Money Management

Having your salary reduced can have a big impact on your personal finances. Read on for ways to manage lowered wages. [[{“value”:”

Many people inevitably end up living paycheck to paycheck without money in a savings account to fall back on. If you’re one of them, then a pay cut of any sort could constitute a huge financial blow.

A March survey from Monster revealed that 15% of workers experienced a reduction in salary in the past year. If you wind up in that unfortunate situation, here’s what to do.

1. Trim some non-essential spending

A 10% pay cut might seem catastrophic when you’re used to spending your earnings in full. But if you take a look at your budget, you might discover some ways to cut back on spending so that you’re able to cover your expenses without resorting to debt.

For example, cutting back on takeout meals and canceling a monthly subscription might help you compensate for half of your pay cut. You might manage to make back the other half if you spend more mindfully at the supermarket and limit apparel purchases to items needed for work only.

2. Take more of a DIY approach

You may be used to hiring a lawn service to cut your grass and a cleaning service to come to your home once a week. Following a pay cut, you may have to be willing to do these things yourself for a period of time to avoid spending beyond your means.

That said, once you get into the habit of doing more chores yourself, you may find that you can uphold those habits even once your pay increases. So from there, you may have an opportunity to build savings.

3. Make up the difference with a side hustle

Losing a portion of your pay doesn’t mean your employer will expect you to work less. But if you can find the time for a side hustle, it could make it possible to boost your income and get it back to where it was prior to when your employer reduced it.

Now do keep in mind that side hustlers tend to fall into a trap. Those who are paid on a freelance basis sometimes use all of their earnings and forget to set aside a portion for tax purposes. So if you’re going to work a second gig to drum up, say, $300 a month, and you don’t have taxes withheld from your wages, you may want to set anywhere from $50 to $100 of that aside in case you end up owing it to the IRS. (Your best bet, of course, is to work with a tax professional who can give you a more accurate estimate of how much to set aside.)

4. Try to negotiate a better setup with your employer

Your employer may have had a reason for cutting your pay. And if you work 40 hours a week, you might still have to do so at a lower rate. But one thing you can do following a salary reduction is negotiate other perks that soften the financial blow.

Let’s say you normally commute to an office five days a week but have a job that can also be done remotely. What you might do is ask your manager if you can start working remotely twice a week. Doing so might save you some money on gas and tolls. And if you have kids, it might also mean needing fewer paid child care hours those days — and spending less in the process.

It’s never an easy thing to take a pay cut. But if that happens to you, use these tips to cope until your paycheck is restored to its former state or you’re able to go out and get a new job that pays you the full wage you deserve.

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Both brands are beloved, but which reigns supreme? Find out in the battle of the paper goods. [[{“value”:”

Both Sam’s Club and Costco are popular for their high-quality house brands. And though there are loyalists on both sides, I didn’t want to blindly follow brand loyalty.

Instead, my family put products from both warehouse clubs to the test to see which gave us the better value. Here’s what we found.

Paper towels: Could be a wash

Costco has one Kirkland Signature paper towel product, but Sam’s Club has two: full-size and select-a-size. We compared the select-a-size towels since they were most similar to the Kirkland version.

Member’s Mark paper towel rolls are a bit smaller — 10 fewer sheets per roll — and the towels themselves are narrower (6″ wide vs. 7″ wide), but you’re getting more rolls in the package, which makes up for it.

The prices, on the other hand, aren’t quite as close. You’re paying more than $3 more for Kirkland paper towels if you’re shopping online. Now, it’s important to note here that Costco in-club prices can be cheaper than its online prices, but it would have to be 14% cheaper to match Member’s Mark in pricing.

Quality review

From a practicality angle, the Kirkland paper towel rolls having more sheets makes them quite a bit wider, which could be an issue for folks with certain types of paper towel holders. (They don’t spin well on mine until you use up a few sheets.) But, if you prefer changing rolls less often, that may be a good trade for you.

As to using them, our family tried both types, and we had mixed opinions. Some preferred the Kirkland paper towels, mostly because they’re a bit bigger (an inch wider). It was also opined that they may be a bit sturdier. However, the rest of us didn’t really notice a difference while using either brand, and I definitely prefer the price of the Member’s Mark.

Toilet paper: Member’s Mark takes the throne

In this category, we’re comparing Kirkland Signature Ultra Soft Bath Tissue with Member’s Mark Ultra Premium Soft and Strong Bath Tissue:

This is a case of paying less for more: Sam’s Club is charging less for more toilet paper. It works out to the Member’s Mark product being about 24% less expensive. So, even if you were to get your Kirkland TP in-store for cheaper, you’d need to pay less than $19 for it to actually be around the same price per square foot. Easy Sam’s Club win here.

Quality review

So, technically, Costco offers two kinds of toilet paper: the Ultra Soft we compared above, and the regular Kirkland Signature Bath Tissue.

Avoid the regular Kirkland Signature Bath Tissue. It calls itself 2-ply, but it feels like half-ply. Seriously, it’s like rest stop toilet paper. My entire family hated it. This is a rare Kirkland fail.

Now, on to the other two. The Kirkland Signature Ultra Soft Bath Tissue is much, much better than the regular Kirkland tissue. It’s sturdy, soft, and works fine.

That said, my family preferred the Member’s Mark toilet paper. We found it to be a bit sturdier — even the good Kirkland stuff tended to rip when trying to get it off the roll. You also can’t beat the price.

Facial tissues: It’s nose and nose

Costco and Sam’s Club each offer two types of tissues: 2-ply and 3-ply. They both have their place, so we compared at all four products:

Sam’s Club wins out on price in both plies — by large margins. You’ll pay 25% more for the Kirkland 3-ply over the Member’s Mark 3-ply. Once again, even if you can get the Kirkland products for less by shopping in person, the discount would need to be very significant to catch up to the affordability of Member’s Mark.

Quality review

In general, 3-ply is what you want when you’re leaky-face sick, since they’re thicker and softer. But 2-ply is handy if you just need a quick tissue to catch a stray sneeze.

As for brand differences, my family found the quality to be fairly consistent across the products. In a direct side by side, however, we found the Member’s Mark 2-ply was a bit sturdier than the Kirkland 2-ply. We also thought the Kirkland 3-ply tissues were a bit softer than the Member’s Mark 3-ply.

TL;DR: I’d stock the Kirkland 3-ply for when we’re sick, while keeping boxes of Member’s Mark 2-ply in every room for everyday use.

You’re saving either way

One thing I really want to emphasize here is that, no matter which brand you chose, you’re probably doing right by your budget either way compared to buying name-brand products. Even when buying them from Costco or Sam’s Club, your Bounty, Charmin, and Kleenex is going to cost more for the same — or, sometimes even inferior — quality.

So count yourself a winner no matter which team you’re on.

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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.Brittney Myers 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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Despite high rates, now might not be the right time to open a new CD. Keep reading to learn when a CD is the wrong move for you. [[{“value”:”

Certificates of deposit (CDs) lock your money up for a specified term in exchange for a fixed interest rate. They can be an excellent way to boost your savings, especially with many of the best CD rates clocking in at around 5%. What’s more, if banks reduce CD rates later this year, as many experts predict, getting a long-term CD now could mean earning high interest at a later date when interest rates are much lower.

But for all their benefits, CDs aren’t the most advantageous bank account for everyone. If you’re not sure a CD is the right investment for you, here are three reasons they might not be.

1. The stock market could make more financial sense

Generally speaking, if you’re investing for a future that’s still a few decades away, you’re going to get better long-term returns from the stock market than CDs. Over the last 50 years, the stock market has averaged annual returns of roughly 10%. Even the best-paying CDs can only promise you a little over 5% for a short term, like six months.

Of course, not every investor will have a 50-year time horizon. Even so, if you’re investing for a goal that’s more than five years away, you might average a better return investing money in a brokerage account than a bank CD.

That said, investing in the stock market is risky; no one can guarantee you’ll get 10% annually for the next 50 years. This is where CDs really shine. Unlike stocks, they can guarantee a fixed rate of return for the length of their terms. If you can’t stomach market volatility right now, CDs could bring stability to your investment portfolio. Likewise, if you have a short-term goal in mind, such as buying a car or going on vacation, a CD with a shorter term could be more prudent.

2. You might need that money in the near future

By and large, the main disadvantage with CDs is their early withdrawal penalties. Getting a CD with a 5.30% APY is fine if you can keep your money locked up for the length of your term. But where you run into problems is with surprise expenses that might force you to cash out your CD before it matures.

Early withdrawal penalties can be expensive. Often, the penalty equals a certain amount of interest, earned or unearned. For example, a 12-month CD may have a penalty equal to three months’ worth of simple interest. If you had withdrawn from this CD one month after opening it, you would still pay three months’ worth, resulting in a loss of your principal.

This makes CDs generally ill-suited for emergency funds. Locking all your savings in CDs might lead to other financial problems, like credit card debt or needing to raid retirement accounts. While certain types of CDs could help reduce the risk of paying penalties, like no-penalty CDs or CD ladders, other bank accounts might better suit your emergency savings. For example, many of the best high-yield savings accounts have APYs comparable to CDs, but with more withdrawal flexibility. Likewise, money market accounts also have great interest rates and may even let you withdraw your funds using checks or a debit card.

3. CDs aren’t always tax efficient

CD interest is taxed as ordinary income and must be reported on your annual tax filing. Likewise, if you live in a state with income taxes, you’ll pay state taxes too on CD earnings too. This makes CDs slightly less advantageous than Treasury bills (T-bills), which have comparable rates to CDs but don’t incur taxes on the state level.

You could avoid this problem by opening a brokered CD in an IRA account. Like other investments held within an IRA, you won’t have to pay taxes on your CD interest. Rather, tax is deferred until you begin taking distributions in retirement, at which point you may be in a lower tax bracket and will thus pay less lifetime taxes.

All in all, CD rates are at levels we rarely see. While they might not suit all investors, certain savers could benefit from their fixed rates and low risks. If none of these three reasons apply to you, check out some of the best CD rates to see how much interest you can earn in 2024 and beyond.

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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 12-month emergency fund is overkill for most people. But is that the case for you? Find out how to tell. [[{“value”:”

You never know when a surprise expense or layoff might wreak havoc on your finances. That’s why it’s so important to have a solid emergency fund.

Data from the Federal Reserve reveals that only 68% of U.S. adults feel equipped to cover an unplanned $500 expense by tapping their savings. That means a good 32% of Americans are probably behind in the emergency fund department. As a general rule, most people need their emergency funds to be able to cover three to six months of essential living expenses.

But for some people, that may not be enough. And there are people out there who choose to maintain a 12-month emergency fund for added protection. But is that a sum you should aim for?

Not everyone needs 12 months’ worth of cash in the bank

The problem with keeping too much money in savings is that you lose out on the opportunity to grow it into a larger sum over time. A savings account might give you an average yearly 2% return on your money over several decades. But the stock market might give you an average annual 10% return.

Let’s say your essential bills come to $3,000 a month, only instead of settling for a six-month emergency fund, you sock away $36,000 to cover a full year of bills. Over 30 years, that extra $18,000 might grow into about $32,600 in savings if you earn an APY of 2.00% on it. But with a stock portfolio, assuming a 10% rate of return, that extra $18,000 might grow into $314,000.

That’s why you don’t want to overfund your emergency savings too much. Rather, it’s good to strike a balance.

If you’re someone with a typical job and typical expenses, a three- to six-month emergency fund will probably suffice. But there are exceptions.

When it pays to consider a 12-month emergency fund

There are certain scenarios where 12 months’ worth of savings is appropriate. For one thing, if you’re retired or on the cusp of retirement, it’s a good idea to have that much cash in the bank.

The reason? In retirement, you may have to tap your investment portfolio regularly so you have money to live on in the absence of a paycheck from work. If the market crashes, it would be a bad time to cash out investments. So if you have a year’s worth of expenses in savings, you’ll buy yourself that much time to ride out a stock market downturn without having to immediately lock in losses.

Another scenario where you may want a 12-month emergency fund is if you have a very unique job. Let’s say your job is to source coffee internationally. There probably aren’t too many people who do what you do. If you’re a bookkeeper or an engineer or a store manager, you probably don’t need a 12-month emergency fund. But if there aren’t many iterations of your job, then 12 months of savings is a good idea.

Finally, if you’re self-employed, you may want to consider a 12-month emergency fund in case a lot of your income comes from a few core clients and they all end up making budget cuts in short order. When you’re self-employed, you don’t get severance or unemployment benefits to fall back on, so extra savings may be in order.

All told, it’s smart to save adequately so you’re protected in the event of an unplanned expense or financial hiccup. But overfunding your emergency savings could cause you to lose out on the gains you might enjoy by investing. So don’t rush to amass a 12-month emergency fund unless there’s a good reason for it.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts could earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.

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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