Money Management

Looking for more ways to stretch your budget? The wheels are already turning, if you can just figure out how to take advantage of them. Here’s how. [[{“value”:”

It’s been several weeks since the Federal Reserve Board met and cut the federal funds rate for the first time in over four years — and it’s expected to do it again soon, if economists are to be believed.

All of this rate-cutting is a huge bummer for anyone who has been reaping the benefits of high interest rates from ultra-safe investment vehicles like certificates of deposit or high-yield savings accounts, but it’s not all bad.

After all, the Fed never drops rates all at once, and instead edges them downward relatively slowly, so the chance that you may be able to balance both decent investment returns with lower interest rates is possible. But we’re here to talk about how rate cuts can save you money right now.

How does the federal interest rate cut help put more money in your pocket?

Like everyone else, you’ve probably been struggling with inflation well overtaking income over the last five years, and may have even gone to great lengths to save money. You can take advantage of cash back apps like the ones on this list, or clip coupons, buy in bulk, and try to not spend more than you have to in order to stay afloat.

But as the federal funds rate drops, other interest rates tend to follow. It may take a little longer for banks to respond by lowering their commercial loan rates, but you can reasonably expect they will fall.

How can you save money with lower interest rates?

If you have only fixed-interest loans, the change in interest rates won’t affect you automatically. Common products with fixed interest include mortgages, car loans, and personal loans.

However, if you have variable-interest loans, like credit cards or credit lines, the odds are that the wheels are already in motion for those rates to begin to drop. For example, the last time rates dropped from where they’ve been was in July 2007, when they fell from 5.26% to 5.02%, and continued falling. By November 2007, they were at 4.49%.

Now, I’m not saying that exact situation is going to happen now, but let’s look at what effect the past drop had on variable-interest credit rates. In August 2007, the average credit card rate was 15.24%, when the federal funds rate was 5.02%. In November 2007, the average credit card rate was 14.38%, when the federal funds rate was 4.49%.

They don’t fall together perfectly, but they do fall.

Ways to save money with lower interest rates

Variable-interest loans automatically adjust their rate as time goes by, but you can put more money back into your pocket when these federal interest rate cuts happen in other ways, too. Here are the biggest ones to consider.

1. Refinance your mortgage

Refinancing your mortgage can save you tens of thousands of dollars in interest over time — if not more — if timed correctly. You’ll have to do the math for your own situation, but anyone who bought a home in the fall of 2023, for example, may be able to cut their interest rates as much as a full percentage point right now, since the average 30-year fixed-rate mortgage peaked at 7.79% in October 2023, and is at 6.54% as of Oct. 29, 2024.

2. Get a new car loan

Did you buy your car when rates were higher and now your payment is killing you? Now is the time to refinance. Check with your lender to see what’s possible in your situation. Refinancing your loan may be able to put a lot of money back in your pocket as interest rates fall.

3. Take out a personal loan

With rates trending downward, another great option for tackling high fixed-interest-rate loans is to simply take out a fixed-interest personal loan to pay them off. Whether it’s an older personal loan that’s at a higher rate, an auto loan that can’t be refinanced, or even a variable-rate product like a credit card, you may be able to save a ton of money by moving your debt into a cheaper fixed-rate product.

Click here for our list of the best personal loans — can one of them help you consolidate your higher-interest debt?

Beat inflation with lower interest rate loans

If you’ve been using our recommended budgeting apps and you’re still having trouble making ends meet, a reduction in overall interest rates may be just what you need. This federal interest rate cut should allow you to refinance your higher cost debt into cheaper debt, which is easier to pay off more quickly and accumulates less interest over time.

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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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Are CDs truly a risk-free savings option? The answer is complicated. Read on to see why. [[{“value”:”

There’s a reason CDs have been such a popular choice for savers this year. For much of the year, CDs were paying 5% or even a bit more. And while CD rates are now down a bit following the Federal Reserve’s mid-September rate cut, many CDs are still paying close to 5%.

So all told, it’s still possible to get a great deal, especially if you shop around. Click here for a list of the top CD rates today.

But if you’re going to open a CD, you need to understand the risk you’re taking on. You might assume CDs are a risk-free savings option. But that doesn’t tell the whole story. Here’s why CDs aren’t as risk-free as you’d assume.

1. There’s the risk of an early withdrawal penalty

It’s common for banks to charge an early withdrawal penalty for removing money from a CD before it matures. The good news is that your bank can’t just spring a penalty on you. It has to disclose what your penalty will be when you open your CD.

But let’s say you’re putting $10,000 into a 12-month, 4.5% CD and the penalty for an early withdrawal is three months of interest. That means you’re at risk of losing $112.50.

And while you might think you won’t end up having to take an early withdrawal, you never know what curveball life might throw at you. You may want to stick to a top-rated high-yield savings account, even if it means earning a bit less interest on your money and not having a guaranteed interest rate like a CD gives you.

2. You could technically lose money if you choose the wrong bank or deposit too much

With a CD, you generally don’t risk losing money if you don’t take an early withdrawal. But that assumes you choose the right bank and don’t make too large a deposit.

If you bank somewhere that’s not FDIC-insured, your deposit isn’t protected, so check to make sure your bank is an FDIC member. You should be able to find documentation somewhere on its website.

Also, keep your deposit to under $250,000, since that’s where FDIC protection maxes out. For most of us, that’s not a problem. But you may be parking a large sum of cash in a CD with the intent to buy a house in a year or two, so be mindful of that limit.

And remember, if you deposit $250,000 into a CD and it starts earning interest, you’ll be over that limit, so be careful. However, that $250,000 limit applies to a single account holder. If you have another account holder on your CD, your FDIC insurance limit doubles to $500,000.

3. You could miss out on better returns in a stock portfolio

CDs are still paying generously today, even if those 5% rates are no longer widely available. But consider this: Over the past 50 years, the S&P 500 has rewarded investors with an average annual 10% return.

When you invest in stocks, you run the risk of losing money. With a CD, you won’t lose a dime as long as your account balance doesn’t exceed $250,000, you bank somewhere that’s FDIC-insured, and you don’t withdraw your money early.

But with a CD, you take on a less obvious risk — losing out on a higher return over time and stunting your financial goals. Before you put a large sum of money into a CD, consider how much better you can do with a stock portfolio. And remember, too, that investing over a long period helps reduce the risk of owning stocks.

As an example, if you have $10,000 to put into a CD, buying stocks instead and earning 10% on that money over 20 years leaves you with $67,275. Even if you were to earn 4.5% on your $10,000 in CDs over the next 20 years, which is highly unlikely, you’re looking at $24,117.

But that extra $43,000 and change might do a world of good for your long-term finances. So that’s not money you should be quick to give up.

CDs technically have the potential to be a risk-free investment. But clearly, there are some hidden risks involved that may end up applying to you. It’s important to know about them, so you can make a more informed decision about opening a CD.

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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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You may not think you need pet insurance. Read on for my story of how pet insurance could have saved me, and what I’m doing now. [[{“value”:”

As a dog owner, this year was rough. I said goodbye to two of my seniors after a valiant battle with the ravages of time. It was a fight I knew I’d never win, but also one that I went into without the armor I really needed — namely, pet insurance.

I didn’t have coverage because when they were young, it felt like pet insurance wasn’t the right choice, and when they were older and I looked into it, they’d already developed so many chronic conditions that it seemed like it wasn’t really worth covering the what-ifs that were unlikely to occur at that point.

So, last winter, when we hit a really rough patch with their health, it nearly broke me. Both financially and emotionally, if we’re being honest here.

What it costs to skip pet insurance

All told, Paul and Jasmine cost me something in the neighborhood of $5,000 in their last year on this Earth. Between diagnostics, medications, special diets, more diagnostics, new issues, and their eventual euthanasia and cremations, the bills just never stopped.

But if I had gotten them pet insurance before Jasmine’s cancer diagnosis in 2022 or Paul’s many heart issues in 2023, it could have been a lot different. I re-quoted those insurance premium prices with my carrier, Spot Pet Insurance, for this story, and for $5,000 worth of yearly coverage each, with a $250 deductible and a 80% reimbursement, I’d have been out $115 for Jasmine and $85 for Paul each month.

To put that differently, with even a less than top tier plan, it would have taken two years to spend enough on insurance to even come close to what I spent in cash during their last six months. I would have been miles and miles ahead.

If you’ve been considering pet insurance, check out our curated list of pet insurance providers, including Spot, that provide great coverage and service for pet lovers like all of us.

What I’m doing now with my pets’ insurance coverage

Since having that horrific experience, I’ve somehow managed to be owned by two little boy kittens by the names of Melvin and Oscar. They’re in great health, they’re both about five months old, and they’ve got pet insurance. And they won’t ever go without it, because I learned the hard way that this is nothing to mess around with.

I was very skeptical about the whole process, and my brain kept telling me that if I was paying for everything upfront, there was no point in waiting for a reimbursement, because I’d never be able to pay for the really bad stuff out of pocket anyway. But that’s never how it really goes.

Jasmine and Paul’s illnesses nearly nickel-and-dimed my finances to death. I’ve never worked so much as I did in those cancer years of Jasmine’s. And I am not going to go through all of that again with the boy kittens, however long they live.

So far, my Spot Pet Insurance plan has paid remarkably well, even if it took a little back and forth with its phone reps to figure out how to get the best results from my claims. It’s always kind of nice to see that money go back into my account, especially right now when the boys are going through their baby shots and neuter surgeries and microchips.

I opted for additional coverage that will help pay for wellness exams, simply to make their medical costs more of a flat monthly expense, rather than an ongoing rollercoaster, and it’s great how one will go in for shots and I’ll get my refund from Spot just in time for the other to do his own round.

Pet insurance can save your life or the life of someone you love

There’s no joking around about the amount of stress having an end-of-life pet can cause, especially when it’s something as slow moving as Jasmine’s cancer was. Every day is an absolute pressure cooker. Every day is medications, vitals checks, so many calls to the vet, and concerns about how to pay for all of this care.

In fact, there was a point where I almost had to take out a personal loan. It’s a good thing we actually maintain a list of personal loans for paying off big surprise expenses. This job can be pretty handy at times.

If fellow pet owners take nothing else from my experience this year, though, let it be this: Get the pet insurance. Even if it doesn’t seem like it’s worth it. Get it while they’re young and healthy, get it before you hit something that will be forever pre-existing, and pay for it religiously.

It may save their lives, and it will absolutely save your sanity when you’re in the thick of it.

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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 easy to understand why people might share a Costco membership. However, take a look at why it may not be a money-saving move. [[{“value”:”

As of today, a Costco membership costs either $65 or $130 annually, depending on the membership level. While it’s not a fortune, it’s not nothing, and sharing a membership with someone else may seem like the best use of your resources.

If you split the cost of a membership with another person or occasionally allow someone to use your membership card, there’s no judgment from us. We understand how tricky sticking with a household budget can be, even if you’re using one of the best budgeting apps. However, we thought it might be interesting to take a closer look at whether sharing equals saving money.

Someone’s missing out

Let’s say you shop in-store with your best friend’s Costco card. Sure, you have access to the products on the shelf, but you don’t have access to all the benefits available to the person whose name is on the card. Here’s a little of what you’re missing:

Travel discountsTire discountsHome, auto, and pet insuranceSpecial couponsCostco Membership Prescription Program discountsPhoto print discounts, including photo books, calendars, cards, posters, and moreBottled water deliveryVehicle purchase discount

If the cardholder is an Executive member, they can earn 2% on all eligible purchases, up to $1,250 annually. A member who regularly shops at Costco can easily earn enough back to pay for their annual membership — and more.

Want to maximize your Costco rewards? Click here to check out a credit card we recommend for Costco shoppers.

In other words, you may be able to purchase a bag of apples or 25 pounds of rice, but you’re overlooking a wide range of other discounts that could benefit your bottom line when you use someone else’s membership card. These discounts and perks could be worth getting a membership of your own.

The risk could cost someone their membership

If you’re a Costco member who allows others to use your membership to shop, the cost may be higher than expected. Recently, Costco implemented new rules regarding identification. Members must now stop at the entry to scan their cards, and cashiers may ask to see a picture ID at checkout.

Costco has long made it clear that memberships are non-transferable, meaning members aren’t supposed to give their cards to someone else to use. You’re permitted to bring up to two guests to the store during each visit as long as you’re the one purchasing the items.

And if you’re the primary member, you can assign your household card to one other person who lives in your home. However, sharing your card with someone else is grounds for Costco to revoke your membership and refund your membership fee.

If you count on Costco to keep your household budget on track, consider what losing your membership might mean for your finances. In most instances, sharing is a good thing. However, you may not find that to be true if you’re still sharing a Costco card with someone else.

Top credit card to use at Costco (and everywhere else!)

We love versatile credit cards that offer huge rewards everywhere, including Costco! This card is a standout among America’s favorite credit cards because it offers perhaps the easiest $200 cash bonus you could ever earn and an unlimited 2% cash rewards on purchases, even when you shop at Costco.

Add on the competitive 0% interest period and it’s no wonder we awarded this card Best No Annual Fee Credit Card.

Click here to read our full review for free and apply before the $200 welcome bonus offer ends!

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.Dana George has positions in Apple. The Motley Fool has positions in and recommends Apple and Costco Wholesale. The Motley Fool has a disclosure policy.

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You might be surprised at how much your money could grow without too much effort. Check out what you need to know. [[{“value”:”

Many people are hesitant to invest in stocks or stock index funds in a brokerage account simply because they see it as a risky thing to do with money. And if we’re talking about a period of a few months or even a few years, there’s a solid argument to be made that it’s true.

On the other hand, you might be surprised at how predictable stock market performance can be over multi-decade periods of time. While there’s no way to know exactly what will happen over the next 10, 20, or 30 years, we can certainly use history as a guide. With that in mind, here’s how much a $10,000 investment in a basic S&P 500 index fund could grow by the middle of this century.

If you’re looking to get started investing, click here for our updated list of the top-rated brokers for beginners right now.

Historic stock performance

The S&P 500 index is widely considered to be the best overall gauge of how the U.S. stock market is performing. And in short periods, it can be rather volatile. Since 1965, the S&P 500 has gained as much as 37.6% or lost as much as 37% in any single year. In the 2007–09 Great Recession, the index lost more than 50% of its value before bottoming.

However, over the long run, the S&P 500’s returns are surprisingly predictable. The exact performance depends on the particular time period you’re looking at, but in most multi-decade periods, the S&P 500 has returned about 10% on an annualized basis. Using the “since 1965” period as an example, the S&P 500 has returned an average of 10.2% per year from 1965 through the end of 2023.

How much could $10,000 grow by 2050?

For simplicity, let’s say that the S&P 500 produced an annualized return of 10% for the next few decades. Of course, in some years, the returns will be greater, and in some they will be (much) lower, but we’re talking about the long-term average.

Since it’s almost 2025, we’ll use a period of 25 years until 2050. So, if we take a $10,000 investment and compound it at a 10% annualized return over a 25-year timeframe, you would end up with more than $108,000.

Again, this is simply based on historical performance, which doesn’t guarantee future results. In other words, the S&P 500’s actual rate of return between now and 2025 isn’t likely to be exactly 10% when annualized. But the point is that over long periods, the stock market has the ability to turn relatively small investments into much larger sums of money.

Take it a step further

Of course, this is what could happen if you made a one-time $10,000 investment in an S&P 500 index fund through a broker or investment app and simply left it alone.

Now imagine if you did this but also added a few thousand dollars each year to your investment and let it compound over time. If you invested $10,000 in an S&P 500 index fund today and added $500 per month to your investment until 2050, you’d end up with a nearly $700,000 nest egg based on a 10% annualized rate of return.

If you’ve ever heard someone say that over time, the stock market outperforms all other major asset classes, it’s true. It isn’t likely to grow in a straight line over time, but if you invest consistently and allow a long period of time for your investments to grow, it’s extremely likely that you’ll end up with much more money than you started with.

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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.Matt Frankel 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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Car expenses are on the rise. Read on to find out how to save on a major recurring expense. [[{“value”:”

More than five years ago, my family of four downsized from two cars to just one. I initially expected us to have a single vehicle for about a year, but it turned into a much longer experiment that has saved us thousands of dollars in car payments, insurance, and maintenance.

Here’s how much we’ve saved compared to the average cost of buying a new car or keeping my old one — and how you can save on vehicle expenses without getting rid of your car.

I saved about $45,000 compared to buying a new car

My family owns one car right now, which we paid off a couple of years ago, so our vehicle costs are pretty minimal, mostly involving paying for gas and car insurance.

However, had we decided to buy a new car five years ago instead of eliminating one from our budget, I wanted to see how much it would have cost us. To calculate all of this, let’s look at the average cost of a new car in 2020, which was $38,960, and the average annual percentage rate (APR) for a car loan at that time (about 5%).

Buying an average-priced new car over the past five years would have cost me nearly $45,000! While I wasn’t in the market for a car at the time, this shows just how much money I would have had to work into my budget over a five-period, which would have likely caused me some financial stress.

Making a larger down payment when buying a car can lower your monthly payments. Click here for high-yield savings accounts that can help you earn the most while you save up.

I saved $17,665 compared to keeping my old car

Even if I had kept my old car, which was paid off, I still saved tons of money by getting rid of it. It was older, so I would have been way more likely to pay for maintenance, which costs about $400 annually ($2,000 over five years) for a Honda Civic, according to RepairPal.

Additionally, I would have had to pay for car insurance over the past five years, which averages about $3,133 annually in my state, or $15,665 over five years. That means if I kept my old car and just paid for insurance and average annual maintenance, I’m still ahead by $17,665!

Want to pay less for car insurance? Go here to see our list of cheap car insurance companies.

How to save money no matter how many cars you own

Car insurance costs have risen 22% this year, causing a strain on many people’s budgets. Luckily, you can do a few things to help lower that cost (that don’t involve getting rid of your car). Here are a few options.

1. Increase your deductible

Increasing your deductible means you’ll pay more money out of pocket if you’re in an accident, but it will also lower your monthly premium costs. Increasing your deductible to $1,000 could save you up to 40% on your collision and comprehensive coverage premiums.

2. Bundle your home and auto insurance

As the commercials suggest, you can save money by bundling home or renters insurance with your car insurance. While it varies by provider, you could save up to 25% by bundling with some companies.

3. Comparison shop

Not all insurance providers will charge you the same premiums. That’s why it pays to compare insurance quotes to find the best car insurance for your needs. A recent Consumer Reports survey found that people who switch car insurance companies saved an average of $461 per year.

While I’ve enjoyed not having the added expense of a second car, I’ll probably need to get another one at some point. And when I do, you can bet I’ll be shopping around for an inexpensive used car — and for cheap car insurance, too.

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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.Chris Neiger 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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