Money Management

Housing, transportation, and food costs have soared. Read on to find out how to lower your expenses. [[{“value”:”

Most Americans don’t need any data showing them that everyday expenses are pricier than they used to be. Every trip to the grocery store reminds them of that.

But it can be difficult to know just exactly how much more we’re all spending, unless we look back at just how much prices have changed over the past few years.

When it comes to America’s top three expenses — housing, transportation, and food — inflation has weighed heavily on our monthly budgets. Here’s how much prices for these three necessities have gone up since 2020 and how to deal with the rising costs.

House prices rose nearly 27%

Housing is the largest monthly expense Americans have, and according to Federal Reserve data, the median transaction price for a house has jumped 26.9% since 2020.

Increasing house prices over the past few years mixed with rising interest rates have made homes unaffordable for many people. Redfin recently noted that potential home buyers need to earn $113,520 to afford a median-priced home — 35% more than the typical household earns.

Rental prices are also straining many people’s budgets, as they have increased 30% since before the pandemic.

How to save on housing costs

Renters may be able to save money by signing a lease during winter months. Realtor.com says that many apartments drop their rent prices in the offseason between November and January. If your lease is up for renewal during those months, negotiating for a lower rent may also be possible.

One overlooked way for homeowners to lower their costs is to shop around for a better homeowners insurance rate. Consumer Reports says that just 13% of homeowners shop around for insurance, but when they do switch, 39% did so because they found a better price.

Tip: Consider bundling your home and auto insurance, which can save you up to 23%, depending on the insurance company.

Additionally, as house values have jumped over the past few years, some homeowners are appealing their home’s assessed value to try to lower their tax liability. You may have to hire a professional to do an assessment and will likely have some paperwork to complete, but if your home’s value has been assessed too high, appealing it could be a smart financial move.

New car prices are up 23%

The second-largest monthly expense for Americans is transportation. Car payments are the most expensive contributor to transportation costs, and they’ve gone up considerably as new car prices soared 22.8% from 2020, according to Kelley Blue Book. That increase means the average transaction price of a new car is now $48,247.

Another reason for the increase comes from car insurance costs soaring 38% since 2020. Insurance costs have jumped as some insurance companies have suffered losses from catastrophic weather events.

How to save on transportation costs

One of the simplest ways to save on transportation costs is to be careful how much you spend on a new car. New cars quickly lose value after they’re purchased, and in 2023, Americans owed a record high $6,064 more on their car loans than the vehicles were worth, according to Edmunds.

Additionally, just like with housing, one way to save on transportation costs is to shop for a better insurance rate. Data from Jerry shows that 60% of people who get multiple insurance quotes end up finding cheaper car insurance.

Grocery prices are up 25%

Rising inflation over the past two years has strained Americans’ monthly food budgets. According to BLS data, food costs are now 25.2% more expensive than they were in 2020.

And by some metrics, it may be even higher. The Wall Street Journal recently analyzed data on common grocery items purchased in 2020 and found that the grocery list for the same items is 36.5% more expensive now.

The Federal Reserve said this month that inflation hasn’t made as much progress this year as it hoped, which means costs could continue to tick higher for some food items.

How to save money on food costs

My family takes a monthly trip to Costco for bulk food items to save on food costs. Buying in bulk doesn’t make sense for all of our food needs, but stocking up on non-perishables, snacks for the kids, and some drinks helps lower our food costs. Depending on what you buy, some data shows shopping at Costco could save you $1,000 annually.

You may also want to consider using virtual coupons to cut down on the cost of groceries. There are also lots of great apps that help you track down the best deals and many of them even give you cash back when purchasing through the app.

It’s impossible to avoid all of the price increases over the past couple of years, but examining your home and auto insurance premium payments, shopping at discount warehouses, and even appealing your property tax assessment could help you lower your monthly expenses and fight back against inflation.

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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.Chris Neiger 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 $2 million nest egg may be within your reach. But it’ll take some planning. Read on to learn more. [[{“value”:”

The average person saving for retirement today has $88,400 socked away, according to Northwestern Mutual. But you may have much loftier goals. Perhaps you’re aiming for a $2 million nest egg. And if you play your cards right, it’s a savings target that may be more than attainable. Here’s how to get there.

Step 1: Start saving from a young age

When growing wealth for retirement, time is your greatest resource. The more time you give your money to grow, the better you get to take advantage of compounded returns in your IRA or 401(k).

Aim to start saving as soon as you can. You may not be able to divert funds to a retirement account during your first year of employment, as you might first have to focus on building an emergency fund (something that should take precedence over retirement savings, since it could keep you out of debt in the near term). But once you’re set with near-term savings, get into the habit of funding an IRA or 401(k) every month.

If you can put those contributions on autopilot and then raise them as your income rises, even better. A 401(k) will pretty much always make this possible since these accounts are funded via payroll deductions. If you’re going the IRA route, find one that allows you to set up an automatic transfer so you stay on track.

Step 2: Invest your savings in stocks for strong gains

Some people worry about investing their savings in stocks because the market has a history of volatility. But it also has a history of strong performance. It pays to rely on stocks to grow your money, because if you play it too safe, you may not get the sort of returns that lead to $2 million.

Over the past 50 years, the stock market’s average annual return has been 10%. But do note that those returns account for years of solid performance and years when the market utterly tanked.

Step 3: Don’t retire too early

Many people aim to close out their careers in their mid-50s, late 50s, or early 60s. That’s something you may be tempted to do if you don’t particularly like your job. But extending your savings window into your mid-60s or beyond could make it easier to accumulate the balance you’re after. So it pays to pursue a career that not only pays the bills, but gives you work you enjoy to some degree (or at least don’t hate).

Remember, too, that even if you get to a $2 million nest egg by age 55, it may not buy you the same retirement as it would at age 65. When you retire in your mid-50s, you have to be more conservative with your withdrawals, leaving you to live a more pared-down lifestyle.

Putting it all together

So now that we have our game plan, let’s say you begin saving for retirement regularly at age 25 — once your emergency fund is complete and you’re in a stronger place financially. Let’s say you also manage to contribute $400 a month to a retirement plan through age 65, all the while enjoying an average annual 10% return on your money.

The balance you’ll be looking at? $2.1 million. That also has you never increasing your monthly contributions beyond the $400 point, which you should be in a better position to do as your earnings increase.

All told, a $2 million nest egg may be more than attainable for you, even if you’re not a six-figure earner. You just need to start early, invest wisely, and keep at it for long enough.

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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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A checking account isn’t the place to keep large amounts of money. Discover a rarely discussed downside of doing so and how it could lead to financial issues. [[{“value”:”

Checking accounts are designed for managing money. Paying your bills, transferring money to savings and retirement accounts — things like that.

They’re not the best place to keep money long term, but some people do it anyway. It could just end up happening if you don’t know what to do with your money. And there are also those who see a large balance in their checking accounts as a form of financial security.

One big drawback of keeping too much money in your checking account is that it won’t earn much interest. Checking accounts generally don’t pay as much as savings accounts. But there’s an even worse problem that could arise.

You may be more likely to spend that money

Different types of bank accounts serve different purposes. A checking account makes money easy to access, since it’s designed for money management. You can get cash at the ATM using your debit card, withdraw funds to another account, or use them to pay bills. As the name suggests, you can even write checks from this type of account! Does anyone still use those?

A savings account is designed for storing your savings. It will keep that money safe and hopefully pay out a reasonable interest rate (high-yield savings accounts are best for that). It may not have all the fast withdrawal options you get with a checking account, but that’s not the point with this type of account.

Because it’s easier to dip into your checking account, people often see the balance as spending money. That’s where keeping too much money in your checking account becomes a problem. When you put money in your savings or invest it, you’re more likely to consider it untouchable. You’ve specifically set it aside for that purpose, so you won’t want to use it for anything else.

When you keep it in your checking account, you may still see it as money you can spend. After all, you haven’t earmarked it for anything in particular. You could save it, but you could also be tempted to use it on big purchases you don’t really need.

Don’t let all your money be spending money

Overspending is a common issue. One of the best ways to keep your spending under control is to give your money a purpose — normally saving and investing. You can do this by transferring a portion of every paycheck to your savings and investment accounts. For example, you could save 10% of your income and invest another 10%.

Let’s say you make $5,000 per month. If you’re saving and investing 10%, then you’d transfer $500 to a high-yield savings account every month. This money would be for any savings goals you have, such as:

An emergency fundA down payment on a homeA holiday vacationAn expensive item you want to buy

You’d also transfer $500 to your retirement accounts and invest it. This money, as you’d expect, would be for your retirement.

If you kept this $1,000 sitting around in your checking account, you’d be much more likely to spend it. Once you move it to your savings and investments, withdrawing it isn’t as easy. You could still do it, but it’s more of a hassle. And you probably won’t want to, because you’ve set that money aside for a specific goal. As an added bonus, your money will also grow much more this way.

It’s fine to keep some money in your checking account to pay your bills. A rule of thumb is to have one to two months of expenses there. But it doesn’t do you any good to overfund your checking account. If you’ve done that, divide that extra cash up between your savings and investments so you can put it to better use.

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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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Having multiple credit cards has several benefits for your wallet. Here are three you should know about. [[{“value”:”

There are plenty of good reasons to open a credit card: You’ll be able to buy things even if you don’t have cash right away. You’ll be able to establish a credit history that will hopefully lead to affordable loans in the future. And you could even earn rewards on your purchases.

Eight in 10 Americans have credit cards, but 30% prefer to keep just one card in their wallets. This isn’t necessarily a bad choice, but it could cause you to miss out on the following three perks.

1. Less disruption if your card is stolen

Your credit card might get stolen (or even lost) at some point in your life. You’re generally not responsible for fraudulent purchases as long as you notify your card issuer quickly. But it will usually cancel your existing card and issue you a new one with a new number.

It will probably take a few days to a week to get your new card, and you could run into problems during this time if you only have one credit card. You’ll have to rely on cash or a debit card for purchases. If this isn’t an option for you, you might have to borrow money from a friend or wait to make purchases until you get your new card.

This isn’t an issue if you have a second card as a backup. You can switch to that one while you wait for your new card to come in. The only time this wouldn’t work is if your entire wallet was stolen. If you prefer, you could keep your backup card in a safe place to avoid this.

2. Improved credit score

Opening another credit card isn’t guaranteed to raise your credit score, but it often does because it lowers your credit utilization ratio. This is the ratio between the amount of credit you use each month and what you have available to you. For example, if you have a $1,000 balance on your card with a $5,000 limit, that gives you a credit utilization ratio of 20%.

Credit card issuers like to see a low credit utilization ratio as long as that number is above 0%. It suggests you’re living within your means. A credit utilization ratio over 30%, on the other hand, suggests you’re heavily dependent on credit and may have trouble paying back borrowed money.

If you’re approved for a new credit card, you automatically gain access to more credit. If your spending remains more or less the same, your credit utilization ratio will drop and your credit score will rise.

But this isn’t a strategy you want to overuse. Every time you apply for new credit, the card issuer does a hard inquiry on your credit report. This drops your score by a few points. Usually, all hard inquiries that occur within about 30 days of one another only count as one inquiry on your credit report so as not to penalize those shopping for a good deal on a credit card or loan.

But inquiries more than 30 days apart could each take a separate toll on your score. To avoid this, only apply for new credit about once every six months, and even then, only do so if you feel you have a decent chance of getting approved.

3. Maximize your rewards

Every cash back rewards credit card has its own system for earning points. Some offer a flat 1% or 1.5% back on all purchases while others have rotating bonus categories that change quarterly. Then, others offer higher cash back rates on specific categories, like dining, all the time.

Having multiple credit cards in your wallet enables you to maximize your rewards by choosing the right card for each purchase. You could have one card you use every time you get gas, for example, and another you use for groceries or dining out. If you shop at a particular store often, you may also want to own its card to unlock special savings offers.

How much you’ll earn depends on the cards you have and how much you spend. But even 1,000 extra points could add up to $10 in cash rewards on a lot of cards.

It’s totally fine if you’re not comfortable keeping track of multiple credit cards. But if you like the idea of any of the above benefits, consider shopping for a new credit card today. Compare a few top offers and look for one that aligns best with your spending habits so you can get the most out of it.

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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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Small business credit cards can be powerful tools. Here’s how many you should have in your (metaphorical) toolbox. [[{“value”:”

We all want to do everything “right” to run our own small business. Unfortunately, it’s often hard to know the right move when every business plays by its own rules.

For example, when handling your business’s finances, you might wonder about the right way — and wrong way — to use business credit cards. Should you have one? More than one? How many is too many?

You should have at least one credit card

My rule of thumb for small business credit cards is the same as it is for personal cards: You should have at least one. I have a few reasons behind this recommendation.

Credit cards are handy financing tools

The simple convenience of a credit card is a big selling point to me. I don’t need to write a check, go to the bank to pull out cash, or worry about qualifying for a vendor credit line. I can just pull out my business credit card and go about my day.

More than that, though, credit cards don’t require me to have money in the bank right that moment. A lot of small business owners can have inconsistent cash flow, especially when you’re waiting on folks to pay their invoices. You can put important expenses on a credit card and give yourself at least a couple of weeks of leeway.

If you need even more leeway, you can find a card with a 0% intro APR offer. This could give you six months or more of 0% interest on purchases, so you can pay charges off over time without accruing lots of fees.

You can separate business and personal expenses

A clear delineation between your personal and business expenses can make all sorts of tasks easier, from your everyday business accounting to your federal and state taxes. Having a business credit card means you can keep business expenses off your personal cards. This makes those expenses easier to track — and, later, potentially deduct from your tax liability.

Additionally, if all of your business expenses are on their own card, you can more easily pay them from your business checking account. This means you aren’t trying to track down business expense payments in your personal accounts.

It’s also worth pointing out here that (most) business credit cards will have less influence on your personal credit, too. Most issuers won’t report your card as a new account or send balance information to the consumer credit bureaus. (There will be a hard pull from the initial credit check, but that should be it from most issuers unless you default on the account.)

You can earn rewards on your business expenses

I never underestimate the earning power of a good rewards credit card — or, heck, even just a half-decent one.

Right off the bat, your rewards card can earn you a good welcome bonus. But the value doesn’t stop there. Pick a card with bonus rewards in the categories your business uses most, then watch the rewards rack up. A nice thing about business cards is they often have bonus categories you won’t see on personal cards, like office supplies or advertising.

My business doesn’t have a ton of overhead, but even just my quarterly tax payments earn me quite a bit in rewards each year. (Yes, even after you include the processing fee you pay for using a credit card.) And that’s on top of the other rewards, perks, and credits I get from my small business credit cards.

A handful of cards can maximize your rewards

Although I think everyone should have at least one credit card for their business, I’ll often suggest adding a second or third card, as well. Why? To maximize rewards, of course!

I’ve worked on my personal card collection to cover all of my life expenses. I get at least 5% cash back on pretty much all of my personal purchases. I did the same thing for my business, too, choosing cards that offer the best return on my top spending categories.

Build your collection up over time so you’re able to earn all the welcome bonuses. You don’t want to be struggling to meet multiple spending requirements at one time. (This can lead to overspending.)

Don’t exceed the number of cards you can manage

There’s no real cap on how many credit cards you — or your business — can have at any one time. Well, alright, a few issuers have their own rules about how many of their cards you can have; but there’s no blanket rule or law.

That being said, don’t exceed your own ability to wisely and responsibly manage your credit cards. (This goes for personal and business credit cards alike.) The more cards you add to the collection, the harder it can be to stay on top of balances and due dates.

Missing a business credit card payment can mean a late fee. If you have a 0% intro offer, a missed payment can cancel it. If you default on the card and the issuer charges it off, that will be reported to the consumer credit bureaus and could also wreck your personal credit.

Business credit cards can be powerful tools, and they’re worth having in your wallet. Just make sure you stay on top of your payments to avoid getting into trouble.

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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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