Almost 40% of Americans Are Making a Major Credit Card Mistake
Why I’m Not Opening Any CDs in 2024 — Even Though Rates Are Up to 5.5%
By: Ben Gran |
Updated
– First published on Jan. 26, 2024
Have you seen how high the APYs have gotten on certificates of deposit (CDs)? As of Jan. 21, 2024, some of the offers on our best CDs list were offering rates of up to 5.51% APY! With the Fed (possibly) getting ready to cut interest rates, now could be a good chance to lock in a high yield on a CD.But even though the APYs are tempting, I’m not convinced that opening a CD is the right move for my personal finances. And CDs might not be the right option for you, either.Here are a few reasons why I’m not opening any CDs in 2024.1. I don’t want to lock up my money in a CDWith my cash savings, I like to keep my options open. Putting money in a CD requires you to commit that cash for a certain length of time — a short CD term might only be three months, but you can’t take the money out. If you do need to pull money out of a CD before the term is up, you will owe an early withdrawal penalty.Instead of a CD, putting your cash savings in a bank or credit union savings account gives you flexibility for using that cash. What if you have an emergency expense? What if you need to replace your car, and you need cash for a down payment? What if you find a can’t-miss deal on an affordable winter vacation, or find some other investment that you want to make with that money? None of these financial moves are possible when your money is locked up in a CD.This lack of flexibility means that I don’t consider CDs to be the best place for your emergency fund. And if you’re saving for short-term or medium-term goals, like a down payment on a house, I don’t believe CDs are the best fit for that either — because the higher APY of a CD isn’t always worth the financial freedom and flexibility that you lose by locking up your money.2. The best high-yield savings accounts pay high APYs tooCDs aren’t the only game in town if you want to earn a better yield on your savings. The best high-yield savings accounts (as of Jan. 21, 2024) are also paying yields of 5% or higher — the best savings account on our list offers 5.32% APY!Is earning an extra 0.19% APY on your savings worth the inconvenience of a CD? Maybe if you have $250,000 to put into a CD, but even then, that difference in APY only amounts to an extra $475 in one year. I would rather have the flexibility of a savings account or money market account.With a high-yield savings account, you get:APYs almost as high as (and sometimes higher than) the best CDsThe freedom to withdraw your cash at any timeNo early withdrawal penaltiesIt’s true that if interest rates go down in 2024, savings account APYs will go down too. I could be missing out on a chance to lock in a higher APY on a longer-term CD. But I don’t try to time the market with stocks, or with savings account APYs. No one knows what the future holds, and no one knows what the Fed will do at their next meeting.Even if interest rates (and savings account APYs) go down by 1% by the end of 2024, that’s a risk I’m willing to take and a price I’m willing to pay. My savings account will be earning a pretty good interest rate during all that time, and I’ll have complete flexibility for how to use my cash.3. CDs aren’t a good long-term investmentSome CD investors like to get long-term CDs (like 3-year or 5-year CDs) so they can lock in a high APY for a longer duration of time. But these long-term CDs are also not a good fit for my personal finances. If I’m reluctant to lock up cash for 12 months or six months, why would I want to lock up that cash for several years?I’m still at an age and stage of life where I basically think about investing in terms of two buckets: I like to have one bucket of short-term cash, with plenty of emergency savings and money for short-term goals like vacations and home repairs. And then everything else that’s not short-term cash goes in the bucket of long-term investments.Based on my age, investment time horizon, and risk tolerance, most of my long-term investments are in stocks. So the idea of buying a 5-year CD doesn’t make sense to me. If I’m investing for five years from now, I’m going to buy stocks. If I need cash for something that’s shorter term, I want the flexibility of a highly liquid, immediately accessible savings account.Your life stage, risk tolerance, time horizon, and overall personal finances and investment goals might be totally different from mine, and that’s totally OK! If you’re a retiree who needs fixed income, maybe buying CDs should be part of your strategy. But if you’re still trying to grow your wealth with long-term investments, buying stocks is likely to be a better strategy.Bottom line: I’m not opening a CD in 2024 because I value the flexibility of a savings account. I don’t want to commit my money to a CD that charges early withdrawal penalties, and the best high-yield savings accounts offer similarly high APYs. My philosophy on CDs is: don’t lock up your emergency savings in a CD, and don’t use CDs as long-term investments. Flexible access to cash in the bank can provide priceless peace of mind.
How to Grow a $1,000 Emergency Fund Into $3,000 in 2024
By: Maurie Backman |
Updated
– First published on Jan. 27, 2024
You need money available in an emergency fund at all times. You never know when you might lose a job, get stuck with a huge medical bill, or face a car repair your regular paycheck can’t cover.Recent SecureSave data finds that 63% of Americans can’t cover an unplanned $500 expense by dipping into their savings. So if you have a cool $1,000 sitting in your savings account, consider yourself to be in better shape than the typical U.S. adult.However, an ideal emergency fund is one that has enough money to cover three months of essential expenses. Chances are, $1,000 isn’t enough to do that unless you happen to have extremely low expenses (maybe you’re a recent college grad who lives at home).Getting from a $1,000 emergency fund to having enough savings for three months of bills can be challenging. And it may have to be a multi-year process. But it may be possible to grow your $1,000 emergency fund to $3,000 in 2024 alone — especially if you make these moves.1. Cut one small expense and send that sum into savings automaticallyTo save $2,000 during the year, you basically need to bank $167 a month. You can probably do that if you cut out all of the fun things in your budget, but that’s really no way to live. So instead, cut one expense. And you don’t even have to cut it completely — just somewhat.Let’s say you cancel one streaming service but keep a second one you have. If that move saves you $16 a month, so be it. That’s almost $200 in savings, or 10% of your goal.However, don’t just cut an expense and call it a day. Set up an automatic transfer so that specific amount leaves your checking account at the start of the month and lands in your savings. You don’t want to accidentally take your $16 or so in Netflix savings and blow it at Starbucks by popping in a couple of times a month.2. Join the gig economyWorking a second job may be a tall order for you if your main job is demanding and you have a lot of obligations outside of the office, like caring for young children or pets. But perhaps it’s feasible to earn an extra $100 to $200 a month doing gig work, which could put you at your savings goal for the year.One thing you may want to focus on is a job that allows you to set your own hours, like driving for a ride-hailing service. That way, you can take advantage of slower periods at work or in your personal life and work more hours then, but scale back when things are busy.3. Take a less expensive vacationPacaso says that in 2023, the average vacation cost $1,919 per week, per person. As such, it’s conceivable that skipping out on a 2024 vacation entirely might basically get you to your $2,000 savings goal.But let’s be real — we all deserve a getaway that allows us to recharge and experience new things. So a more realistic approach may be to see if you can spend more like $1,000 on a 2024 vacation if you’d normally be inclined to spend double. You can then put the sum you aren’t spending on things like airfare and lodging in the bank.Another thing to consider is a staycation. The upside there is that you still get a break from work and you still get new experiences. But not paying to get places (other than perhaps some gas or train fare) or for lodging could save you a lot.Tripling your emergency fund could put you in a much better position by the end of the year. Make these moves to give your savings a boost — and to enjoy the peace of mind that comes with it.
My Brother Won a Car on The Price Is Right. Here’s What It Cost Him
By: Maurie Backman |
Updated
– First published on Dec. 6, 2023
When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.Taking the money and runningMy brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.Gearing up for a giant tax billMy brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.The exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.As a very basic example, let’s say you win $20,000 on a game show and fall into the 24% tax bracket based on your income. You might, in that case, end up having to pay as much as $4,800 on your winnings. If that $20,000 is a cash prize, you could simply reserve some of it for your tax bill. But what if you win a $20,000 vacation package, or $20,000 in furniture? It’s not like you can send the IRS a dining room chair or a loveseat and call things even.So be very careful when you’re looking at taking home any sort of game show prize. You may even want to meet with an accountant before applying to be on a game show to get some advice.The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you’ll likely end up losing a large chunk of that $26,000 when you account for the portion you owe the IRS.All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.
3 Reasons Not to Shop at Aldi Despite the Low Prices
By: Maurie Backman |
Updated
– First published on Jan. 8, 2024
At the start of 2023, one of the financial resolutions I made was to spend less money on groceries. As someone who was already in the habit of buying staples in bulk (thanks, Costco), that was a pretty challenging thing. But then a friend of mine introduced me to Aldi, and suddenly, I found myself in a position of being able to save money on food at a time when grocery prices were still pretty high across the board (kudos, inflation).I did a fair amount of shopping at Aldi during the first half of 2023. But I’ll admit that as the year wore on, I found myself visiting the store less frequently.It’s true that shopping at Aldi has the potential to result in a fair amount of savings. But here’s why you may not want to shop there despite the low prices.1. You have picky eaters at homeSome people have pickier children than others. But my kids are pretty choosy about the food they’re willing to eat. So when I brought home cheap granola bars from Aldi at one point last year, my kids downright refused to touch them because they weren’t familiar with the brand. As such, instead of saving a few dollars on granola bars, I wasted a few dollars.Aldi says itself that more than 90% of its products are exclusive brands, which means they’re not the brands you see advertised all over the place. If you’re not picky about brands, then by all means, stock up at Aldi. But if you have a household of picky eaters, you might unfortunately end up throwing your money away to some degree.2. You have limited time to shop for groceriesAnother hiccup I ran into last year during my Aldi shopping was not being able to find staple items consistently. Some weeks, for example, there would be no white bread. Other weeks, the store was out of cucumbers or strawberries.If you have a busy schedule and limited time to shop, you may find Aldi to be a frustrating experience. You might have to make multiple trips in the same week to get everything you need. And if that’s something you just don’t have time for, then it could pay to do your grocery shopping elsewhere.3. Your closest Aldi is far awayI happen to have an Aldi within 15 minutes of where I live. And as a bonus, it’s right near Costco. So I don’t have to spend extra on gas to get there if I want to pop in, since I typically go to Costco once a week.But if the nearest Aldi to your home is a 30-minute drive or more, you may want to do your shopping at a store that’s closer. Driving that long on a regular basis may not be feasible. What you save on groceries, you might end up spending on gas.There are personal finance benefits to shopping at Aldi, and I haven’t given up on the store completely. I’ll still stop in on occasion if I’m doing a Costco run to see what produce is in stock, because believe it or not, in my experience, Aldi’s prices are often more competitive than Costco’s in that category. But if the above factors apply to you, you may not want to make Aldi your go-to store anytime soon.
5 Kirkland Products to Try at Costco This Month
By: Maurie Backman |
Updated
– First published on Jan. 18, 2024
If you’re fairly new to shopping at Costco, you may not be so familiar with Kirkland products. So in a nutshell, Kirkland is Costco’s store or signature brand. You’ll find the Kirkland name all over the store’s grocery aisles, as well as on household essentials and even clothing.Now, if you’re someone who takes comfort in the brands you know, you may be hesitant to give Kirkland a try. But loading up on Kirkland products could be a huge source of savings. So if you pick up these products this month, you may be doing a good thing for your personal finances to kick off the year.1. Kirkland Signature Variety Snack Box, 51-countWe all need snacks that are easy to grab and take with us on the go. And Kirkland’s variety snack box fits that bill. For $32.99 online, you can snag a box of 51 individual snacks that include granola bars, trail mix, and roasted almonds and cashews. The theme among these snacks is that they’re a bit less heavy on sugar and more energy-focused. And at $0.65 per snack, it’s hard to beat the price.It’s also worth noting that Costco products are almost always less expensive in-store than online. So you might run up a smaller credit card tab if you buy a mix like this in person.2. Kirkland Signature Organic QuinoaQuinoa is being hailed as the new super grain, and it’s versatile enough to go into a range of dishes. You could serve it warmed for breakfast with fruit or eat it cold in a mixed salad for lunch. Or, throw some grilled fish or chicken and roasted vegetables over it for dinner.You can buy a 4.5-pound bag of Kirkland quinoa online for $10.99, bringing your cost to just $0.15 per ounce. At a local supermarket, your per-ounce cost might be three times as high.3. Kirkland Signature Semi-Sweet Chocolate ChipsIf you can’t remember the last time you baked cookies at home, then a 4.5-bag of Kirkland chocolate chips is probably not something you need. But since these chocolate chips have a decent shelf life, if you’re an avid baker, they could be a good buy — especially in January. People who live in cold weather climates often tend to hunker down more in winter, which could lead to more baking opportunities.If you buy this sack of chips online, you’ll pay $13.99, or about $0.19 per ounce. At a local supermarket, you might easily pay more than $0.30 per ounce.4. Kirkland Signature Wild Flower HoneyWinter tends to be the time when people catch a host of viruses and colds, which means a large supply of honey might serve you well. Honey has antimicrobial properties and might help your family feel better, according to the Harvard Medical School. Kirkland’s version will cost you just $17.99 online for a five-pound bottle, or $0.23 per ounce. You might easily pay 30% more at a regular supermarket.5. Kirkland Signature Organic Pure Maple SyrupThere’s nothing like a batch of homemade pancakes on a cold winter morning with delicious maple syrup drizzled over the top. Unless you have your own tree to tap, you’ll be hard-pressed to find maple syrup at a lower price than Costco’s Kirkland version. A 33.8-ounce jug costs $14.99 online, which translates into a cost per ounce of $0.44. At a regular supermarket, you might pay almost double.These are only five of many Kirkland products you’re likely to spot at Costco or Costco.com this month. It pays to take a look around and see which Kirkland items check off a need on your list.Remember, buying Kirkland products at Costco is a very low-risk proposition. Costco is known to stand behind the items it sells. So if you buy a Kirkland product you aren’t happy with, rest assured that you’ll most likely be able to take it back for a full refund without a hassle.
