Money Management

Revitalize your finances this spring with expert tips. Take a look at how to start your financial detox now. [[{“value”:”

The last of winter’s chill is fading away. In the spirit of spring cleaning, why not extend that fresh start to your finances?

Veetahl Eilat-Raichel, financial entrepreneur and Sorbet CEO, formerly CMO at a major credit card firm, suggests it’s the perfect time to detox your credit “wardrobe” and plant seeds for a flourishing financial future. Let’s dive into some of Eilat-Raichel’s top tips for making your personal finances bloom this season.

1. Reset your budget

First, give your budget a thorough dusting. This isn’t just about shaving a few dollars off your grocery bill; it’s a holistic reevaluation of your financial flow. Are you subscribing to services you barely use? Now’s the time to cut them loose.

Take a magnifying glass to your debt-to-income ratio, too. If your debts are nibbling off more than their fair share of your income, it’s time for some strategic planning to get back on track. Think of it as decluttering your financial closet.

2. Assess your credit

In today’s economic context, assessing your credit is crucial, especially with U.S. credit card debt reaching all-time highs. Eilat-Raichel’s advice highlights the importance of regular credit checks as preventive measures for your financial health. These checks serve as a diagnostic tool, helping you monitor credit utilization and detect early signs of debt.

This proactive step is essential for preventing minor issues from spiraling into significant problems, ensuring that you’re aware of your financial standing and actively safeguarding it against potential instability. After learning your credit status, it’s vital to take concrete steps toward improving or maintaining your financial health. This includes:

Devising a targeted repayment strategy for high-interest debts and adjusting your budget to curb future borrowing.For those with better credit, options like asking for a credit limit increase from your card issuers can be explored to improve credit scores, albeit cautiously.

These efforts, alongside consistent monitoring of your credit score and reports, not only translate insights from your credit assessment into effective action but also promote a proactive stance in managing and enhancing your financial well-being.

3. Accessing “hidden” money with PTO

Here’s a surprising stat: Only 45% of earned PTO days are used by employees. That’s thousands of dollars in untapped resources sitting idle. Think of it as the loose change in your couch cushions but on a grander scale. Eilat-Raichel suggests cashing in on this “hidden” money for debt payments or saving for a sunny summer getaway.

How do you do this? Any employee who works for a company with a rollover PTO plan can apply to use Sorbet directly without having to go through their employer. The employee can essentially borrow against the cash value of their own unused PTO. Then they pay Sorbet back, either when they leave the company and get their PTO payout, or after two years, whichever comes first. It’s a way to reward yourself for your financial diligence.

4. Avoid lifestyle creep

Ah, lifestyle creep — the sneaky financial phenomenon that can erode your savings as fast as spring showers wash away pollen. With online shopping just a tap away, resisting temptation has never been more challenging. Eilat-Raichel offers some savvy hacks to keep those old spending habits at bay:

Remove ApplePay from your phone to add a barrier to mindless spending.Ditch credit card auto-pay options on your browsers; making payments manually can be a deterrent against unnecessary purchases.Hit unsubscribe on those promotional emails.

Spring cleaning your finances isn’t about making monumental changes overnight. It’s about taking stock, pruning the excess, and setting the stage for growth. By resetting your budget, assessing your credit, accessing hidden funds through PTO, and avoiding lifestyle creep, you’re not just cleaning up; you’re setting a foundation for financial health that can last all year round. So, as the days get longer and the air warmer, take a moment to consider how you can refresh your financial habits. After all, a little spring cleaning can lead to many fresh starts.

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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 Apple and Target. The Motley Fool recommends Flow. The Motley Fool has a disclosure policy.

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You have a lot of great options for high-paying CDs today. Read on to learn how much $2,500 in one could net you over time. [[{“value”:”

Today, investors have an unprecedented opportunity to buy certificates of deposit (CDs) paying very competitive rates. In fact, there are dozens of CDs available that offer yields above 5.00%. But are they worth investing in? Just how much money can you make if you purchase a CD?

Let’s take a look at what your investment could turn into if you have $2,500 to put into a certificate of deposit.

A $2,500 investment in a CD could earn you a great return

When you have $2,500 to invest in a CD, you’ll have your pick of options, since that’s the minimum investment required with many different banks. (Some banks have lower minimums or no minimums at all, and others have higher ones.)

The amount of money that you can make is going to depend on what CD term you choose and which bank you invest with. Let’s take a look at what you could earn if you opened a 6-month, 1-year, and 5-year CD based on The Ascent’s list of the highest CD rates available as of April 29, 2024.

As you can see, the longer you leave your money invested, the more you can earn. That’s because you’re being paid interest for a longer period.

You may also notice that the yields on short-term CDs are actually higher than the rates 5-year CDs are paying right now. This is unusual, since CDs with longer terms generally offer higher rates to convince investors to lock up their money for years. Current economic uncertainty and the Federal Reserve’s stated desire to lower interest rates is the reason for this phenomenon (which is called an inverted yield curve).

The high rates on short-term CDs present a major opportunity right now. You can invest without making a long-term commitment and still earn a substantial amount of interest in a short period.

Should you invest in CDs?

Since CDs are FDIC-insured, you can’t typically lose money on them (unless you have to withdraw your money so early that your penalty exceeds the interest you’ve earned to date). And the rates they’re offering are some of the most competitive we’ve seen in years. Being able to earn $527.04 on your investment without really taking any chance of loss is a pretty nice opportunity.

But that doesn’t mean CD investing is right for everyone. The rates you can earn are still below the 10% average annual returns you could make on an S&P 500 index fund. As a result, your money still belongs in a brokerage account if you won’t need it for around five years or more. That should give you a long enough timeline that investing in the S&P 500 presents a pretty small risk of loss. And you do have to give up liquidity to invest in a CD, so money you may need really soon (or at any time, like your emergency fund) doesn’t belong in one either.

If you happen to have $2,500 available that you can tie up for a few months to five years, but not for much longer, you should absolutely think about opening a CD today. Check out the best CD rates on The Ascent’s list and get your money invested now, before today’s competitive rates disappear for good.

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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 bakery is loaded with deals. But should you join for the express purpose of getting to access it? [[{“value”:”

There are a host of reasons why I’m a huge fan of Costco. But one of my favorite things about shopping there is getting access to the store’s fantastic bakery.

Not only are the baked goods you’ll find at Costco delicious, but the prices, in many cases, can’t be beat. But should you join Costco for the bakery alone? That’s an interesting question. Let’s explore.

You might make back your membership fee in savings

A basic membership at Costco costs $60 a year, while an Executive membership costs $120. With the latter option, you get 2% cash back on your Costco purchases.

If you’re thinking of joining Costco just for its bakery (and really, I wouldn’t judge you at all for doing that), then you may want to stick to a basic membership. But will you make your $60 back? Well, it depends on how many bakery purchases you make.

In my family, we have a tradition called Muffin Saturday where we — wait for it — eat muffins for breakfast. At Costco, I can buy 12 jumbo muffins for $9.99, and that lasts my family of five for four breakfasts. My three kids and I each eat half a Costco muffin while my husband eats a whole one. So we’re only going through three of those muffins per weekend.

At my local supermarket, a pack of four regular-sized muffins costs $5.99. And there would be no splitting of those muffins, since they’re smaller.

My kids and I would each eat one, and my husband would probably eat two. So all told, at Costco, I’m paying $9.99 for four Muffin Saturdays for my family. At my local store, I’m paying about $36. Therefore, I’m saving about $26 per month at Costco on muffins alone, which more than pays for a membership. (OK, so I might have a muffin problem, but we’ll table that for another discussion.)

Now, perhaps you don’t consume muffins in the same quantity my family does. But still, if you have multiple kids and tend to need larger cakes for their parties, you can get a giant Costco sheet cake to feed several dozen people for $24.99. At a local bakery in my area, you’d pay three times as much for a cake that size. So in that case, you might almost make back your $60 membership fee with a single large cake purchase.

There are other benefits of a Costco membership you may not know about

There’s nothing wrong with joining Costco for access to the bakery alone. But chances are, once you buy a membership, you’re likely to stumble upon and take advantage of different perks that you may not have known about initially.

For example, Costco’s auto center offers huge savings on tires and gives you perks like free rotations and five years of road hazard protection. Costco’s optical center offers lower prices on glasses. And Costco’s travel service gives you access to unique vacation packages at competitive price points.

So all told, if you’ve been introduced to a Costco bakery item you love (perhaps you had a friend who was nice enough to share one of their Costco muffins with you), then it could pay to get a membership and see what happens. And remember, if it turns out you’re not getting such great use out of your membership, you can always cancel it and get a refund. So all told, it’s a pretty low-risk proposition for your budget — and it might end up being one that puts a lot of delicious cake on your table.

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.

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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.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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Net worth is an important financial metric. Find out the average net worth for the upper, middle, and lower class to see where yours lands. [[{“value”:”

Net worth is a common way to measure wealth. Add up the value of all your assets, subtract all your outstanding debt, and voila. For example, if you have $100,000 in retirement accounts, $25,000 in savings, and $10,000 in debt, then your net worth would be $115,000. This gives you an idea of how you’re doing financially.

Once you know your net worth, you may be interested in seeing how it compares to the upper, middle, and lower classes. Thanks to research from the Federal Reserve, we have data on just that.

Here’s the net worth of the upper, middle, and lower class

Class is often based on income, at least in financial discussions. The highest 20% of earners are considered upper class. The bottom 20% make up the lower class. Everyone else makes up the middle class, specifically the lower-middle, middle, and upper-middle class.

The Federal Reserve provides the median net worth for these groups in its 2022 Survey of Consumer Finances. Here’s the much each group has:

The upper class starts with an average net worth of $793,120. That’s for the top 80% to 90% of earners. The top 10% has much more — an average net worth of $2.65 million.The upper-middle class has an average net worth of $300,800.The middle class has an average net worth of $169,420.The lower-middle class has an average net worth of $58,550.The lower class has an average net worth of $16,900.

Keep in mind that net worth isn’t the only important factor. That alone doesn’t signify that you’re doing well financially.

If you’re a young adult, it’s normal to have a lower net worth. You haven’t had time to build wealth yet. And while a high net worth is generally a good sign, it’s not the only thing that’s important. If you have millions of dollars, but you’re worried about spending any money on yourself, that’s not healthy, either.

How to increase your net worth

There’s no need to obsess over your net worth, but it is important to build wealth as you get older. You’ll have more financial security, and by setting aside enough money, you’ll be able to retire when you want.

Here are a few smart financial habits to follow that will help you do this:

Commit to saving and investing a portion of your monthly income

A popular recommendation is to save 10% and invest 10%, but you can use whatever numbers work for you. For example, if you make $5,000 per month, you could transfer $500 to your savings account and another $500 to an investment account.

Invest heavily in the stock market to grow your money

The stock market is one of the most proven investments historically, with an average annual growth rate of about 10%. If you aren’t planning to retire within the next 10 years, most of your portfolio should probably be in stock investments.

Build an emergency fund to be ready for unexpected expenses

Emergencies will happen, and if you’re not prepared for them, you may need to go into debt to pay for unplanned bills. Put some of your savings toward an emergency fund — when fully funded, this should have three to six months of living expenses.

Be very selective about taking on debt, and avoid high-interest debt

Some types of debt can work out well, with mortgages being the best example. But high-interest debt, such as credit card debt, makes it much harder to build wealth.

If you follow those habits, your net worth will grow over time. Now, it will go through ups and downs. You might need to dip into your savings at some point, or the value of your investment portfolio could temporarily drop.

For that reason, you shouldn’t get too wrapped up in tracking your net worth from month to month. No matter what class you’re in now, and where you end up, building wealth is a long-term process. Results are measured in years and decades. As long as you have good money habits, you’ll be going in the right direction.

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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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Some workers are eligible for severance pay when their jobs are eliminated. Read on to see why falling back on that option is pretty dangerous. [[{“value”:”

In April, the U.S. economy added 175,000 new jobs and the unemployment rate held fairly steady at 3.9%. But even in a fairly strong labor market, there’s always the chance that your job might land on the chopping block — not because of something you did, but due to circumstances outside of your control.

That’s why it’s so important to have money in a savings account in the event of a lost job. That’s money you can use to cover your bills until you’re employed again, thereby sparing yourself the cost of carrying a credit card balance.

But what if you’re confident you’ll be eligible for severance in the event of a layoff? Can that payout take the place of your emergency fund, or do you still need savings of your own?

Can you really count on getting severance?

The extent to which you can plan to fall back on severance in the event of a layoff really hinges on the employment contract you signed. If there’s language in that contract spelling out a severance package, and you know you qualify for compensation in the event of being downsized from a job, then you may be able to take some comfort in the money that’s coming your way. And in that case, you may be able to get away with having a smaller emergency fund.

Let’s say your employment contract expressly states that any worker who’s laid off gets severance equal to one month of pay per 12 months of employment, up to a total of 12 months of compensation. If you’ve been at your company for 15 years, your contract basically tells you that you’ll be getting your salary for a year if you’re let go. In that case, you may not need a huge emergency fund — though you should always have some emergency cash on hand for expenses not related to job loss, like home or car repairs.

However, if there’s no specific language about severance in your employment contract, then severance is something you can’t rely on. It’s that simple.

What’s more, even if your contract spells out the terms of how severance is paid, to get that money, you may be required to sign a separation agreement with unfavorable terms. A separation agreement might contain language that limits your ability to seek work elsewhere, which would make signing it a poor choice. But your employer might also withhold your severance pay if you don’t sign its agreement.

Now, in this type of situation, it’s a good idea to get an employment lawyer involved. They may be able to help negotiate the terms of your separation agreement so you can get your severance and be on your merry way. The point, however, is that even when severance is “guaranteed,” you might still need a backup plan in emergency fund form.

Don’t neglect your savings

It’s nice to be able to have severance pay to fall back on in the event of a layoff. But don’t use that as a reason to avoid building an emergency fund.

Not only might you need cash for unplanned bills that arise while you’re still gainfully employed, but it might also take more time than expected to find a new job after losing one. So the more money you have in the bank, the less stress you’ll have in that regard.

Your job, for example, might give you a year’s worth of pay following a layoff. In many cases, that’s enough time to find work. But if you have a very specialized or upper-level role, it might take more than 12 months to get hired elsewhere. And you don’t want to land in a situation where your severance has run out and you’re forced to take any old job because you don’t have the savings to stay the course and find a job you want.

So at the very least, aim to build an emergency fund with enough money to cover three months of expenses. Having that sum of cash on hand buys you options either way.

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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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