Money Management

Credit cards can lead to serious issues if you don’t use them well. Learn about the most common warning signs that you shouldn’t get a credit card yet. [[{“value”:”

Credit cards are useful, but they also have their risks. Since they make it easy to borrow money, it’s also easy to end up in debt with them. And if you don’t manage your credit card well, it could damage your credit score. These kinds of issues can take years to fix and cost you thousands of dollars.

Because of the risks involved, it’s not a good idea to open a credit card before you’re ready. If any of the following warning signs sound familiar, you’re better off waiting.

1. You have trouble paying bills on time

If paying your bills often slips your mind, adding a credit card to the mix is a recipe for disaster. Your card issuer can charge you a late fee each time you miss a credit card payment.

Once your bill is 30 days late, then the card issuer can also report the late payment on your credit file. This will lower your credit score — some consumers see their scores drop by over 100 points from a single late payment!

Find a system for paying bills on time before you get a credit card. You could set up autopay. Or, add monthly payment reminders to your phone’s calendar.

2. You’re already struggling with debt

When you’re trying to get out of debt, don’t put yourself in a situation where you could potentially add more. Now, to be fair, it’s possible to use credit cards without going into debt. If you pay in full every month, you’ll stay out of debt and avoid interest charges.

But that can be hard to do when money’s already tight, so it’s not worth the risk. If you have personal loans or other expensive debt to manage, focus on paying that off. Once you’re in a better financial position, then start thinking about credit cards.

3. You spend money to make yourself feel better

Have you ever noticed that you feel better after you buy something? It’s not just you, and there’s a scientific reason behind it. Making purchases triggers the release of dopamine and endorphins in the brain.

If you get into the habit of seeking out that same feeling, it can lead to overspending. Some people even end up with a shopping addiction. They spend more and more on items they don’t need, all because of the rush they get from making the purchase.

There’s nothing wrong with spending money on yourself from time to time. But if you often find yourself spending money because you like how it feels, getting a credit card will likely only cause you to spend even more. Look for healthier outlets so you don’t need to rely on spending money.

4. You don’t understand how credit cards work

One of the reasons people get into trouble with credit cards is because they don’t entirely understand them. For example, some people only make minimum payments on their credit cards, because they figure that’s all they need to pay. While that’s technically true, when you only make minimum payments, it can take years or even decades to pay off credit card debt.

It’s an understandable mistake. No one instinctively knows that you should pay more than the minimum (and ideally, the full balance) on a credit card. But it’s a mistake that can cost you quite a bit of money. If you make minimum payments on a $3,000 balance, and your card has a 20% APR, it will take you nearly 19 years to pay off and cost you $4,390 in interest.

Fortunately, this is one of the easier issues to solve. Spend a little time learning how credit cards work before you apply for one. The Motley Fool Ascent’s beginner’s guide to credit cards can help you learn everything you need to know.

5. You’d spend more than you earn

Credit cards allow you to borrow money and pay it back later, but that’s not the best way to use them. You get more out of credit cards if you pay in full every month. If you do that, your card issuer won’t charge you any interest on your purchases.

If you know that a credit card would tempt you to spend more than you earn, you shouldn’t get one. This never ends well. You’ll be going deeper into debt every month. Your credit card balance will get bigger, which means it will cost you more in interest and be harder to pay down. You should only get a credit card if you’re already in the habit of spending less than you make.

It’s better to recognize you’re not ready for a credit card than to rush in and regret it later. These are all fixable issues, but they’re all easier to fix if you do it before adding a credit card to your wallet.

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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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This writer is upset about a recent issue with her bank. Read on to see what it is and why it may be such a deal breaker. [[{“value”:”

Not so long ago, I logged into my checking account to follow up on a payment I was expecting to hit when I noticed that my bank had debited a $15 service fee. When I dug deeper, I saw that it was due to not meeting my bank’s minimum balance requirement.

Only here’s the thing — my checking account balance never actually dipped below that minimum threshold. Not even close. So when I saw the $15 charge on my account, I knew that it was clearly an error. And at first, I wasn’t all that annoyed, because I figured a quick call to customer service would rectify the issue.

But that’s not how things wound up shaking out. And while my bank ultimately corrected the error it made on its own, I’m so annoyed with my poor customer service experience that I’m thinking of leaving my bank altogether.

When customer service is impossible to reach

The bank that charged me a fee erroneously is the institution where I have my business checking account, not my personal checking account. And I think that fact is partly what made my experience all the more aggravating.

When I noticed the erroneous charge posted to my account, I called customer service to try to get it removed. I then proceeded to wait on hold for more than 60 minutes in an attempt to get to a live person before hanging up in frustration.

Now frankly, I find that kind of wait time unacceptable for any bank. But there were two things that, in my mind, made this situation particularly unacceptable.

First, my bank is a major one. I won’t name names, but it’s one of those banks everyone has heard of. And while I could maybe see how a small community bank would have limited resources and sometimes force customers to wait a long time before getting to speak to an employee, that kind of wait time is just downright ridiculous for a major bank with plenty of resources to fill its call centers.

The other thing that really rubbed me the wrong way is that when you have a business account, you come to expect a different level of service. An issue with a business account could have serious consequences. It could, for example, spell the difference between a company being able to run payroll or not.

Now as the sole employee of my business, I won’t pretend that losing access to my $15 had much of an impact. But that’s not the point.

The point is that this actually wasn’t the first time I’d experienced a really long wait time to speak to customer service at my bank. And that’s not an experience I’m eager to repeat. So because of this, I’m thinking of finding a new bank.

You shouldn’t have to settle for poor customer service

To make a long story short, my bank must’ve somehow recognized the error it made on its own, because the next afternoon, I logged into my account and saw the $15 credited back to me. A day or so later, I received an email from my bank explaining that $15 had been charged erroneously and been refunded.

So technically, the bank solved the problem and made things right. Only I don’t feel satisfied with that outcome.

What if it had accidentally debited $15,000 from my account, not $15, and I couldn’t reach anyone to assist? That’s the reason I’m thinking of switching banks. I’m not angry about the missing $15 for 24 hours. I’m angry that customer service just isn’t nearly as accessible as it needs to be.

If you’re finding that customer service is similarly hard to reach at your bank, then that alone could be a reason to make a switch. You never know when you might have an urgent issue you need to resolve right away. And you don’t want to run the risk of having to wait on hold for an hour or more trying to get someone on the line (or, in my case, wait on hold for over an hour and hang up out of frustration).

Of course, you don’t necessarily have to switch banks over a single poor customer service experience. But if you find that customer service is consistently poor or inaccessible, then that really is reason enough to make a change.

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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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Being a stay-at-home parent is not for the faint of heart, but it can be good for your finances. Here are five factors to consider. [[{“value”:”

Some couples dream of diving into their careers and building their lives as those careers blossom. Others dream of one half of the couple working and the other staying home to care for the children. There is no right or wrong decision here, just a matter of preference. However, if you are considering becoming a stay-at-home parent (SAHP), you may be surprised by some of the financial benefits.

1. You may save more on child care costs than expected

Chances are, one of the reasons you’re considering adopting the SAHP lifestyle is due to the high cost of child care. The average weekly cost of daycare in the U.S. is $321, according to Care.com. That’s $16,692 out of your bank account each year.

What’s more, if you decide to have another child, you’ll be handing over another cool $16,692 annually. There aren’t many families in the U.S. that can easily absorb such a cost, and stopping the flow of money from your checking account to a daycare provider may be all the inspiration you need to investigate further.

2. Small, miscellaneous expenses may disappear

Whether you stop by a coffee shop a couple of times a week on your way to work or routinely pick up a muffin for your mid-morning snack, you’re spending money that you may not spend as a SAHP. Or perhaps you enjoy a weekly lunch at a local restaurant with co-workers or the occasional happy hour after work.

Let’s say you spend an extra $20 weekly on small niceties. That’s an extra $1,040 that you could use to offset the lost income of the SAHP or invest in a retirement account. Your personal finances are uniquely your own, but every time you save money, you make it a little easier for a parent to stay at home.

3. You’ll (probably) spend less on clothing

We’re not suggesting you stop buying clothes as a SAHP. However, you may naturally find yourself purchasing less than you did when you worked. On average, a person spends a little over $1,900 annually on clothing, including shoes. Whether you find yourself enjoying leisure clothes more than you thought you would or find that you already have enough clothing in your closet to last you for years, you’re likely to enjoy some savings.

If one of your concerns is that being a SAHP means there won’t be enough money to cover an emergency, small cuts like this are a great way to fund your savings account.

4. There’s a fair chance you won’t drive as many miles

You can count on trips to the grocery store and pediatrician’s office, but once you’re a SAHP, you may not spend as much time behind the wheel. This is especially true if your previous job was far from your home.

Not driving as much means saving money on auto upkeep and maintenance, mainly because your car won’t be racking up the miles. It may also mean getting a break on your auto insurance, due to how little you’re driving.

5. You may cook at home more

How many times have you been exhausted after work and couldn’t bear the thought of making dinner? Instead, you picked up fast food on the way home or met the family for dinner at a restaurant.

As a SAHP you may find yourself in a slightly different situation, primarily because keeping an eye on the kids can be stressful. You’re throwing in a load of laundry while one child teeters dangerously close to the stairs, and unloading the dishwasher as another child tries to get the family dog to eat a plastic apple from their play kitchen.

That said, you may simply cook more at home because you don’t want to change your (very comfortable) clothes to go out to eat, or you get into the habit of throwing something in the slow cooker first thing most mornings.

The average U.S. family spent more than $3,600 eating out in 2022, according to BLS data. Even if you find yourself cutting that in half, you’re still saving an impressive $1,800 annually.

Most people feel strongly about whether there should be a SAHP while children are home, but your opinion is the only one that matters. Ultimately, you must do what’s right for you and your personal finances. Most importantly, you must do what you believe is right for your children.

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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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Hybrid cars get better mileage than gas-powered cars and are cheaper than EVs. Find out why they’re worth considering. [[{“value”:”

Electric cars are the future, so I signed on to finance my 2021 Toyota Corolla Hybrid last month. Hybrids aren’t EVs, but right now? They’re perfect. There are good reasons to invest in a hybrid car, even at a time when Tesla Model 3s are becoming price-competitive with some hybrids.

It boils down to timing. Right now, EVs are going through puberty. They’re growing up, becoming cheaper upfront and more affordable long term. They’re also pains in the rear. Sticker prices are a problem, and, well. EVs literally make some riders feel like vomiting, myself included.

For now, hybrid cars occupy a reasonable middle ground between the past and the future. Here are three reasons hybrid cars are worth the investment, beginning with the obvious: mileage.

1. Hybrids have great mileage

You can purchase a Toyota Hybrid with 50ish miles-per-gallon (MPG) for less than $30,000. My 2021 model gives me 500 to 600 miles of runway per $50 to $60 top-up at the gas station. That’s a winning combination: cheap sticker price and great mileage. Full stop.

Gas cars often boast lower sticker prices than hybrids, but mileage is worse. Driving 40ish mph, you get about 20 MPG less from a 2024 Toyota Corolla than a Corolla Hybrid. Hybrids are more cost-effective at the tank, and the more you drive, the more mileage matters to your wallet.

It’s reasonable to purchase a hybrid if it makes driving cheaper than a gas-powered car. You get much better mileage at a slightly higher sticker price.

2. Hybrids have cheaper sticker prices than EVs

You can get hybrid cars with great MPG and solid range for cheap. A 2024 Toyota Corolla LE has an MSRP of $22,050, and a hybrid version costs $23,500. Not much more expensive.

You won’t find many EVs in that $20,000 to $25,000 price range. A Tesla Model 3 retails for at least $38,990, about $15,000 more than a hybrid with a better range. True, EV tax credits can help buyers recoup the cost of buying some EVs. But even factoring in tax credits, it’s pricier to purchase or finance the cheapest EVs than the most affordable hybrids, assuming equal rates.

It’s reasonable to invest in a hybrid for lower monthly payments. Driving a cheaper car can even get you affordable car insurance. (Cheaper parts cost insurers less to replace.)

3. Hybrids are less likely to give you motion sickness than EVs

When shopping for EVs, I asked a friend to take me for a spin in his Tesla Model Y. The experience? Smooth, novel, and dizzying. After 10 minutes on slow mode, I was astonished to discover my stomach had crawled its way up my throat. Breathing was hard. I felt sick. I tried driving. Though diminished, the motion sickness lingered until minutes after I left the car.

Others have felt similar, as the Reddit r/electricvehicles community can attest. It’s worth taking an EV for a spin before buying. It might save you from buyer’s remorse — and one very uncomfortable trip to the dealership. (Hi, hello. Yes, I’m here because your car makes me sick.)

Investing in a hybrid is reasonable if driving an EV gives you (or your riders) motion sickness. It swiftly turned me away from leasing an EV. Instead, I financed my hybrid, a happy medium.

Other reasons to invest in a hybrid car

When it comes to EVs vs. hybrids, price comparisons fail. There are many moving parts, and costs depend on specific models. Pricier cars have domino effects: a pricey car typically means pricey car insurance, steepening the monthly cost of ownership.

But hybrids have many perks. Other reasons to invest in a hybrid car include:

The Tesla Model 3, one of the most popular EVs, is expensive to insure.Some plug-in hybrids qualify for $3,750 federal tax credits.According to Kelley Blue Book, hybrids retain value longer than EVs over five years.

Then there’s the future of driving to consider. If Tesla really produces a $25,000 electric car, it’s reasonable to assume that more gas drivers will switch to electric vehicles. If gas demand goes down, supply may rise, shrinking prices at the pump. I’m speculating, but it’s worth considering.

For now, hybrids offer a worthy combination of lower sticker prices and good MPG. An affordable hybrid might be well worth the investment in 2024.

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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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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You don’t necessarily need to start saving from the moment you begin working to retire early. Read on to learn more. [[{“value”:”

Some people work stressful jobs and realize at the midway point of their careers that they’d like to exit the labor force on the early side. You, however, might come to that conclusion by age 30 if you’re in a demanding industry and already feel yourself burning out.

Of course, early retirement has its benefits. You can reclaim your days and use your time at a point in your life when your health might be stronger. And not having to work a stressful job could do good things for your mental and physical health.

But what if you decide at age 30 you’d like to retire early, only you have no savings so far to support that goal? You might assume that early retirement is off the table. But if you change your savings habits, you may find that you’re able to make an early workforce exit despite your somewhat late start.

It’s definitely not too late to pursue early retirement

Fidelity says that to retire at a typical age, it’s a good idea to have 1x your salary saved by age 30. So if you’re 30 with no money in your IRA or 401(k) whatsoever, then it’s easy to see why you might think your early retirement plans are doomed.

But remember, early retirement can mean a lot of different things. Social Security’s full retirement age for people born in 1960 or later is 67. And Medicare eligibility begins at age 65. As such, these are common ages to kick off retirement, and it can be argued that leaving the workforce at any point prior is considered retiring early.

But let’s say that to you, early retirement means wrapping up your career at age 55. If so, that gives you a 25-year window to build up a nest egg.

One thing you’ll need to be mindful of is that if you’re saving for retirement in an IRA, your money won’t be available to you penalty free at 55. So a good bet is to keep some of your retirement savings in a regular brokerage account. You may be able to access your 401(k) funds without a penalty if you’re tapping the retirement plan offered by your most recent employer, and you separated from that employer in the calendar year you’re turning 55.

What the math might look like

With that out of the way, you now have 25 years to accumulate enough funds to retire early at 55. It’s smart to invest your savings in stocks if you have multiple decades ahead of you before you expect to need your money. Even though stocks can be risky, the market’s average annual return over the past 50 years has been 10%. If you go heavy on stocks, your returns might be similar (though past results don’t guarantee future performance).

Meanwhile, let’s say you commit to socking away $1,200 a month between a retirement plan and a brokerage account for the next 25 years. At a 10% annual return, you’re looking at accumulating over $1.4 million. With careful money management, that could be enough to allow you to retire early.

Of course, it’s hardly an easy thing to go from saving nothing for retirement to saving $1,200 a month. But remember, not all of that money has to come from you. If you have a 401(k) plan with a generous match, your employer might end up contributing a nice chunk of that.

You can also look at downsizing your lifestyle to free up the money for your retirement savings. That’s not an easy thing to do, but the idea of retiring early just might motivate you.

Another option to consider

It’s more than possible to retire early even when you’re a bit late to the savings game. But remember that early retirement has its risks.

When you retire early, your savings need to last longer. And if you retire before you’re eligible for Medicare, you might need to bear the cost of health insurance on your own, which could be enormous.

If your main reason for early retirement is to shed the stress of a job, before you do that, try switching jobs or careers. You may find that a lower-paying job gives you the benefit of health insurance and a paycheck that allows you to leave your nest egg untapped a bit longer.

You can also look at shifting over to part-time work in your 50s rather than leaving the workforce for good. Some employers will let you retain your health coverage as long as you work a certain number of hours.

There are many different paths you can take to early retirement. If you want to increase your chances of success, it’s best to start saving for that goal from as young an age as possible. But if you’ve already missed that boat, don’t write off the idea of early retirement when you have the potential to ramp up on the savings front in a meaningful 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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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