Money Management

Many Americans are boosting their retirement savings. Read on to find out how to increase your contributions. [[{“value”:”

The latest data on Americans’ 401(k) savings rate is in — and workers should pat themselves on the back. Fidelity Investments says the average 401(k) savings rate reached a record high of 14.2% recently.

Considering inflation’s rise over the past two years, this is an impressive feat. Here’s how close workers’ savings are to the recommended savings rate and how to boost your balance if it’s not where you want it to be.

A 14% savings rate is impressive

Workers achieved their 14.2% savings rate thanks to some help from their employers. Americans contributed an average of 9.4% of their earnings, while employers contributed the remaining 4.8%.

Most retirement experts recommend saving 10% to 15% of your pre-tax income.

Of course, this is a general rule that needs to be adjusted depending on when you start saving for retirement. For example, if you start saving at age 25, Charles Schwab says your savings rate could be as low as 13% to 18%.

However, if you don’t begin putting money into a retirement account until age 40, your savings range should increase to 21% to 28%.

Why do these percentages change? The general goal is for you to have 25-times your planned annual spending saved by the time you retire. The earlier you get started, the more time your investments have to grow.

How to maximize your retirement savings

If your savings rate is lower than you want it to be, or you’re nearing retirement and find yourself far behind your goals, here are a few steps to improve it.

1. Save windfalls

Cash windfalls can take many different forms, including gifts, inheritances, or even raises. They don’t even have to be a lot of money. Putting hundreds of additional dollars toward your retirement can add up over time.

For example, maybe you receive $200 every year from family members via birthday cards, Christmas presents, or other gifts. If you have $10,000 in your retirement account right now, add $200 annually, and earn the historical annual rate of return of about 10%, you’ll end up with nearly $80,000 in 20 years. Not bad for just $200 in annual contributions and a modest starting amount.

2. Automate savings

Automating your contributions is one of the best ways to reach your retirement savings goals. We all have the best intentions of setting money aside for retirement, but setting up automatic withdrawals puts those intentions into action.

If you have a brokerage account for your retirement savings, you can automate a certain amount to invest each month. For example, you could set up a $50 investment to buy a low-cost index fund each month.

3. Sign up for employer matching

This is one of the most critical — and easiest — ways for many workers to reach their retirement goals. Remember the 14.2% workers are saving? Just over one-third of that percentage came from employers matching their employees’ contributions.

Many employers offering 401(k)s have matching programs, with many of them giving you $0.50 for every $1 you contribute, up to 6% of your income. For example, if you earn $65,000 and contribute $3,000 to your 401(k) over the year, your employer would contribute an additional $1,500, giving you a total of $4,500.

That’s basically free money you didn’t have to put into your retirement account. Just remember that some employers may require you to stay at the company for a few years before receiving the employer contributions.

Saving for retirement can seem overwhelming. But taking a few simple steps to automate your savings, depositing windfalls into your account, and signing up for any available matching programs will help put you on the right track.

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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.Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Charles Schwab. The Motley Fool recommends the following options: short June 2024 $65 puts on Charles Schwab. The Motley Fool has a disclosure policy.

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Many people aim to earn income without working long hours, and you can do this with some businesses. Check out a few options to look into. [[{“value”:”

Passive income is money that requires little or no work to earn. Being able to earn more money without spending a significant amount of time or putting forth a lot of effort is a goal for many people. There are many businesses that you can operate to generate passive income.

While you may need to exert more effort and commit more time in the beginning, you can later benefit financially without being as heavily involved. Want to start a business that earns passive income? Check out these business ideas.

Run a laundromat

There will always be a need for laundromats. This business idea is an excellent choice for those who can afford an initial investment.

To run this business, you’ll need to rent a space and buy equipment or purchase a laundromat that someone else is selling. Buying an existing business and equipment from someone retiring may be more cost-effective than creating an all-new space.

You’ll want to consider how you handle repairs and maintenance and budget for these costs. Additionally, consider hiring a part-time or full-time manager to help you run your business. But it’s possible to earn income from this business without spending every day at the laundromat.

Sell digital downloads online

If you’re a creative looking to earn passive income, consider exploring a digital download side hustle. You can sell digital files you’ve created through online marketplaces like Etsy. People are looking for digital templates like planners, to-do lists, meal-planning lists, and more.

The nice thing about selling digital files on a platform like Etsy is that the customer is emailed the file right after purchasing it. After you create several files and list them for purchase, you can earn money without being involved daily.

You’ll need to spend some time creating your digital files, and it would be beneficial to update your product descriptions for SEO purposes occasionally. But with this unique side hustle, you can make extra money while exercising your creative skills.

Sell food and drinks in vending machine

Another option is to run a vending machine business. You’ll need to invest in vending machines and put in effort and time upfront to determine what companies or buildings will allow you to place your machines in their spaces. But little day-to-day work is involved with this business beyond cleaning and restocking the machines.

Once you get your business running, you can earn passive income. You’ll want to consider maintenance and upkeep costs, because your machines may need repair occasionally. You should also make a plan for how you will fund purchasing the drinks and snacks. Even with these considerations, this could be a fun business idea that generates extra income.

You can use a business credit card to earn rewards as you pay for business expenses like this. But to avoid interest, don’t carry a balance on your card. Paying the entire statement balance every month is the best strategy to use credit effectively.

Use small business tools to stay on top of your goals

No matter what business opportunity you explore to reach your passive income goals, using software and tools to simplify your life can be a big help. One example is accounting software, which can help you keep track of your company finances.

As you grow your business, you’ll want to know how much you’re spending on expenses and how much profit you’re making. This tool can make it easier to stay informed and make changes as needed. Check out our list of the best accounting software solutions to learn more.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

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Credit card APRs could fall next year if the policymakers cut rates. Read on to discover how to lower your interest rate now. [[{“value”:”

Americans’ credit card debt has soared recently, reaching a historic high of $1.1 trillion. That’s put a strain on some consumers’ budgets, and the latest data shows that 1 in 5 cardholders has maxed out their credit card limit.

So, that’s the bad news.

The good news is that if the Federal Reserve starts cutting the federal funds rate later this year and throughout next year, it could lower credit card interest rates. Here’s how.

A rate cut could lower credit card rates

The average credit card interest rate is a shockingly high 24.8% right now. But credit card annual percentage rates (APRs) are variable, meaning they can fluctuate based on the federal funds rate.

The Federal Reserve quickly raised the federal funds rate in 2022 and 2023 to fight inflation, pushing rates higher for nearly everything, including credit cards.

But the federal bank now says it could make one rate cut by the end of this year, with four potential cuts next year. If that happens, your variable credit card APR could come down.

It will take multiple cuts to feel any impact

Because credit card APRs are so high right now, one rate cut likely won’t lower your rate enough for you to notice. However, four rate cuts could bring your APR down.

If the Fed made four rate cuts equal to a total 1% rate decrease, your credit card rate could theoretically fall by as much. Just keep in mind that it usually takes a month or two for credit card APRs to start coming down after the federal funds rate is cut.

How to lower your credit card rate right now

While your credit card payments could become more manageable next year, there’s no need to wait around for policymakers to make a move. There are two ways you can immediately lower your credit card interest rate. Here’s how.

1. Apply for a 0% balance transfer card

With credit card rates so high right now, using balance transfer cards can be a very smart move. You’ll usually receive a low introductory interest rate, often 0%, for a set time (usually six to 21 months).

Opening one of these cards can help you pay off your credit card debt much faster. For example, if you have $5,000 on a card with a 24.8% APR and pay $250 monthly, it will take you 26 months to pay it off, and you’ll have spent $1,449 on interest.

But if you transfer your $5,000 balance to a 0% credit card and make monthly payments of $250, you’ll eliminate your balance in about 20 payments and pay $0 in interest. The only extra thing you’ll have to pay is a balance transfer fee, usually between 3% to 5% of the balance. In this case, a 5% fee on a $5,000 balance would cost you $250.

2. Ask for a lower rate

Surprisingly, it’s possible to ask credit card companies for a lower interest rate — and many of them will give it to you. A recent survey showed that 76% of cardholders received a lower rate when they asked, with an average decline of more than six percentage points.

That could save you tons of money. Paying off $5,000 in debt at an 18.8% interest rate versus a 24.8% rate would save you $460 in total interest if you made monthly payments of $250.

While it’ll be great for many cardholders if the Federal Reserve makes significant rate cuts next year, asking for a lower rate or applying for a balance transfer card now are smart moves. If you successfully lower your rate now, you’ll be in an even better financial position if rates do indeed drop next year.

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Click here to read our full review for free and apply in just 2 minutes.

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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Trying to choose between cash back credit cards vs. airline credit cards? See why travel perks can be worth more than money. [[{“value”:”

Trying to decide on which credit card to apply for next? Some people love cash back credit cards, because it feels good to get an immediate discount on everyday purchases. But if you love travel, want to save money on airfare, get free hotel stays, and improve your travel experiences, the best travel rewards credit cards can be an even better deal.

Here are a few reasons why airline credit cards can be an even better deal than the best cash back credit cards that pay 2% unlimited cash back.

1. Get travel perks for your next flight

The best airline credit cards can give you a free checked bag for your next flight. Since airline checked bag fees are now in the range of $35-$40 (or more) for domestic flights, using an airline credit card to book your next trip could help you save $70-$80 on every U.S. roundtrip. If you fly four times per year, that’s an annual savings of $280-$320!

Some premium airline credit cards can give you extra special VIP travel perks, like free airport lounge access. The best of these high-level travel perks tend to come from cards that charge a higher annual fee, like $550 or more. But the extra value you get can make these airline credit cards worth paying for, if you’re a frequent-flying adventurous traveler who loves to travel in style.

2. Earn frequent flyer miles to get “free” (extremely cheap) plane tickets

Along with the immediate value of perks like free checked bags or airport lounge access, perhaps the best reason to apply for an airline credit card is that it gives you a faster way to earn frequent flyer miles. Some airline credit cards let you earn bonus frequent flyer miles when you use the card to book flights, such as an extra 5x miles on the airfare, when you’re a member of the airline’s frequent flyer program.

Other travel rewards credit cards make it easy to earn points from your everyday spending that can then be transferred to partner airline frequent flyer programs. For example, with the right travel rewards card, you could earn 50,000 points from your monthly spending, and then transfer those points to a partner airline program and convert them to 50,000 frequent flyer miles.

By racking up frequent flyer miles with airline credit cards, you can build up a special “savings account” to be spent on travel. And sometimes, booking flights with miles (or points) can give you a better deal than an equivalent amount of cash — I recently booked a flight on Southwest Airlines with 33,000 Rapid Rewards points that would have cost me $500 in cash.

Keep in mind that booking award flights with frequent flyer miles is not technically “free” — there are still a few costs you’ll have to pay with cash. But airline credit cards can open a new world of saving money on travel!

3. Travel rewards can be worth more than money

If you’re passionate about travel and you want travel to be at the center of your life, travel rewards credit cards can elevate your experience. Travel is one of my favorite hobbies and lifelong learning experiences, and I never regret spending money (or credit card points) on getting out of the house or leaving the country altogether.

Vacations I’ve taken with my family are some of my happiest memories and were worth paying for — those travel memories are priceless, and are worth more than some small percentage of money I could’ve gotten from a cash back credit card. Travel rewards credit cards can help you buy more joyful moments and powerful memories.

Bottom line

There are some excellent cash back credit cards available right now, and if you like the feeling of saving 1%-2% (or more) on everyday purchases, go ahead and use those cash back cards. But if cash rewards don’t feel as exciting as converting your everyday spending into inspiring travel experiences, travel rewards credit cards and airline credit cards could be a better deal. Whether it’s cash back in your bank account or fun perks on travel, the best credit cards should help you live a more enjoyable, varied life.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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 recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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