive, it might be easier to navigate these challenging times.

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 

A spending freeze can save you money, but that’s not all. 

When you spend no disposable income, it’s called a spending freeze. How long a freeze lasts is up to you. To be clear, you would still pay your monthly financial obligations, like your regular bills, but take a break from buying anything else during that period. What if you freeze spending for one week out of each month? Here’s a look at how much you could get ahead by trying this.

Just groceries

According to the latest U.S. Department of Agriculture numbers, a “thrifty” family of four spends $223 per week on groceries. Your number may be higher or lower than that, but let’s use this number as a baseline.

While this fact alone does not indicate how much you might save by spending no money one week a month, it does give us a good place to start.

Buying in bulk

Naturally, you’re still going to need to eat during a spending freeze week, and that means planning ahead. In addition to creating a menu of meals you plan to enjoy, you’ll need to shop for the supplies to make those meals.

Let’s say you normally shop weekly but plan to go on a spending freeze the third week of each month. That means you’ll need to pick up cooking and baking supplies during your first or second week shopping trip.

Now, here’s where you could save money. By creating a menu based on what’s on sale in your area, you can buy in bulk. And according to some estimates, buying in bulk saves an average of 20% (more on some products).

If you typically spend $223 per week on groceries, that amounts to an average savings of $45 during the freeze week, or a total of $2,340 per year.

Meal planning

Meal planning is essential if you’re going to refrain from spending for seven entire days each month. And one benefit of meal planning is the amount of money it saves you. The better you plan for each meal, the less food you’re likely to waste.

For example, according to the nonprofit organization Feeding America, the average American family of four tosses $1,600 a year in produce alone. That’s $1,600 that can be tucked away in a college savings plan or used to fortify a rainy day fund.

If you’re tossing $1,600 per year in produce, that’s $133 per month. Now, let’s say you use the groceries you’ve purchased for at least one week of the month. That amounts to $33 per month, or $396 per year.

Miscellaneous expenses

Research from The Ascent notes that according to the Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics (BLS), the average American household spends the following on these miscellaneous expenses each month:

Entertainment $297Restaurants $253Apparel and services $146Personal care $64Alcoholic beverages $46Tobacco/smoking products $28Reading $10Other miscellaneous $82

That’s a total of $926 per month. A spending freeze for a single week would put an extra $231 in your bank account, or $2,772 per year.

Impulse buys

Most of us are guilty of the occasional impulse buy. We’re standing in a checkout line and see something we suddenly can’t live without or head to the store to buy a new top and end up with a new pair of shoes too. The average American spends about $314 per month on impulse purchases, according to a Slickdeals study.

Not making impulse buys one week each month would save you $79, or $948 each year.

A mindful reset

Let’s say you try a one-week spending freeze and find that it’s not for you. That’s okay. One of the best things that can come out of an experiment like this is a more mindful approach to spending. Once you’ve tried to cut it from your life (even for a short time), you’re far more likely to recognize those moments when you’re reaching for a product you don’t need or buying an item that you’re likely to end up tossing in the trash.

If a week seems like a stretch, why not try a one-day spending freeze and see what you think?

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