Money Management

Is six months’ worth of savings sufficient for you? Is it too much? Read on to find out. [[{“value”:”

Life has a way of throwing surprise expenses at us when we least expect them. You might wake up to take a hot shower, only to find out your water heater has decided to stop functioning. Or you could go to pull your car out of the driveway only to realize that a branch has fallen onto your windshield and shattered it to pieces.

That’s why it’s so important to have a fully loaded emergency fund. And for most people, that means having enough money in savings to cover three to six months’ worth of expenses.

But should you be aiming for the higher end of that range? Or can you get away with less than six months’ worth of bills in your savings account?

Why a six-month emergency fund could be the sweet spot

Your emergency fund isn’t just designed to cover the cost of unplanned home or car repairs. It should also be there in case you wind up out of a job. The reason people are often advised to save a three- to six-month emergency fund separate from their checking account is that it could easily take you that long to find a new job after losing one. And the more unique your job is, and the more seniority you have in it, the more time you might need to get hired again following a layoff.

So that’s why a six-month emergency fund could make a lot of sense for you. That way, you buy yourself more time to find a new job without having to resort to debt to cover your expenses.

It could also pay to have a six-month emergency fund, as opposed to only a three-month fund, if you have a lot of expenses you can’t easily shake. If you’re single and have a month-to-month apartment lease, a three-month emergency fund may be fine. You could conceivably give notice and find a cheaper home in the event that it takes longer than expected to find a job after losing one.

But when you own a home, you can’t just give your mortgage lender a month’s notice and stop making payments on that loan. And if you have a family, it’s harder to uproot a spouse and children than it is to move on your own.

So if you’re not sure whether you need six months of bills in savings, think about your specific situation. If you worry that your job may be a harder one to replace and you have expenses you’re pretty locked into, then you may want to aim for a six-month emergency fund for better protection and more peace of mind.

You may not need to save beyond the six-month point

There’s no rule stating that you must stop building your emergency fund once you’ve got enough cash to cover six months’ worth of bills. In fact, for some people, a 12-month emergency fund makes sense. And if you’re self-employed or think your job would be extremely hard to replace, then you may want to aim for 12 months’ worth of bills in savings.

But otherwise, a six-month emergency fund likely gives you the protection you need. So if you have money to spare beyond that point and are comfortable putting it aside for the long term rather than putting it into a savings account, you may want to consider investing it instead.

Over the past 50 years, the stock market’s average annual return has been 10%. Even though many savings accounts today are paying somewhere in the ballpark of 4%, that’s not the norm. And even 4% is considerably lower than 10%. So you don’t want to overfund your emergency savings when there’s the option to invest your excess funds and potentially grow them into a lot more money 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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Costco’s Memorial Day savings have kicked off. Check out these five amazing deals before their offers expire. [[{“value”:”

Unsurprisingly, Costco has a ton of good deals going on right now. Many are linked to its Memorial Day savings, such as its deals on mattresses and paddle boards, but quite a few seem to be stand-alone offers that expire at the end of May.

Often, I find the best deals are those that don’t get much publicity, such as the items buried under its “deals” page on its website. If you’re a Costco member, here are five such deals under $50 that won’t blow your budget.

1. Pet bed

Price: $39.99

The Kirkland Signature Bolster Cuddler Pet Bed is a dog bed with shreds of memory foam in the cushion and a bolstered wall that keeps the fiber mat in place. The cover is washable, so you don’t have to worry about it getting smelly. The bed comes in four colors: sand, brown, slate gray, and charcoal. You can also buy a slightly smaller hexagonal shaped Kirkland bed for a cheaper price ($29.99).

To be honest, most of my pets have shunned pet beds, preferring to sleep wherever they want, which is usually wherever I like to sit (chairs, couches, my bed). But my pets have been cats, who, let’s be real, do it on purpose. For small to medium-sized dogs, however, this bed could be a new favorite snuggle spot.

2. Vegan protein shakes

Price: $28.99

Orgain Plant-Based Protein Shakes are one of my favorite vegan shakes. They’re low in calories, high in protein, and have dozens of superfoods added. The problem is they’re expensive, running up to $43.98 for an 18-pack at full price at Walmart. At Costco, however, you can currently buy the same 18-pack of shakes for $28.99 (up to six per membership) after a $7 discount.

3. Reusable water balloons

Price: $34.99

You read that right: reusable water balloons. The Zuru Bunch O Balloons open and close like a Pokemon ball with magnetic strips that keep them sealed until impact. So no more picking up those plastic ribbons and twisted knots after a water balloon fight, these balls stay intact long after soaking their victim. You also don’t need to fill them up with a hose, but can just dunk them in a pool of water to fill them up. The regular price is $44.99, but if you buy them at Costco before May 27, 2024, you’ll get $10 off.

4. Skechers Men’s shoes

Price: $31.99

If you need a pair of slip-on sneakers, the Skechers Men’s Glide Lite Pacer Shoe could be your new kicks. They come in navy and black and in sizes between 8 and 13. Get $6 off when you purchase them before June 9, 2024, or save $20 to $50 when you pair them with at least five other qualifying clothing items on Costco.com.

5. Solar string lights

Price: $39.99

Little string lights might evoke Christmas, but something about string lights with big bulbs reminds me of summer nights on the patio. The Sunforce 36′ 18 LED Solar String Lights can add some charm to your outdoor spaces, with 36 feet of coverage. They come with a solar panel so you don’t even need to plug them into an outlet. Normally, they cost $49.99, but are discounted by $10 through May 31, 2024.

These five items only scratch the surface of Costco’s deals. Take a peek at the “deals” section on Costco’s website, or go to your local warehouse to see what other great savings opportunities you can take advantage of before offers expire.

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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 and Walmart. The Motley Fool has a disclosure policy.

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If you’re going to open a CD, it’s important to choose a term that works well for you. Here’s how to decide between a 12- and 24-month option. [[{“value”:”

There’s a reason every other person you know has been talking about opening a CD lately. CD rates are sitting at some of their highest levels in years. But those rates may not last much longer.

The reason CDs are paying so generously at present is because the Federal Reserve spent much of 2022 and 2023 raising interest rates to help slow the pace of inflation. Now that inflation has cooled nicely, the Fed has signaled that it should be ready to start cutting interest rates at some point this year.

There’s a fair amount of pressure to cut rates because the central bank’s hikes have made borrowing more expensive for consumers. Once rate cuts arrive, products like personal loans and mortgages may become a bit less expensive to sign.

If you’re eager to open a CD before rates start to fall, you may be torn between a 12-month CD and a 24-month CD. Ask yourself these questions to figure out which is the better choice.

1. Which term offers the better rate?

These days, you’ll find that many banks are offering a higher interest rate on a 12-month CD than a 24-month CD. But that may not be a given.

Before you make your decision, spend a good amount of time looking around. You may find that the APY on a 12-month CD is highest across the board, but since it’s your money at stake, it pays to do your research.

2. Which term will give me the highest total payday?

You might snag a higher APY on a 12-month CD than a 24-month CD right now. But that doesn’t automatically make a 12-month CD your most lucrative bet.

We just discussed the fact that the Fed plans to start cutting interest rates soon. If you lock in a 12-month CD today, you might earn more over the next year than with a 24-month CD. But then, you’re taking the risk of rates plummeting substantially over the next 12 months.

To put it another way, say you’re looking at a 5.00% APY on a 12-month CD and a 4.00% APY on a 24-month CD. If you open a 24-month CD with $10,000, you’ll earn $816 in interest. With a 12-month CD, you’ll earn $500 in interest your first year.

But what if in a year from now, the best 12-month CD rate you can get is 2.50%? That’ll put another $262.50 in your pocket. But when you add that to $500, it’s $762.50, which is less than the $816 you would’ve gotten with the 24-month CD. So while you might think a 12-month CD is the more lucrative bet, in this example, you’ll come out $53.50 richer with the 24-month CD.

3. Which term better aligns with my financial needs?

Maybe you’re hoping to buy a home in 2026. Or maybe you’re looking to start graduate school that year and will need access to all the money you can get your hands on. In either case, a 24-month CD may be a riskier bet than a 12-month CD.

What if you’re accepted to an academic program for January 2026, but your 24-month CD won’t mature for another six months at that point? You may be forced to borrow money to pay your tuition instead of accessing the cash that’s already yours in the bank. Or, instead of borrowing, you might withdraw your CD early and face a penalty. Neither is ideal, so think about your personal financial plans before committing to one CD term versus the other.

A lot of people are drawn to 12-month CDs right now because they’re generally the product with the highest rate. But before you make your choice, look at the big picture and crunch all of the numbers to come to a wise decision.

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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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Many would-be home buyers today are being thwarted by high mortgage rates. But read on to see why falling rates may not make it any easier to purchase a home. [[{“value”:”

There’s a reason so many buyers are struggling to purchase a home today. Not only are property values way up on a national scale due in part to a lack of inventory, but mortgages have been expensive to sign since rates started rising in 2022. As of this writing, the average 30-year mortgage rate is 7.02%, according to Freddie Mac. That’s a tough pill to swallow when just a few years ago, you could sign a 30-year loan at 3%.

Let’s say you’re taking out a 30-year fixed $200,000 mortgage. At 3%, you’re looking at $843 per month for principal and interest. At 7.02%, that number rises to $1,333.

Given that gap, it’s easy to see why homeownership is so unaffordable for so many buyers right now — especially first-timers who don’t have equity in a starter home to put toward a new one.

The good news is that mortgage rates are expected to fall later in 2024. The bad news, though, is that that may not result in any relief for buyers. It could even end up making things worse temporarily.

Why mortgage rates could start to drop

Mortgage rates are elevated right now as part of a broader trend. In 2022 and 2023, the Federal Reserve raised interest rates in an attempt to cool inflation. The central bank’s efforts worked to a large degree, and this year, living costs have been rising at a more moderate pace than in recent years.

Because of this, the Fed is expected to start cutting interest rates at some point in 2024. And while we don’t know exactly when that will happen, once the Fed lowers interest rates, mortgage rates should start to follow suit. It’s not inconceivable that mortgage rates could creep down toward the 6% mark by the end of the year.

Why falling mortgage rates may not help buyers — at all

In theory, lower mortgage rates should make buying a home more affordable. In practice, what may happen is that falling rates spur a surge in buyer demand, thereby driving more bidding wars across the market. The result? Even higher home prices than what we’re seeing today.

Right now, buyers aren’t vying for homes the way they were in 2020 and 2021, when mortgage rates were ultra-low. But if rates fall just enough, we could see demand soar again, giving sellers even more of an advantage.

That’s why you may not necessarily want to plan to buy a home later in 2024 — even if mortgage rates drop to a notable degree. Instead, what you may want to do is give the market more time to cool off following what could be a sizable uptick in demand.

Remember, the Fed isn’t expected to cut interest rates only this year — it’s expected to continue doing so into 2025, and possibly beyond. Once buyers see that rates are falling steadily, they may not be in such a frenzy to jump on available homes. So waiting until 2025 to buy could mean not only snagging a better mortgage rate but also having less competition to deal with.

In the meantime, there are a few things you can do to set yourself up for success as a home buyer. You can try to boost your credit score so you can qualify for the best mortgage rate available at the time, and you can grow your savings so you’re able to make a larger down payment. These moves, combined with a bit of patience, could put you in a great position to become a homeowner.

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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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The Costco Executive membership costs twice as much as a standard membership, but can be well worth it. Here’s one writer’s experience. [[{“value”:”

The Costco Executive membership costs $120 per year, which is exactly twice as much as a standard, or Gold Star membership. So, you’re paying a $60 premium for the higher membership level.

Executive memberships come with a few perks, but by far the most significant is that Costco gives 2% back in rewards on most purchases. There are a few exceptions, such as tobacco, gift cards, and alcohol purchases, but the 2% back applies to most Costco purchases.

In this article, we’ll look at how you can determine whether an Executive membership is worth the cost for you, and how I once justified the more expensive membership in a single shopping trip.

Is a Costco Executive membership worth it for you?

Let’s do a quick break-even analysis. If you’re paying an additional $60 for the Executive membership and get 2% back in rewards, this means you would need to spend $3,000 on qualifying Costco purchases in a membership year in order for the savings to justify the cost.

Now, my wife and I do most of our grocery shopping at Costco and use traditional supermarkets like our local Publix and Kroger to fill in the gaps. After all, Costco doesn’t have everything, and let’s be honest, there are some things we don’t need a large quantity of. But for our family of four, we easily surpass $3,000 in Costco grocery spending in the typical year, so we’ve been Executive members ever since a Costco opened in our area about six years ago.

Mine paid for itself in one trip

If you’re like me, you often leave Costco, look at your receipt, and ask yourself, “What just happened?” But even so, spending enough to justify an Executive membership in a single trip is not a regular occurrence.

It has happened once, however. About two years ago, we had a “perfect storm” of expensive items that we needed to purchase, and the best deals on them were invariably at Costco. We decided to rip off the band-aid and buy them all in one trip, and of course, also did some grocery shopping while we were there so we would be stocked up for the next couple of weeks. After all — who wants to deal with Costco twice on a busy weekend?

We spent about $400 on groceries in that trip, and while I can’t remember the exact prices of each item, we also bought:

A new mattress for our guest room, replacing the 20-year-old hand-me-down that had been in there (about $600).A new laptop for my wife, who was about to start a doctoral program (about $1,000).A higher-quality TV for our playroom, as the $99 model I bought just a few years before died (about $300).A new pre-lit Christmas tree after years of using natural trees and cleaning up the mess they make (about $250).A new dishwasher, after the one that came with our house 10 years ago stopped working (about $600).

While I don’t recall the exact prices of the items we bought, there are two things I remember very clearly about that shopping trip. First, we used every cubic inch of my Ford Expedition’s cargo capacity. And second, we had a credit card tab of over $3,000 for a single Costco trip — justifying our Executive membership all by itself.

If you’re undecided about upgrading your membership, think ahead to any large purchases you may be planning to make throughout the next year. You don’t have to make them all in a single trip in order for them to make your Executive membership worth it, but they can certainly cause your Costco yearly spending total to add up, thus justifying the upgrade cost.

Top credit card 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.Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.

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