Money Management

You could spend an extra $65 on household supplies at Costco. But find out what purchase could be an even better use of that money. [[{“value”:”

A lot of Costco shoppers are on a tight budget. Stubbornly high inflation is pushing a lot of people to their financial limits, forcing them to think carefully about the purchases they make — even in the context of everyday items like groceries and cleaning supplies.

But if you can find an extra $65 to spend at Costco, there’s one specific purchase it pays to make.

An upgraded Costco membership could work wonders for you

The current price difference between a Gold Star membership at Costco and an Executive membership is only $60. But starting Sept. 1, you’ll have to spend $65 more for the upgraded membership. Beginning next month, a basic Costco membership will cost $65, while an Executive membership will cost $130.

If you have an extra $65 to spend at Costco, you may be interested in using it to load up on extra items for your fridge or pantry. But a smarter move could be to pay to update your membership.

The great thing about Costco’s Executive membership is that it gives you 2% cash back on your purchases. Over a year, that could result in a lot of savings if you shop at Costco regularly.

Let’s say your weekly Costco haul amounts to $100, and you shop at Costco 50 weeks out of the year. That has you spending $5,000 in total and getting $100 back from your Executive membership. That $100 can easily cover your $65 upgrade fee and leave you ahead by $35 compared to sticking to a basic Costco membership.

Even if you only shop at Costco every other week spending $100 per trip, that’s still $2,600 over a year. If you make some larger one-off purchases at Costco, that could get you beyond the $3,250 a year it takes to break even on the $65 Executive membership upgrade cost. So even if you only spend $3,260 a year, the higher-priced membership still makes financial sense.

Costco provides a membership guarantee

You don’t want to spend an extra $65 on an Executive membership only to not accrue enough cash back to make up that fee. But thanks to Costco’s more-than-reasonable membership downgrade policy, that’s not something you have to worry about.

If you see that the Executive membership isn’t working out for you, you can downgrade to a Gold Star membership, no questions asked. Costco will refund you any portion of the $65 upgrade fee you didn’t make back with the 2% reward.

Let’s say you only spend enough to earn $50 back through your Executive membership. When you downgrade, you’ll be refunded $15 so you’re made whole on your $65 upgrade fee.

For this reason, it pays to invest an additional $65 in an Executive membership if you shop at Costco on any sort of regular basis. In a worst-case scenario, you’ll get that money or a portion of it returned to you if you don’t make enough money back. And in a best-case scenario, you’ll end up with extra cash in your pocket you can use to pay for future Costco purchases or anything else you might need.

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

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

Click here to read our expert recommendations for free!

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Today’s CD rates are very appealing. But read on to see how you can earn a lot more on your money than 5%. [[{“value”:”

There’s a reason so many people have been jumping onto the CD bandwagon. CD rates are sitting at record highs, with many 12-month CDs offering a 5% APY. That’s a pretty sweet deal considering you’re not taking on any risk in opening a CD (provided your bank is FDIC-insured and your deposit is limited to $250,000).

But while you might consider a 5% CD a deal that’s too good to be true, the reality is that you can actually do a lot better than 5%. And if you’re looking at a long savings window, you’re probably far better off investing your money than settling for what a CD will pay you.

A stock portfolio could do so much more for your money

There’s a world of difference between putting money into a CD vs. using it to buy stocks. With a CD, as mentioned, your deposit is guaranteed. That’s never the case when you buy stocks. You could invest $10,000 in a portfolio of stocks only to see its value plunge to $8,000 in just a few months’ time.

But there’s a big upside to putting money into stocks instead of CDs — you’re likely to score a much higher return over the long run. That could spell the difference between meeting your financial goals and falling short.

Today’s CD rates are higher than usual. But even today’s 5% rates pale in comparison to the stock market’s average annual 10% return over the past 50 years.

You should also know that 10% return accounts for years of outstanding stock market performance and years of losses. This should tell you that if you’re a long-term investor, you’re more likely to make money in the stock market than not.

How much could you make with stocks vs. CDs?

Now, let’s see what sort of a difference a stock portfolio might make for your goals vs. a CD strategy. If we assume that CDs will continue paying 5% for the next 25 years (they won’t, but we’ll go with it), a $10,000 deposit today has the potential to grow into almost $34,000. So in that case, you’re looking at about a $24,000 gain.

But let’s say you put that $10,000 into a stock portfolio instead. At 10% over the next 25 years, you’re looking at a balance of about $108,000. That’s a $98,000 gain — about four-times the gain you’d be looking at with CDs. And whether you’re saving that money for college, retirement, or something else, $98,000 is apt to do you a lot more good than $34,000.

Don’t be lured by today’s CD rates

It makes sense to go after a 5% CD when you’re saving for a short period and it’s not safe to put your money in stocks. That generally means a period of five years or less.

But for a long-term savings window, investing in stocks is a better bet. Sticking with CDs means settling for a lower return, and one that’s likely to inch downward as interest rate cuts start to take hold.

If the idea of investing in stocks makes you nervous, you can mitigate that risk by assembling a diversified portfolio — meaning, investing in companies across different industries. But if that seems daunting to you, you can buy shares of an S&P 500 ETF (exchange-traded fund) that give you built-in diversification.

This strategy basically has you investing in the stock market on a whole. And while you are taking on risk, the reward has the potential to be huge.

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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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Wildfires can be devastating, personally and financially. Take a look at five moves that can help you get back to normal. [[{“value”:”

Wildfires are among the most costly natural disasters, and they’re happening with increasing regularity. Early evacuation can reduce the likelihood of human casualties, but there’s no way to pick up your home and move it out of the fire’s path. Wildfires can wipe out entire neighborhoods in a day, and the associated homeowners insurance claims can be very high.

There’s a lot to grieve when this happens to you, and it can be difficult to know how to get back to normal. Here are five key steps to get you started.

1. Prioritize your safety

The loss of your home, personal property, and even family heirlooms can be devastating, but it’s nothing compared to losing your own life or the life of a loved one. There will be time to address the damages later, but while the fire is still nearby, it’s important to comply with all evacuation orders and get somewhere safe. Do not return to your home until authorities say it is safe to do so.

2. File a homeowners insurance claim

Homeowners should file a claim with their insurance company as soon as possible so they can get the funds they need to rebuild their property. It helps to have your policy number handy, but insurance agents can help you track this down if you don’t have it readily available. If the wildfire destroyed vehicles, you may need to file an auto insurance claim as well.

It can take time to complete the claims process, especially for homeowners who reside in a hard-hit area. But most home insurers have online tools that enable customers to track their claim online. Feel free to check in with the insurance agent as often as necessary and be prepared to provide requests for further information as needed.

3. Find an alternative place to live

If your home isn’t habitable due to wildfire damage, you may need to find a place to rent while you rebuild. Homeowners insurance typically covers the cost of alternative living arrangements. This is also known as loss of use coverage.

But it’s not unlimited. Generally, loss of use coverage is limited to about 20% of the policy’s dwelling coverage. So if the home was insured for $500,000, the homeowner would get $100,000 to cover alternative living arrangements.

Check with the home insurer to learn more about this coverage and how to claim it. You’ll probably need to keep receipts proving how much you’ve paid for other living expenses.

4. Take stock of destroyed belongings

Homeowners insurance also covers personal property — everything from dishes and toiletries to electronics and heirlooms. Ideally, you’ll have completed a home inventory before the fire detailing what you own and its approximate value. If you don’t have this, you’ll have to do a little extra legwork.

Gather any receipts or purchase agreements related to personal property and make a detailed list of what you owned. Reviewing any photos of your property might jog your memory. Be as specific as you can, noting makes, models, and years of purchase when possible.

Note that certain types of items, like jewelry and computers, may only have limited homeowners insurance coverage unless the policy had a rider increasing this limit. Contact the insurance agent if you’re unsure how much some of these more expensive items are covered for.

5. Check into government aid

Homeowners may qualify for government aid if their home is part of a federally declared disaster area. The Federal Emergency Management Agency (FEMA) website lists all federally declared disaster sites and the assistance available to anyone living in one.

Even if you follow the above tips, it may take a while to fully recover from the devastating effects of wildfire. Take things day by day and stay in touch with your insurer as needed. Respond promptly whenever you can to speed the claims resolution process.

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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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Overfunding a savings account could backfire on you. Read on to see why. [[{“value”:”

Recent data from the Federal Reserve finds that 37% of Americans could not cover an unplanned $400 expense. So if you have a large pile of cash in your savings account, you’re clearly in much better shape than those who couldn’t come up with $400 on the spot.

But while it’s better to have a large savings account balance than one that’s too small, there is such a thing as having too much cash in savings. And it’s important to recognize whether you’re in that situation.

The problem with keeping too much money in savings

The nice thing about savings accounts is that they’re a safe place to stash your money. As long as you choose a bank that’s FDIC-insured, your money is protected up to $250,000 per depositor, per FDIC-insured bank, per ownership category. It doesn’t matter if your bank fails or what market conditions look like — you can’t lose a dime of your deposit.

But with a savings account, you may not earn all that much interest on your money. It’s true that many savings accounts are paying 4% or more right now. But today’s rates are not typical for savings accounts.

You may find that in a few years, the best you can get out of your savings account is 1% or 2% on your money. And at that pace, it could take a really long time for your money to grow.

That’s why it’s important not to overfund your savings. If you keep too much cash in the bank rather than invest it, you could lose out on serious returns.

Over the past 50 years, the stock market’s average annual return has been 10%, accounting for both good years and bad. If you were to keep an extra $10,000 in a savings account paying 2% a year over 20 years, you’d end up with about $15,000. In a stock portfolio paying 10%, in 20 years, you’d end up with a little more than $67,000. So in this example, sticking to a savings account could cost you $52,000.

How much savings should you have?

As a general rule, it’s smart to have enough emergency savings to cover three to six months of essential bills. This way, if you were to lose your job or run into a major issue with your home, car, or health, you’d have a way to avoid costly debt.

It’s also okay to keep money in your savings account beyond your emergency fund. If you’re trying to buy a home in a year, a savings account is the best place for your down payment.

But money you don’t need for emergencies or near-term goals is money you should strongly consider investing. Keeping too much money in your savings means stunting its growth and making it harder to achieve long-term goals, like setting yourself up for a comfortable retirement.

And if you’re worried about the risks associated with investing, just remember that the stock market has tanked plenty of times over the past 50 years, yet investors have still enjoyed an average annual return of 10%. That should tell you that if you invest in stocks for the long haul, there’s a good chance you’ll come out a winner, 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 a disclosure policy.

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An Executive membership at Costco costs twice as much as a basic one. Here’s why I’m sticking with it anyway. [[{“value”:”

When I first joined Costco, I didn’t have kids yet and therefore didn’t spend as much as I do now on groceries. But years back, I decided to upgrade to an Executive membership when my family started spending more on food, and I’ve stuck with it ever since.

In fact, there’s pretty much nothing anyone can say to convince me to give up that Executive membership — despite the higher cost. Here’s why.

A higher fee worth paying

A Gold Star membership at Costco currently costs $60 a year, while an Executive membership costs $120. Starting Sept. 1, though, the cost of a basic membership is rising to $65, while an Executive membership will cost $130. Either way, you’re looking at paying double for an Executive membership.

But the Executive membership comes with one giant perk — 2% cash back on your purchases. And when you shop at Costco as much as I do, getting the higher-cost membership is an easy call.

I do a Costco run almost every week, and I usually spend at least $100. That’s just what it costs to feed a family of five and get enough necessary supplies like paper towels, tissues, and cleaning products.

I also tend to turn to Costco for certain one-off purchases, whether it’s new fall jackets for my kids or gift baskets for my children’s teachers during the holidays. This extra spending, coupled with my regular weekly spending, makes it easy to recoup the cost of my Executive membership upgrade and come out with extra cash back in my pocket.

Right now, it takes $3,000 in annual Costco spending to make back the cost of the Executive membership upgrade. Once the store’s fee hikes take effect, it’ll take $3,250 to reach that break-even point.

Since my annual Costco spending typically comes to over $5,000, there’s no question that the Executive membership makes financial sense for me. At $5,000 in spending, I’m looking at $100 cash back. That gives me my $65 upgrade fee back and leaves me with extra money.

I’ll keep the Executive membership even if my Costco spending declines

There may come a point when I’m not going to Costco every week for groceries and supplies. But even then, keeping the Executive membership makes sense for one big reason — you’re guaranteed not to lose money on it.

If you buy the upgraded membership and don’t earn enough cash back to recoup the extra cost, Costco will allow you to downgrade your membership and refund you the difference. In other words, let’s say you buy the more expensive membership, but only earn $52 in cash back when you paid $65 for the upgrade. If you downgrade to a basic membership for the next year, Costco will give you back the $13 of your upgrade fee you didn’t recoup.

For this reason, I refuse to give up my Executive membership. And you may want to reconsider if you’ve been sticking to a basic one. Rather than assume you won’t make back your upgrade fee, evaluate your yearly Costco spending. You may be surprised at the total.

Also, don’t rush to dump your Executive membership if your household situation changes. You might spend less on groceries once you’re an empty nester. But you might also spend more at Costco on other things.

It pays to keep the upgraded membership and see what happens. Either way, you’re guaranteed not to lose any money.

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

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

Click here to read our expert recommendations for free!

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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A CD ladder allows you to stagger your investments. Find out how much you can earn over five years by investing just $1,500. [[{“value”:”

When it comes to investing in a popular banking product, a certificate of deposit (CD) is one of your best bets. You don’t have to worry about losing money because the best banks carry FDIC insurance and guarantee your money will be safe. And unlike a savings or money market account (MMA), your interest rate is fixed for the entire term of your investment.

If there’s a drawback associated with CDs, it’s that you must tie your money up for a specific amount of time, but that’s where a CD ladder comes into play. With a CD ladder, you divide the money you have available to invest by the number of CDs you wish to open. Next, you open multiple CDs, each with a different maturity date.

Here’s a look at how much you could earn by opening three separate CDs and depositing $500 into each (for a total of $1,500).

Your earnings

Three factors go into determining how much you’ll earn on a CD ladder:

The term. Most banks offer CDs with terms ranging from three months to five years, although it varies by bank.The annual percentage yield (APY).How much you deposit.

This example assumes you open three CDs with terms ranging from six months to five years. I’ve used the highest rates I could find as of Aug. 6, 2024.

At the end of six months, your first CD will have matured, and you’ll collect $13 in interest. After 18 more months (at the end of two years), you’ll have another $47. Finally, when your third CD matures at the end of five years, you’ll be able to add another $120. In total, your $1,500 investments would earn you $180. Not bad for a relatively small but mostly risk-free investment.

Factors to consider when shopping for the right bank(s)

When choosing where to open a CD, it’s important to look for a bank that provides the features you’re looking for. Here are three points to consider.

1. Do you want the ability to withdraw interest without penalty?

At some banks, you’ll lose a portion of your interest if you withdraw funds before your CD matures. However, some banks allow customers to withdraw interest anytime, leaving just the initial investment to grow.

2. Do you want all of your CDs under the same roof?

Some people prefer to open all their CDs at one bank to prevent confusion. Others are fine spreading them out among different financial institutions, settling only on the bank with the highest APY — especially if it means earning more money.

3. Do you prefer to do your banking on the go?

If you routinely pull out your smartphone to make deposits and transfers, you may want to consider the quality of a bank’s app and how easy (or difficult) it can make the process.

Laddering reduces your risk of early withdrawal penalties

There’s one more big reason to consider laddering your CDs, besides taking advantage of the best rates among multiple banks: You could be charged an early withdrawal penalty if you withdraw money from your CD before it matures. It’s a bank’s way of encouraging you to leave your money in place for the full length of your CD term.

CD ladders can help with this since they’re structured to allow CDs to mature at different times. As a result, you can count on some of your money to be freed up every so often. Knowing money will be available just around the corner may reduce the need to withdraw funds before another CD matures.

If you want to take advantage of the high rates on CDs right now and avoid the risk of early withdrawal penalties, laddering your CDs might just be the way to 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.The Motley Fool has a disclosure policy.

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