Money Management

It’s a move you might sorely regret. 

These days, the U.S. labor market is in pretty good shape. Unemployment is low on a national level, and many companies are still hiring.

But that doesn’t mean some people aren’t closing out 2022 with a pink slip in hand. In recent weeks, a number of large tech companies have implemented layoffs. And some companies may have downsized their staff due to recession fears.

Of course, getting laid off isn’t exactly the best way to kick off the holidays. And if you recently lost a job, you may be doing your best to put on a happy face and push negative thoughts aside to celebrate the holidays in full.

You may also be inclined to use some of your severance pay to purchase holiday gifts. But that’s a mistake you might regret.

It’s time to conserve funds

Some people who get laid off are entitled to severance pay. And the amount of that can vary from one employer to another. It can also vary based on the number of years you spent working for your employer.

A recent survey by Yellow Octopus found that almost three out of four recently laid-off U.S. workers are using their severance pay to buy gifts this holiday season. And you may be inclined to do the same. But before you do, you’ll need to make sure that’s something you can truly afford to do.

If you don’t have a lot of money in your savings account, then you might really need your severance pay to cover your essential living costs while you look for work. And so if, for example, you received a lump sum of $5,000 in severance, and you normally spend $2,500 a month on living costs, you should probably hold off on using that cash to purchase gifts if your savings account is empty.

On the other hand, let’s say you have a decent-sized emergency fund to fall back on, and you happened to receive a severance package that includes compensation for six months of wages. That’s pretty generous. If that’s your situation, then sure — go ahead and spend a few hundred dollars on the last-minute holiday gifts you need to buy. But otherwise, be really careful with severance pay so you don’t wind up falling behind on bills in the coming months.

Other ways to celebrate

It’s easy to see why you may be inclined to use severance funds for holiday gift purposes — you don’t want to disappoint the important people in your life. But think about it this way: Would you rather give your kids fewer holiday gifts and keep the lights on this winter? Chances are, that’s an easy decision. So instead of splurging on gifts, find a family movie to watch, get into cozy pajamas, and establish new traditions that are more budget-friendly.

Ideally, you’ll be able to find yourself a new job once 2023 kicks off and hiring is back in full swing. But until you’re gainfully employed again, be very careful with how you spend your money — and resist the urge to go all out at the last minute for the holidays when you might need your limited funds to put food on the table and pay your rent or mortgage.

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Could this app help you save money too? 

I am really hesitant to install apps or browser extensions on my computer — even money-saving apps. Since I write for a living and my laptop is my livelihood, I don’t want to take a chance on slowing my machine down or, worse, getting a virus or causing some other problems with the system that could affect my bank account by impairing my ability to work.

That’s why it took me a really long time to take action and install a tool called Honey. Although everything I read about it seemed great, I didn’t want to break my longstanding rule of not using browser extensions.

Finally, though, I recently decided to take a chance and just see how it worked for me. And I’m very glad I did, because it saved me $31 the very next day — and it’s continued to save me money ever since.

How does Honey work?

Honey is a really simple extension to use.

After I added it to my browser, it started providing me with information on the price history of items I was looking at online and showing me if there were other stores that had the item I was looking for at a cheaper price. This way, I was able to see if the website I was on had the product at the lowest cost or if I could save by buying elsewhere.

Not only does Honey advise you where to shop, but it also inputs coupon codes for you. When I was ready to check out for my online purchase, it auto-filled the promo code box with several possible discount codes to see which ones, if any, would apply to reduce my cost.

The extension also prompted me to sign up for cash back, which I could earn by shopping with participating merchants and redeem through PayPal. I didn’t have to do anything special to get this cash back, and it would be on top of the credit card rewards my card issuer pays me for using my card to make purchases.

How did the Honey app save me money immediately?

After I installed the Honey app, I forgot about it and just went about my business — until I shopped for some holiday chocolates at Russell Stover. Once I added some cases of caramel ornaments into my cart and went to check out, the Honey extension did its thing. And, all of a sudden, my $75 price for several cases dropped dramatically and I was paying $31 less than anticipated.

I happily checked out with my bargain chocolate and am now enjoying several cases of caramel ornaments that taste even better due to the deal I got on them. And, as if that wasn’t enough, Honey also awarded me cash back for my purchase and in just over a week of shopping, I’ve already earned $1.77 in cash rewards.

I’ll be keeping the Honey extension installed on my computer forever after this, and I even added it to my phone as well so I can save money on purchases I make while I’m on the go.

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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 PayPal. The Motley Fool has a disclosure policy.

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Could you be putting your financial security at risk? 

Dave Ramsey is a financial expert who has offered advice on a wide range of issues ranging from what type of investment account you should use to how much house you can afford.

While not all of Ramsey’s advice is worth following, he does have an important warning you should heed about a money mistake that could have devastating consequences. Here’s what it is.

Are you at risk of financial ruin?

According to the Ramsey Solutions blog, one of the biggest money mistakes you could make is to spend your cash without deciding in advance what you’ll do with it.

“You won’t get ahead if you don’t have a plan for your money,” Ramsey said. “Instead, you’ll find yourself wondering where your money went at the end of every month! That’s not financial independence — that’s a recipe for financial disaster.”

Ramsey goes on to explain that “Financial freedom is impossible if you’re not living on a budget” because “you’ve got to tell your money where to go, or you’ll end up wondering where it went.”

He urges using a zero-based budget in which you allocate every dollar to a specific purpose and then tracking your spending to make sure you’re using your money according to your pre-set plan. He also suggests making your budget every single month to ensure you’re addressing the upcoming expenses you face.

Ramsey believes this is important regardless of how much you make, because otherwise it’s far too easy to spend your money on things that don’t actually help you improve your financial situation in the long run.

Should you listen to Ramsey’s advice?

While budgeting may not be your idea of a good time, the reality is that Ramsey is pretty much spot-on with his warning that spending your money with no plan usually doesn’t lead to prosperity.

Even if you earn a lot, it’s far too easy to give into impulse buys or to spend on fun purchases and not set aside enough for the future. You may not even realize how much money you “waste” if you don’t know where your cash is going, and you may not get as much value out of your hard-earned dollars if you don’t allocate them with purpose.

You don’t necessarily have to follow Ramsey’s preferred budgeting approach and create a rigid list of all of your spending needs to allocate each dollar you earn though — especially if you find this process to be tedious and think making up a detailed budget every month sounds like a nightmare.

In fact, trying to be so rigid about your budget could make it more likely you give up and just keep spending without a plan since creating a detailed budget isn’t fun for most people. While you can try out this technique, if it doesn’t work for you, don’t be afraid to consider alternatives like a simplified 50/30/20 budget. That type of budget just requires you to save 20%, keep your fixed expenses to 50%, and then spend the remaining 30% on discretionary costs.

While your budgeting approach may differ from Ramsey’s recommendation, you should heed his advice and make some kind of budget or plan. Otherwise, as he said, you could be on the fast-track to financial disaster.

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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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These moves could be your ticket to slashing your spending. 

Are you spending too much money on a regular basis? If you’re constantly running up against your credit card limit, and you frequently have to carry a balance forward into the following month, then it may be time to reevaluate your spending habits and try to cut back. And the start of a new year is a great time to implement changes that help you curb your spending and boost your savings. Here are some moves you can make to spend less in the course of 2023.

1. Stick to a budget

For many people, a budget can be a huge wake-up call. Once you’re on a budget, you may have an easier time identifying areas where you can spend less. Or, you may be motivated to slash some expense categories altogether.

If you’ve never followed a budget before, you should know that there are different budgeting apps you can use to make the process easy. Play around with a few until you find the perfect one.

2. Shop with cash instead of credit cards

When you’re tempted to buy something out of the blue and have a credit card sitting there in your wallet, completing that purchase doesn’t tend to be much of a challenge. But one way to take impulse buys off the table — and reduce your spending on the whole — is to get into the habit of shopping only with cash.

Of course, to pull this off, you’ll need to make shopping lists ahead of time and estimate the cost of your purchases so you bring enough money with you. But if you’re willing to make that effort, you may find that you end up spending much less at stores.

3. Ban the practice of shopping out of boredom

Many people spend their evening hours browsing the internet when they’re trying to wind down, or when they don’t have anything better to do. But shopping online to fill up free time is a practice that could end up costing you a lot of money.

A better bet? Don’t do it. Instead, find other ways to occupy your time. That could involve getting into a new podcast, streaming service, or novel you borrow from your local library.

4. Find a savings partner to keep you accountable

Spending money can bring you joy if you’re buying things you like. And so you may need extra motivation to cut back on spending. That’s why it pays to partner up with someone who has similar goals. If you enlist the help of an accountability buddy, you can work to keep each other in check.

5. Take the option to spend a chunk of your paycheck off the table

The less money that lands in your checking account, the less you’ll be able to spend. You can always set up an automatic transfer from your checking account to your savings to try to limit your spending, but let’s face it — banks make it easy to transfer that money right back if you’re really tempted to use it.

Instead of setting up an automatic transfer to a regular savings account, arrange for money to land in a 401(k) plan or IRA each month. These plans effectively force you to leave your savings alone by penalizing you for early withdrawals. If you want to limit the amount you spend, locking your money up in an account you can’t touch without serious repercussions is a good bet.

Cutting back on spending isn’t an easy thing to do. But these moves could help you achieve that goal — and close out 2023 feeling really proud of 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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