Money Management

I’m focusing on liquidity and long-term retirement goals, so CDs aren’t going to cut it. Read on to learn more about the accounts I’m prioritizing and why. [[{“value”:”

In a time when interest rates are expected to fall, certificates of deposit (CDs) can be an alluring financial product. They allow you to lock in rates before they fall, and at the end of the term, you get your money back, plus interest. But there can be drawbacks to these products that can be a net negative for your finances.

Here are three places I’d rather put my cash than a CD, and why they work.

1. High-yield savings account

High-yield savings accounts (HYSAs) have comparable — and in some cases, higher — rates to CDs, but without the requirement that you leave that cash alone for months or even years. And since I’m favoring liquidity as I work toward my various financial goals, including rebuilding my emergency fund, that’s a major win. (Emergency funds are best stored in accounts that you can tap into when you need them.)

It’s worth noting that if rates fall going forward, as is expected following the Fed’s benchmark interest rate cut, HYSA rates will also likely fall since they come with variable APYs. Even so, the accessibility offered by HYSAs is enough to tip the scales for me, especially as they’ll still offer much higher interest rates than traditional savings accounts.

Ready to explore your HYSA options? Check out our top high-yield savings accounts for 2024.

2. Checking account

As a freelancer, my income tends to fluctuate from month to month. So I make a point to keep a checking account buffer. This amount is meant to stay in the account so that if an invoice isn’t paid on time, I’ll have enough money to pay my bills.

Although checking accounts aren’t usually known for paying interest (meaning my cash would technically be losing money over time, due to inflation), the best checking accounts often pay at least some interest, with a low barrier to earn the highest rate. That way, you can still hedge against income fluctuations (as well as financial stress) while preserving as much value as possible.

3. Roth IRA

Saving for retirement may not give that relatively quick satisfaction of getting returns on your investment. But given enough time, it can turn even small contributions into major funds for your post-working life.

Roth IRAs also offer tax-free withdrawals in retirement in exchange for giving up a tax cut in the year you make contributions. That means you won’t have to worry about potentially pushing yourself into a higher tax bracket by taking money out of that account.

Let’s say you invested $200 a month in a Roth IRA for one year (for a total of $2,400). After 25 years, you’d have about $26,000. And this assumes a 10% annual return (which is slightly below the average return for the S&P 500 over the last 10 years), as well as zero additional contributions after that initial year of investing.

Finding the best accounts to store your cash isn’t just about the return. To choose the best options for you, you’ll have to decide your needs and goals for that cash.

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The savings run deep at Costco — perhaps deeper than you’ve ever thought. Check out some of the wildest items you can buy there. [[{“value”:”

Lately, I’ve been inching closer to signing up for a Costco membership. As a result, I’ve been doing plenty of research and weighing the pros and cons before I decide. And I have to say, the more I learn about the savings that are possible at Costco, the more impressed I am.

I already knew that Kirkland Signature brand items are a great value, and that the lower price of gas at Costco can be worth waiting in line for. But there were some items I recently found out you can buy at the warehouse giant that made me do a double take.

1. A casket

Not to start on too morbid a note, but did you ever think you’d be able to buy your final resting place in the same store as your paper towels? That’s pretty wild. But once I thought about how expensive funeral costs can be, I understood the appeal of saving money on this very pricey item.

The average cost of a casket is $2,000 to $5,000. Meanwhile, at Costco, you can take your pick from various tasteful options — not a store logo in sight — for $1,150.

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2. A gold bar

I’ve seen plenty of cartoons and movies that feature a glimmering pile of neatly stacked gold bars. It seems like such a trope that I was well into adulthood before I realized gold bars are something you can actually buy. If you’re looking to start your own stockpile, you might want to give Costco a look.

For the current price of about $2,720, Costco members can take home a 1 oz 24kt gold bar. Just keep in mind, the website says these are non-refundable. Apparently gold doesn’t fall under Costco’s normally generous return policy.

3. A diamond engagement ring

Whether you’re ring shopping for or with your future spouse or you’re browsing solo to get ideas for your future self, take a break from your grocery list and check out Costco’s selection of engagement rings. I was surprised to learn just how wide the store’s jewelry selection is.

From a $500 band to a $340,000 halo ring, you have a lot of options to choose from. Various colors, sizes, and settings are available. And once you find the one that speaks to you, you can go straight back to shopping for gallon jugs of olive oil. Efficient!

4. A 6.6-pound bucket of Nutella

I saved the best for last, and this was actually the item that spurred this article idea. While sure, it’s just a tasty spread and not a sparkly jewel, it seems both decadent and ridiculous to be able to buy Nutella in such a large quantity.

I will point out that this tub-o-hazelnuts is available for delivery through Costco Business Center, so your average member won’t be able to walk out of the store with it. I suppose thinking of this as a restaurant supply item makes a lot more sense, but I still like to imagine reaching into this huge bucket for a little swirl to put on my morning toast.

Costco offers a lot more than you might think

While the beloved warehouse chain is well known for its bulk home goods and grocery items, look beyond your standard shopping list. Costco offers a wide range of services, from pharmacy prescriptions to photo printing to hearing aids, that can provide plenty of relief for your savings account. And large, infrequent purchases like major appliances, car tires, and travel packages can be found at significant discounts.

If you’re considering getting a Costco membership, don’t overlook all the less-obvious ways you can save money. Yes, you can get an excellent deal on sunscreen or Parmesan cheese. But there’s a whole wide world of Costco discounts out there to explore, 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.The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Leverage leaves you vulnerable to a glitch in human psychology. Find out why many smart investors avoid investing with debt. [[{“value”:”

Don’t blink. A minute is how long it takes to turn an uphill ride into a downhill, off-the-rails plunge into debt. Just ask crypzsof, a Redditor who recounted the tale of how he started with $30,000, peaked at $1 million in his brokerage account, and ended up $50,000 in debt.

Leverage is the fastest way to lose it all. But the most dangerous moment — the one to watch for — may come after the initial loss.

Commenters in the Reddit thread for this story echo a theme: When things got bad, they doubled down. Some leveraged even more to reverse their falling fortunes, worsening losses. In other words, it may be whether you decide to double down, to fight fire with fire, that matters most.

Is leverage bad?

Many of the most well-known financial gurus seem to be wary of it. Warren Buffett and Charlie Munger, two of the most successful money managers of all time, avoid it. Morgan Housel, author of one of the most popular books on money, calls leverage “the devil.”

In Housel’s New York Times–bestseller The Psychology of Money, he says “Leverage — taking on debt to make your money go further — pushes routine risks into something capable of producing ruin.” In other words, leverage makes it easier than ever to go into debt. It’s why financial gurus often advise avoiding margin accounts and day trading.

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Leave room for error

Even the smartest people in the world go bankrupt to leverage.

In one of his many public talks on investing, Warren Buffet said, “Charlie and I, we saw many high-IQ people, really extraordinarily high-IQ people, destroyed by leverage.” Even though Berkshire Hathaway would have been many times richer had it leveraged, Buffett still avoids doing so.

The reason so many smart people fall prey to leverage probably has a lot to do with psychology, including a concept Morgan Housel calls “room for error.” The idea is, when you live on the wire, you’re particularly vulnerable to all the problems you won’t see coming.

Inflation, a pandemic, a housing market crash — they can all cause unexpected reversals in the stock market. Leveraged investors are hit hardest. Unlike regular investors, leveraged traders leave themselves wide open for financial ruin, which typically manifests as debt.

The psychology behind doubling down

Traders like crypzsof tend to “double down” because of sunk-cost fallacy. It’s a known psychological term for the tendency people have to justify poor-decision making with, “I’ve already gone this far — it’s too late to turn back now!”

I know the feeling. Like crypzsof, I’ve leveraged my investments when the market was easy. Then the market crashed without warning, like it often does, and my profits turned to losses. Instead of paying off my debt and going “clean slate,” I clung to my leverage for months.

The takeaway here is to expect leverage to cloud your judgment when you need it most. Even knowing about sunk-cost may not be enough. Many smart people avoid it for this reason.

An emergency fund is the opposite of leverage

Building an emergency fund makes going into debt less likely. It’s a cash cushion, the purest form of “room for error” in finance (except for, maybe, a solid insurance policy).

Let’s say someone crashed into your car, and you need to pay the insurance deductible. Pay with your emergency fund. Your dog broke her hip? Emergency fund. Roof caved in? Emergency fund. An emergency fund lets you pay unexpected bills without taking on debt.

An emergency fund isn’t the solution to leveraged investments. But having it can make daily life more stable. A high-yield savings account is one of the best places to build an emergency fund. Click here to explore accounts with returns 10-times higher than average.

Before you take out leverage

You should know the psychological risks before taking out leverage. Leverage is one of the fastest ways to go into debt. Your brain is wired to respond poorly to leveraged investments tanking. It’s not just spreadsheets you must track — it’s how you feel when your money burns. How do you react? Your financial future hinges upon 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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

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For many, the dream is retiring young, kicking back, and enjoying life. Find out why I have no desire to give up my job. [[{“value”:”

I think about retirement every day — just not mine. Retiring is not something I’ve ever been interested in doing. However, my husband looks forward to a day that doesn’t begin with an alarm clock going off at 4:30 a.m. and when he has time to pursue hobbies.

As his retirement crawls ever closer, interacting with brokerages is part of my everyday life. You’d think all this planning would make me second-guess my decision, but it hasn’t. Here’s why.

1. Less risk of cognitive decline

Studies indicate that people who “use it don’t tend to lose it.” Well, not at the same rate, anyway.

Postponing retirement until age 67 or later helps protect you against cognitive decline, according to the National Institutes of Health (NIH). The National Institute on Aging states, “Previous research has indicated that people with complex jobs have better cognitive function as they age and a lower risk of dementia.”

In other words, the more people use their brains on the job, the more they appear to be protected against cognitive and memory problems that may arise as they age.

There are few absolutes in this world, and I know there are exceptions. We all know or have heard of a brilliant scholar who suffered from dementia. We all know someone who retired young but remains sharp as a tack. And honestly, I suspect that retiring early and taking on a new challenge may be just as protective. Still, it’s something that concerns me.

My dad was one of the most intellectually curious, intelligent people I’ve ever known, and watching that curiosity slip away from him as he fought vascular dementia haunts me. If continuing to research and write helps stave off dementia even a little, I’m going to give it all I’ve got.

2. Better chances of a longer life

According to Harvard Health, studies have linked working past traditional retirement age with better health and longevity. Another study published in the Journal of Epidemiology and Community Health followed approximately 3,000 people for years. Their research suggests that working even one year beyond retirement age is associated with a 9% to 11% lower risk of dying during the 18-year study period — regardless of the participant’s health.

Further, a Centers for Disease Control and Prevention (CDC) study of 83,000 older adults found that, compared to their peers who’d retired, people who worked past age 65 were about three times more likely to report being in good health. They were also about half as likely to have serious health problems like heart disease or cancer.

I should admit something here: As my husband and I took the dogs on a walk last night, I told him about my deep dive into this research. It occurs to me that it may be a matter of “the chicken or the egg.” Were these folks able to work longer because they entered their 60s in better health, or did working longer keep them physically healthy?

Despite never wanting to retire, I’ve never had a desire to live forever. My dream is to remain relatively healthy, though. If there’s any chance that remaining on the job helps me maintain my health, I’m going to give it a shot.

3. More social engagement

My family has moved many times. I’m forever leaving people behind and starting over again. Depending on where we live, making friends may be as easy as joining a club, or it may take a long time. I can honestly say I don’t have a single friend in this town — yet. It’ll happen, but it’s taking its sweet time.

Although I primarily talk to my coworkers at The Ascent via texts, online, or Zoom calls, after 5 1/2 years of writing here, I’ve gotten to know some of my coworkers pretty well. It may be because they’re all younger, but they keep me informed and engaged. I can’t imagine trading this experience for anything.

In addition to remaining socially engaged, working allows me to double down on investing for the future. If you’re beginning an investment journey, check out these IRAs that are among our favorites.

4. I’ve finally hit my stride

Have you ever heard a woman say that she feels invisible? I’m here to testify. Just as my friends warned me would happen, I officially became invisible one day in my 40s. Not only did construction guys stop ogling me (how rude!), but slowly, it began to dawn on me that I was being underestimated.

After decades of writing everything, from novels to newspaper and magazine articles, I’ve hit my stride. I’m wise enough to know my strengths and how I can benefit a publication, but I’m not too proud to ask questions when necessary. Just as importantly, I’m still wild about the work I do. Why would I give up work when it still sparks me with joy?

5. I want to be able to ride out bear markets

Bull and bear markets are part of life and as normal as the ebb and flow of the tides. I love it when we’ve got a good bull market going and my investments thrive, but I also know that a bear market will come along. It’s simply a fact of life.

I never want to pull more than is legally mandated from our retirement accounts while stocks are tanking. Those are the months we should spend scooping up bargain investments. For me, working means protecting our finances when stocks spiral downward. Making money should allow me to ride out bear markets without further depleting our savings.

Based on the horrified expressions on my friends’ faces when I tell them I don’t care to retire, I realize that I’m in a minority, and that’s OK. The best any of us can do is make choices that seem wise and feel right.

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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.Dana George has no position in any of the stocks mentioned. The Motley Fool recommends Flow. The Motley Fool has a disclosure policy.

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Building a perfect score is possible, but it’ll take some time. Read on to find out how to get to a credit score of 850. [[{“value”:”

I once had such bad credit that a furniture store wouldn’t let me buy a sofa on credit. I spent several years slowly building up my score by paying my credit card bills on time, and eventually earned my current score of 769.

Credit scores range from 300 to 850. According to Experian, just 1.54% of American consumers have a perfect 850 score. I’m far from reaching that level, and honestly, I’m not trying to get there. But if you want to be part of that exclusive group, here’s how you can achieve it.

1. Pay bills on time

Everyone knows they should pay their bills on time, but it’s important to understand just how critical on-time payments are. Your payment history is the largest percentage of your FICO® Score, accounting for 35%. (The FICO® Score is the most commonly used scoring model by lenders.)

If you want a perfect credit score, you have to make all of your payments on time, every time. The average number of delinquencies for perfect-score consumers is zero. This also means you can’t have any bankruptcies on your credit report or have any accounts sent to collections, which stay on your report for up to seven years, along with late payments.

Fact: Consumers with good credit scores can access cards with better perks. Click here to see our list of the best credit cards.

2. Keep your debts very low

Nearly just as important as your payment history is the amount of debt you owe; this is often referred to as your credit utilization, and it accounts for 30% of your FICO® Score.

You have to use none or very little of your available credit to have a perfect score. Experian says perfect score holders tend to have more credit cards than the average consumer (about six, compared to about four for most borrowers), but they have credit utilization on average of just 4%, compared to 29% for most consumers.

That means someone with a perfect score could have four credit cards, each with credit limits of $15,000 — giving them access to $60,000 — but they might be using only $2,400, at any given time.

3. Build a long credit history

About 15% of your credit score is determined by the length of your credit history. Longer histories give a more accurate picture of your creditworthiness to lenders, which is why keeping an old account open — even if you’ve paid it off — is generally a good idea.

People with perfect scores have long credit histories, which is why baby boomers and older generations account for 66% of people with an 850 score. In comparison, millennials and younger borrowers account for less than 8%, Experian says.

So, if you have a credit card account that’s been open since you were in college, keep it open!

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4. Maintain a mix of credit

It’s better for your credit score if you have a mix of credit accounts. Your credit mix accounts for 10% of your score and should include both revolving (credit cards and personal lines of credit) and installment (car loans and mortgages) accounts.

Perfect score consumers have an average of about six credit cards, four retail cards, a mortgage, and an auto loan. Younger consumers may have some difficulty achieving the best credit mix because they may not have certain accounts, like a mortgage.

However, it’s important to point out that you shouldn’t look at this list of credit accounts and assume that you need to take on lots of debt to try to improve our score. A mix of credit will develop over time.

It’s important to remember that perfect score holders utilize very little of their available credit — about 4% — and they pay all of their bills on time.

5. Limit your credit applications

While consumers with perfect credit scores have many accounts, it’s likely they’re not applying for new accounts frequently. Recent credit applications, like applying for an auto loan or credit card, can lower your credit score. These hard credit inquiries account for about 10% of your score.

This is where having a long credit history helps you. If you opened two credit cards 10 years ago, those applications are far in the past and won’t impact your score. But if you apply for two cards today, your credit score will take a temporary hit.

A perfect credit score might be nice, but it’s not necessary. Experian says that a credit score of 760 or higher is usually good enough to get the best available interest rates from lenders. So, while there’s no harm in trying for a perfect score, don’t fret if you end up falling a bit short — you’re probably not missing out on much.

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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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