Money Management

12% of small businesses have tried shrinkflation. But 68% of consumers have switched brands due to shrinkflation. Read on for a better strategy. [[{“value”:”

Small business owners are thinking about shrinking — shrinkflation, that is. A recent survey from Clarify Capital found that 12% of small business owners have implemented “shrinkflation” — defined as selling smaller sizes, portions, or packages of products, but at the same price. And an additional 20% of business owners are considering this strategy.

Recent years of high inflation and supply chain problems have hit small businesses hard. Consumers often believe that inflation is good for business, or that businesses enjoy driving up profits when prices are high. But that’s not always true for smaller companies. Many small businesses are struggling to cope with higher costs of doing business, and they can’t always raise prices without risking customer attrition.

Sometimes shrinkflation could seem like a viable pricing strategy, especially as a last resort. If you don’t want to raise prices or can’t compete against lower-cost competitors, your business might consider shrinking your product sizes. But beware: shrinkflation can be risky.

Let’s look at a few reasons why shrinkflation can hurt your relationships with customers — and what you could do instead.

Customers hate shrinkflation

You might feel like you’re doing your customers a favor by “not raising prices,” but customers have strong feelings about shrinkflation — they don’t like it. Clarify Capital’s shrinkflation survey found that 81% of consumers are already noticing shrinkflation in their everyday lives, and 78% are worried about it. Shrinkflation also has a general air of dishonesty to it; 96% of customers believe that businesses are not transparent about shrinking their product sizes.

It’s no wonder that people can sometimes sound a bit paranoid and conspiratorial about shrinkflation. The Clarify Capital survey found that sizable percentages of consumers believe shrinkflation is happening even to products that shouldn’t be possible to “shrink” — like eggs, meat, and dairy.

Shrinkflation can shrink your sales and customer loyalty

According to Clarify Capital’s survey, shrinkflation can be bad for customer retention. In fact, 68% of consumers said they have switched brands due to shrinkflation, 45% chose generic alternatives, and 29% researched alternative products. Only 32% of people said they responded to shrinkflation by buying the same product as usual.

The lesson for small business owners: Don’t assume that you can get away with shrinkflation. Customers will notice, and they’ll vote with their wallets.

What to do instead of shrinkflation: Better marketing built on trust

Shrinkflation is not an ideal way to treat your customers. People who are loyal to your business deserve better communication and honest engagement. Instead of quietly (sneakily?) giving people less value for money, it’s time to get creative with your small business marketing. Try to turn higher prices into an occasion for deepening your customer relationships in these ways.

Communicate openly about your pricing challenges

Instead of sneaking in a price hike, communicate openly and honestly with your customers, with human vulnerability. Be blunt about how hard your business is trying to keep prices low, and how you’ve been affected by global supply chain issues. Customers might understand — if they don’t feel as if they’re getting price-gouged, they might be willing to pay more for the same product sizes that they’re used to.

Tell the story of your supply chain

If you run a small chocolate shop or cafe, tell the story of how much it costs to buy the ingredients from your suppliers — whether it’s sustainable, eco-friendly coffee or Fairtrade cocoa that pays a generous living wage to small-scale farmers. Show customers why they’re getting extra value from what they spend with your business. They might be willing to pay a bit more to help keep your company (and your suppliers) thriving.

Offer new customer loyalty incentives

The Clarify Capital survey also found that 36% of customers are responding to shrinkflation by buying items in bulk. Instead of making the size of your products and packaging smaller, what if you could do the opposite — and make your customer relationships “bigger”?

Offer more bulk items. Offer premium add-ons so people get more value for their dollar. Launch an expanded customer loyalty program where people can get a discount if they buy from you more often. Instead of making your customers feel short-changed by shrinkflation, extend an invitation to make higher prices a win-win deal: Spend more money, get more value.

Bottom line

Shrinkflation is becoming a more popular pricing strategy for struggling small businesses, but this might not be the best plan for your company. Consumers tend to have strong, negative feelings about shrinkflation. They might respond to smaller portions and package sizes by taking their money to a competitor.

Instead of shrinking your customers’ experience with your product, try doubling down on generous offers and authentic, human-centered marketing. Don’t drive customers away by giving them less value for money. Instead, try to use this occasion to show that small businesses are also hurt by rising prices, and we’re all in this together. Building trust with your customers and improving customer retention is always a good investment.

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People are often encouraged to buy a home because it’s considered a good investment. Find out why you shouldn’t see your home as part of your investment portfolio. [[{“value”:”

I’d heard most of the typical arguments for buying a home by my mid-20s. Land…they’re not making any more of it! Rent is just throwing your money away. And of course, a home is a great investment.

Looking at the average house price, that last argument would seem to be correct. It went from $273,600 at the end of 2013 to $435,400 at the end of last year, according to data gathered by The Motley Fool Ascent. That’s an increase of over $160,000.

Buying a home could be a good decision if you can afford it and you’re ready to settle down in one place. But you shouldn’t do it as an investment. Here’s why.

1. Homes and investments serve different purposes

Even though homes are often seen as investments, that’s not really accurate. A home is a place to live. An investment is an asset you purchase to make money. The only way to make a profit on your home is to sell it. If you don’t want to move, or you’ve found your forever home, you won’t be making any money from it.

What makes your home more livable also doesn’t always make it a better investment. If you’re like many homeowners, you might decide at some point that you want to remodel. Most remodels cost more than the value they add to a home. In the 2024 Cost vs. Value Report by Zonda, only three out of 23 types of remodels had a positive return on investment (ROI).

Let’s say you’d like to do a major kitchen remodel. This costs more than twice as much as it adds to a home’s value, on average. It may make your home a nicer place to live for you, but it wouldn’t make any sense as an investment.

2. There are regular costs to owning a home

Some home buyers focus on how much their mortgage payment will be. But that’s just one of many costs of homeownership. Here are a few more you’ll need to be ready for:

Property taxesHomeowners insuranceMaintenance and repairsUtilities (this often includes bills you didn’t have to pay as a renter, such as sewage and garbage collection)

Those are all expenses you’ll have on a regular basis after buying a home. This isn’t a big deal, assuming you planned for these costs and can afford them.

But if you’re looking at your home as an investment, it’s a huge disadvantage. On top of the fact that your home isn’t making you any money, you also need to keep putting more money into it — not something you need to do when you invest in stocks.

3. Homes don’t always increase in value

Investing has its risks. One of the most effective ways to reduce the risk of losing money is to build a diversified portfolio. Instead of putting all your money into a few companies, you put it into a few dozen. Or you buy index funds that invest in a large number of stocks. For example, you could pick an index fund that invests in the entire stock market.

You can’t do that with your home. You’re only buying one, after all. When you buy a home, you’re putting all your eggs in one basket. Once again, this isn’t a problem if you’re looking at it as a place to live. But it’s the opposite of what you’d want to do as an investor.

4. You can’t use your home to fund your retirement

One big reason why investing is so important is so you have money to live on in retirement. Social Security benefits only replace about 40% of pre-retirement earnings, according to the Social Security Administration. When you have an investment portfolio, you can gradually withdraw from that to help cover your bills.

There’s no way to do this with your home. You could get a home equity line of credit (HELOC) or loan, but you’d need to pay that back. If you want to tap into the value of your home, you’d need to sell it, which also means finding a new place to live.

Homeownership has plenty of benefits. You’ll have your own place and the freedom to do what you want with it (although you may need to check with an HOA first). And if you sell your home one day, you might make a profit from it. But if you decide to get a mortgage and buy a home, remember that it’s a place to live, not a part of your investment portfolio.

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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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Personal loans can be flexible and convenient, but it’s not a great time to sign one. Here’s why. [[{“value”:”

Having cash in a savings account can put you in a position of not having to borrow money when unplanned expenses pop up, or when you have a planned expense you no longer want to put off. But if you don’t have enough cash in the bank to cover unexpected bills or larger expenses like home renovations, then you may seek to borrow money. And you may decide to apply for a personal loan for the multiple benefits involved.

The nice thing about personal loans is that they allow you to borrow money for any purpose, whether it’s repairing your car, finishing your basement, or buying equipment to start a side hustle. Plus, with a personal loan, you get the benefit of a fixed interest rate and predictable, steady monthly payments.

During the fourth quarter of 2023, 28.1 million new personal loans were issued, reports TransUnion. And you may be eager to sign one in the near term. But here’s why you may want to reconsider that.

You risk unfavorable consequences for falling behind

Personal loans, unlike auto loans and mortgages, are unsecured, which means they aren’t tied to a specific asset. As such, you don’t risk losing your home or having your vehicle repossessed when you fail to repay a personal loan on time. But that doesn’t mean you don’t risk unfavorable consequences.

If you don’t repay a personal loan, at the very least, your lender will report you as delinquent to the credit bureaus. From there, your credit score could take a massive hit. Once that happens, you may be denied the option to borrow again in the near term. And if a lender does approve you for a loan or line of credit, you might get stuck with a very expensive borrowing rate.

Also, if you blow off your personal loan completely, your lender could attempt to sue you in court. If a judgment is entered against you, you risk consequences like wage garnishment to help your lender get repaid.

It’s a bad time to borrow in general

The Federal Reserve spent a good part of 2022 and 2023 raising interest rates to help cool inflation. As a result, it’s expensive to put pretty much any type of loan in place, including a personal loan. This holds true even if you have excellent credit.

The good news is that the Fed is expected to start cutting interest rates at some point this year. And those rate cuts are likely to continue into 2025. So in time, the cost of signing a personal loan has the potential to come down.

But we’re not there yet. So if you’re able to wait on borrowing money, it’s a good idea to sit tight. Waiting a year to take out a personal loan could leave you paying a lot less each month, which reduces your risk of falling behind.

Of course, if you need a personal loan to repair your roof, you may not be able to wait. But if you want one to renovate your kitchen, that’s something you can put off as long as your current kitchen is functional.

All told, personal loans can be a convenient means of borrowing. But any time you commit to a loan, you take on a bit of risk — not to mention an extra monthly expense. So think carefully before signing up for a personal loan today, especially given current borrowing rates.

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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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Balancing a checkbook can take hours each month. Take a look at what one writer does instead. [[{“value”:”

The internet is such an integral part of most of our lives that it’s hard to imagine a world without online banking. Yet, in the year 2000, 20% of U.S. banks still didn’t offer their customers online access to their accounts. If a person wanted to know the status of their checking or savings account, they had to visit their local bank branch or stop by an ATM. Neither of those tasks may seem labor-intensive, but they did take time.

Fortunately, we can now access our accounts via our computers and mobile devices anytime. For example, a few nights ago, I was nearly asleep when I suddenly realized I wasn’t sure if a certain payment had cleared my account. Thanks to technology, checking my account was as easy as pulling up the mobile app on my phone.

As much as I appreciate that instant access, the thing I like most about how banking works today is the ability to check my account balance and transactions daily. While it may sound excessive, hear me out. I have some fairly logical reasons for doing so.

1. Security

My checking account has been hacked twice. Each time, I noticed a payment I didn’t recognize. Because I check my accounts daily, I’ve been able to let my credit union know right away and get reimbursed.

The earlier you report fraud, the better your chances of minimizing the damage and recovering stolen funds. According to my credit union’s fraud department, bad players often conduct a “test run.” They charge something small to your account and wait to see if you notice it. If not, they feel confident enough to make a larger purchase.

Fun fact: One of the crooks used my account number to place an order that was sent to his home. It may go without saying, but he was really easy for the bank to find.

Would I have noticed the fraud if I had not given my account a daily once-over? Probably, but I don’t know how long it would have taken or if it would have been so easy to get all my money refunded.

2. Forgotten bills

I know we hear a lot about how many subscriptions the average person is paying for and not using, and that’s certainly been true for me. Checking my accounts daily means I catch a forgotten subscription quickly enough to minimize my losses. I’ve also noticed bills that I absolutely forgot to include in the household budget for the month. For instance, if I make a donation and forget to plug it into the budget or an insurance payment comes out, I know right away.

3. Hard-to-miss patterns

The only downside of checking my accounts daily is that I can’t lie to myself about where my money is going. It’s right there in black and white. If I’m spending too much on groceries or there are multiple purchases from Amazon, I’m forced to face the truth and adjust my spending.

Checking daily also serves as a reminder. Each Thursday morning, I transfer money to my Solo 401(k). If, on Fridays, I don’t see that transfer pending, I’m reminded that I need to take care of it.

Because I use one account solely for my small business, I can see at a glance whether I’ve been paid. In fact, if I need to remember how much I was paid for a job three weeks ago, the easiest way is to scroll back to that date rather than look through a bunch of invoices or emails.

4. Great return on investment

The older I get, the less time I’m willing to waste. When my husband and I were first married, I spent hours (and hours) each month balancing our checkbook, and never quite sure I got it right. I always seemed to be off by $0.84 or some random amount. It was always far more stressful and time-consuming than I would have liked.

I’m not exaggerating when I tell you it takes me less than five minutes daily to check four bank accounts. That’s not five minutes for each account, but five minutes in total. In exchange for those five minutes, I know which bills have cleared, which are pending, and whether the accounts have been accessed by someone other than my husband or myself. That’s a pretty great return on my investment of time.

I know spending time checking in on your bank accounts every single day may not be everyone’s idea of a good time. However, I think if you give it a try, you may find your own list of perks for doing so.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dana George has positions in Amazon. The Motley Fool has positions in and recommends Amazon and U.S. Bancorp. The Motley Fool has a disclosure policy.

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