How Much Will It Cost You to Wait to Start Investing?

Wouldn’t it be great if we all had a crystal ball that told us what the interest rate environment would do? We could figure out the best time to get a mortgage or the best time to buy a car. And of course, we would know exactly when to put all of our money into certificates of deposit (CDs) to maximize our yield.Unfortunately, that isn’t the case. Nobody knows what interest rates are going to do in the future — not even the people in charge of setting benchmark interest rates. However, we can use the latest economic projections to consider the most likely scenario and what else could happen instead. So here’s what we know (and don’t know) about what CD yields will do in 2024.Where do CD yields come from?The short explanation is that CD rates are a combination of three main factors:The current interest rate environmentThe bank or financial institution that offers themThe maturity termIn other words, when benchmark interest rates rise, CD rates generally tend to rise along with them. However, the rates paid by CDs can vary dramatically between banks.For example, as I write this, our top 12-month CDs have APYs ranging from 4.25% to 5.65%. The same is true for CDs of other maturity lengths as well. But because the Federal Reserve has raised benchmark interest rates so aggressively in the past couple of years, this range is significantly higher than it was.When it comes to different maturity lengths, it’s a little tricky to explain, but the general idea is that shorter-term CDs tend to track benchmark interest rates rather closely. The current federal funds rate (the most important interest rate the Fed controls) is set to a range of 5.25% to 5.5%, and this is certainly aligned with most of the top 1-year CDs we track.With longer maturities, there are a lot of economic factors at work, but the simple explanation is that CD yields are a combination of the current interest rate environment and expectations for future interest rate movements. In most environments, longer-maturity CDs tend to have higher yields, since banks typically pay a premium if customers agree to leave their money on deposit for a longer time. But as of Oct. 2023, the range of 5-year CD yields on our top CD list is 3% to 4.85%, with the average yield significantly lower than the average 1-year CD.This makes sense. According to the latest projections from the policymakers at the Federal Reserve, the benchmark federal funds rate is expected to fall to 4.6% by the end of 2024 and to 3.4% by the end of 2025.What will CD rates do in 2024?There’s no way to predict with accuracy what CD rates will do next year. Even the Federal Reserve’s own projections can be very wrong. In fact, the Fed’s projections in Sept. 2021 called for a federal funds rate of just 1% at the end of 2023.Having said that, the latest projections call for one further quarter-point rate hike by the end of 2023, which would likely push CD yields slightly higher to start 2024. And if the Fed’s projection of a 4.6% federal funds rate proves to be accurate, we could expect 1-year CD rates to gravitate towards that level, with other maturity terms drifting generally lower as well.However, it’s tough to overemphasize that we don’t know what is going to happen. If inflation proves far more difficult to control than the Fed expects, it’s entirely possible that several more interest rate hikes will be needed and CD yields will be much higher at the end of 2024. On the other hand, there’s the possibility of a recession coming and the need for the Fed to aggressively cut rates if the economy takes a worse downward turn than expected.The bottom line is that CD rates are higher right now than they’ve been in a long time, and the best course of action is to put your money in CDs that make sense for you now — not to leave your cash on the sidelines in anticipation of rates rising even further.However, one smart strategy could be to create a CD ladder, which gives you the best of both worlds. If rates end up rising in 2024, you’ll end up with some money to take advantage. And if rates fall, most of your money will be locked in at today’s rates.

By: Brittney Myers |
Updated
Oct. 23, 2023 – First published on Oct. 23, 2023

Just $250 a month at Costco would earn enough back to pay for the upgrade. In other words, if you spend more than $250 a month at Costco, upgrading makes financial sense.If that sounds like a ton of money to you, then definitely stay with your regular membership. But if your family goes through Kirkland Signature toilet paper like they flush it down the toilet, and you’re one of the people who actually finishes that 3-liter bottle of olive oil, then a membership upgrade could be a smart idea.Double up with rewards cardsWhether an Executive membership is right for you or not, there’s another way to earn rewards that everyone should be taking advantage of: rewards credit cards.Unfortunately, you can only use Visa credit cards in a Costco warehouse. If you’re shopping at Costco.com, you can use Visa or Mastercard credit cards. While these restrictions certainly stymie some of my favorite rewards cards, you’re not completely out of luck. There are still some great options from either issuer. Costco even offers its own cobranded Visa card, which can be especially rewarding when it comes to gas purchases. I prefer to use my Chase Freedom Unlimited®, however, for 1.5x points per $1.

By: Christy Bieber |
Updated
Oct. 27, 2023 – First published on Oct. 27, 2023

Mark Cuban is the owner of the Dallas Mavericks and is well-known for his business skills and investing prowess. Over the years, he has provided some tips to others who want to get rich, and one of them was a pretty surprising one.His advice: Buy a two-year supply of toothpaste. Here’s why the billionaire suggested making this unconventional move.Cuban has a simple reason for buying so much toothpasteMark Cuban doesn’t just want your teeth to be really clean. He had a good reason for suggesting purchasing such a large stockpile. Specifically, he advised doing this if you use the same brand of toothpaste regularly and can find it at a deep discount.”If we, hopefully we’re all using toothpaste every day, right, couple times a day, and we’re gonna go through toothpaste every month, whatever it may be, you’re better off buying two years’ worth of toothpaste when it’s on 50% discount,” he said. “That’s an immediate return on your money.”Cuban’s point was that the prices of items go up over time, so you’re better off purchasing them at the lowest possible price as this puts guaranteed money in your pocket. You also immediately benefit from the savings since you get to spend less now and in the coming years, keeping more cash in your bank account.Toothpaste isn’t the only item Cuban believes you should stock up on. “Any of your reusables, consumables that you have to have, when they’re on a huge sale on Amazon, buy them, because chances are, their prices are gonna go up, but that’s a real savings that you get to put in your pocket.”Cuban said that while it can feel difficult to make a profit by investing in a brokerage account, this is a simple step that anyone can take that will have an immediate positive impact on their personal finances.Should you follow Cuban’s advice?Listening to Cuban just makes good sense — especially as the recent few years of rising prices and surging inflation have demonstrated that routine products and services that we use every day can and do see big price increases.If you’re able to get many of your consumer products at discounted prices, this can make a noticeable difference in your personal finances. It’s not difficult to do either. Most stores put items on sale on a predictable schedule, such as marking down a product once every six or eight weeks. If you can stock up when there’s a good price — and especially if there’s a deep discount, then you’ll be able to slash what you spend on groceries and personal care.Use this extra money wisely to do things like repay debt or invest for your future, and you will end up being able to build wealth without changing your lifestyle at all. But, no matter what you do with the money, you probably have better stuff to spend it on than paying full price for toothpaste.

By: Christy Bieber |
Updated
Oct. 27, 2023 – First published on Oct. 27, 2023

As you can see, the payments are pretty high — even if you pick a loan with a long repayment timeline and even if you get a pretty low rate. Since you should typically try to keep your transportation costs to about 10% to 15% of monthly income (including loan payments and auto insurance), you’d need to make a good amount of money to be able to afford a car that comes with a $100,000 price tag.How to keep your car loan costs downIf you do decide to borrow for a $100,000 car, you can try to reduce the monthly payments and total interest expenses you get hit with by:Making as large of a down payment as you canImproving your credit score to help you qualify for the most affordable rateShopping around for your loan to get the best financingWhat you don’t want to do, though, is stretch out your payoff time unnecessarily, as this significantly increases total costs and you could also end up owing more than the car is worth, which isn’t a great financial position to be in.Choose the shortest loan term you can reasonably afford, get the best loan rate and terms that you can, and make sure you can still do other important things with your money before moving forward with buying such an expensive car.

By: Natasha Etzel |
Updated
Oct. 28, 2023 – First published on Oct. 28, 2023

If you’re currently living paycheck to paycheck, please know that you’re not alone. Many Americans are struggling to afford everyday living costs. A 2023 study by SecureSave found 74% of Ameridans are now living paycheck to paycheck. It can be challenging to reach your financial goals when you have little money left over after paying all your bills.Keep reading to find out some of the reasons why Americans can’t stop living paycheck to paycheck.1. Rising living costsOne reason many Americans struggle financially is due to rising living costs. When everyday costs increase, it can have a significant impact on your personal finances.For many people, housing is their priciest expense. While rental costs have cooled recently, median rental prices nationwide remain high. According to data from Zumper, the national median price for a one-bedroom rental is $1,505, and it’s $1,862 for a two-bedroom rental.Average mortgage rates have pushed well above 7%, resulting in high housing costs for more recent home buyers. Rising rent and mortgage loan costs can make it difficult to escape the paycheck-to-paycheck lifestyle, especially for those in high-cost-of-living areas.2. Household debt continues to climbAnother reason Americans continue to live paycheck to paycheck is due to debt. Research from The Ascent found that total household debt in the U.S. continued to climb in 2023. Data from the Federal Reserve Bank of New York shows that household debt reached a record high of $17.1 trillion in the second quarter of 2023.Credit card debt is a costly debt that many Americans have. The above study also found that Americans had $1 trillion in credit card debt in the second quarter of 2023, up from $986 billion in the first quarter of the year. Credit card interest is expensive and can quickly get out of control. The more your credit card bills climb, the harder it is to get out of debt.3. Salaries aren’t keeping up with inflationMany Americans have seen little to no change in their income despite rising living costs. A recent poll from the Associated Press-NORC Center for Public Affairs Research discovered that two-thirds of U.S. adults have experienced rising household expenses over the last year, yet only one in four have seen their income increase.When you have no choice but to pay more for necessary costs like food, housing, and utilities, it can be challenging to get ahead financially — especially if your income stays the same. Many people continue to fall deeper into debt, which makes their financial situation worsen.For Americans struggling with rising living costs and salaries that aren’t keeping up with inflation, it may be worthwhile to consider applying for new jobs that offer more pay and better benefits. Another option is to negotiate a salary raise with a current employer. Finally, getting a part-time job or side hustle could allow you to boost your checking account balance.Small changes can make a big differenceIf you feel discouraged about your finances, don’t give up. While you may be struggling now, you can make improvements. Making small changes can make a big difference in the long run.It’s never too late to make small improvements. Getting a higher-paying job, paying off debt, and reworking your budget are ways to improve your financial situation.Setting a budget could allow you to reduce your spending to free up extra cash. If you need help budgeting, check out our list of the best budgeting apps. Many of these apps are free to use.