All that to say: Improving the bottom line has never been harder for hardworking Americans.

So in service of helping you get on track, Stash collected 100 of the best financial tips you’ll want to implement going into 2024—advice that will lessen the burden on your wallet and make it possible for you to get closer to your money goals.

Our Stash 100 tips are simple, jargon-free, and easy to follow. Bookmark them, share with your friends, and scrawl them on your mirror. It’s advice that will lessen the burden on your wallet and, even more importantly, put your mind at ease as you tackle the world ahead.

Investing 

1. Invest now. The sooner you start investing, the greater your earning potential.

2. Invest for the long-term with a buy-and-hold approach, and put your money to work. 

3. Invest regularly, and it becomes a powerful new habit that compounds your success. 

4. Diversify. Choose a variety of investments with different risks to reduce your risk of loss and reduce swings in your account value.

5. Choose low-fee ETFs. It’s safer to invest in ETFs, or baskets of assets, than in any one asset. 

6. Take advantage of dollar-cost averaging, which is periodically buying certain stocks or other assets using a set amount of money on a schedule. You’ll buy assets when the price is low and when it’s high without being driven by emotion. 

7. Combat inflation by investing your cash. Keeping too much money on-hand allows inflation to erode its value over time.

8. Don’t be afraid to invest. Having some cash is important, but keeping all your money on the sidelines can put you at risk for missing out on tens of thousands, or even millions of dollars over the course of your lifetime.

9. Keep your emotions in check. Avoid impulsive decisions based on fear or greed, and instead focus on your long-term goals and intentions. 

10. Don’t panic sell just because an investment is down. Knee-jerk reactions can derail your investing success.

11. Leave day-trading behind. You can be a great investor without being a frequent trader. In fact, trading less often can often be a better investment strategy. 

12. Focus on goals. Understand your objectives and time horizon to help you determine what combination of investments is right for you.

13. Park your cash in short-term Treasurys if you think you will use it within a year. 

14. Learn the value of compound interest, or when interest earns interest because it remains invested. It allows your money to grow exponentially over time. 

15. Avoid concentration risk. Buying individual stocks can be fun, but you shouldn’t invest more than 2% of your portfolio in any one stock.  

16. Automate your investments. Then check in at least once a year or when you have a major life change to make sure your investing strategy still makes sense for you. 

17. Understand and minimize what fees you are paying on your investments. Compare similar funds’ expense ratios and look out for commissions and other hidden fees. 

18. Don’t trust anyone that tells you they know how the market or a stock will perform in the future. No one has a crystal ball. 

19. Remember that investing is a marathon, not a sprint. Get-rich-quick schemes often end up in losses.

Retirement Planning 

20. Save for retirement. The years pass faster than you expect.

21. Start by saving 1% of your salary if that’s all you can afford now, and work your way up in 1% increments. Saving for retirement may feel like a luxury or impossibility, but any amount of savings is better than none. 

22. Use standard guidelines for retirement planning: Consider setting aside 15% of your pre-tax salary for retirement if you want to retire in your 60s and maintain your lifestyle. 

23. Calculate a personal retirement goal. If you aren’t sure, retirees typically spend between 70-80% of their pre-retirement income to maintain a similar lifestyle. You can also multiply how much you think you’ll spend every year of retirement by 25, and start there. 

24. Does your employer offer a retirement plan? Evaluate the investment options because every plan is different. Then choose one that’s appropriate for you, and never let your contributions sit idle. 

25. Don’t leave money on the table. Prioritize taking advantage of any employer match offered in your retirement plan. 

26. Consider multiple accounts. If you’re eligible for an employer-sponsored plan like a 401(k) and an individual retirement account like a traditional or Roth IRA, you may want to take advantage of both simultaneously—they each have their own pros and cons. 

27. Add social security benefits into your calculations by checking your Social Security Statement at SSA.gov. Guaranteed monthly income in retirement can help you maintain your retirement nest egg much longer.   

28. Healthcare related costs are retirees’ largest annual expense. Consider investing in a Health Savings Account (HSA) if you have access to a high deductible health plan. They have great tax benefits and will help offset those large expenses in your golden years. 

29. Try to avoid touching your retirement accounts, and learn about the tax implications and penalties associated with different retirement account withdrawals. Retirement funds are generally only accessible without penalty after you turn 59.5. 

30. Plan to retire early? Understand the tax rules and penalties of accessing your investments, and consider having alternate investment accounts that you can withdraw from first if need be.   

31. Avoid cashing out your retirement plan when changing jobs (it’s called an early distribution), which can tack on taxes and fees. Roll that money into an IRA or your new company’s 401(k) plan and allow the money to continue to grow. 

Financial Wellness 

32. Honor the principles of saving and investing. It’s not about how much you make—you can make a million dollars a year and still be flat broke if you spend it all. 

33. Set SMART savings goals. Make goals Specific, Measurable, Achievable, Realistic & Timely. This will help keep you motivated and aware of your progress.  

34. Establish an emergency fund as priority one. A good rule of thumb is to save between 3-6 months worth of your essential expenses. 

35. Eliminate stress over your bills by setting up automatic payments. 

36. Avoid the pitfalls of the U.S. post office by opting for direct electronic payments.  

37. Save money by changing banks. You may reduce expenses like monthly fees by switching banks or using an online financial institution for your checking and savings accounts.

38. Earn money on your cash. Set aside what you need for regular spending, then maximize the interest you earn on excess cash by comparing high yield savings accounts, money market funds, and U.S. Treasurys. 

39. Pay yourself first. Sometimes an employer can deposit a percentage of your paycheck directly into your savings or investment account, or set up an automatic transfer for when your paycheck hits. 

40. Check your pay stub regularly. Ensure that deductions are accurate and tax withholding seems appropriate. Consult HR right away if something seems off.

41. Protect what you have. Insurance is an often overlooked part of financial health. Whether it’s adequate health insurance, car insurance, homeowners, life or disability, set yourself up for unexpected life events.

42. Jumpstart your child’s long-term savings with a custodial account.

43. Talk to your kids about money. Teaching financial skills such as budgeting at a young age can help lead to strong financial habits as they grow. Celebrate milestones together to model diligence. 

44. Acknowledge your hard work when you hit a savings balance or come in under budget. It’ll keep you motivated for future success.  

45. Take security seriously. Use strong passwords, two-factor verification, and secure internet connections when managing your finances online. 

46. Be vigilant about phishing scams, especially approaching the holiday season when fraud activity tends to increase. It can be very hard, if not impossible, to get stolen money back.

Budgeting

47. Create a budget to help you understand where your money goes every month. One way to do it: Take the money that hits your bank account, minus your expenses, equals what’s available for your goals. 

48. Keep budgeting simple with the 80/20 approach: Save 20% of what you make so you limit the rest of your spending to 80% of your income. You can also get even more detailed with the 50/30/20 rule.

49. Keep a money journal and track all of your expenses—but don’t let it overwhelm you. The goal is to build awareness of your spending habits.

50. Create funds for large and irregular expenses like the holidays, travel, camp, or car maintenance. Set aside money each paycheck or month so that the money is available when you want it.

51. If taxes aren’t automatically deducted from your paycheck, set aside part of your paycheck so you don’t find yourself in trouble come filing season. 25-35% is a good starting point (refer to last year’s taxes or speak with your accountant for a more precise estimate).

52. Make a shopping list in advance—and stick to it! Studies show you can save yourself from unplanned purchases when you have it in-hand. 

53. Overspending? Try the 30-day rule. If you want to make an unplanned purchase, set the money aside for 30 days, then revisit. Often you’ll find the impulse to spend has gone away and you’re able to avoid unnecessary purchases. If waiting 30-days feels unrealistic, start with 48 hours. 

54. Delete your online payment info. The more effort it takes to shop online, the more likely you’ll be to pause and think about whether you truly want to buy it.

55. Sometimes it’s the right time for a “cash diet.” Commit to only making purchases in cash. You’ll likely spend less even on planned purchases like groceries, and it guarantees you won’t spend more than you’ve budgeted.

56. Swap your credit card for a debit card: Research shows that consumers spend less when they see real money immediately leaving their bank account. Pay down your credit card more frequently for a similar effect. 

57. Buy store brands instead of name-brand products with the same ingredients. Tiny savings add up on frequent purchases. 

58. Beware of BOGO “deals.” Slow down and consider the price of one item; often they are marked up to cover the cost of the discount. 

59. The best rates on hotels sometimes come 15 days before you travel. Make a refundable reservation far in advance, and then check the rates again leading up to your trip. If rates have dropped, cancel the original booking for free and lock in the lower rate. 

Debt

60. Take inventory. Make a list of your debts, such as credit card bills, student and auto loans, and mortgages, and include the lender, balance, interest rate, payment date, and monthly payment amount. Then take action.

61. Consider using the debt snowball or avalanche methods to prioritize which debt to pay down first. Each approach targets focusing on one debt at a time, rather than making extra payments on multiple obligations each month. 

62. Try to avoid paying more in interest and fees. While consolidating debt can be a smart solution, doing so in a high interest rate environment might mean more dollars out of pocket now. Beware of committing to a higher minimum monthly payment if cash flow is tight.

63. Pay off your high interest rate debt—such as credit card debt—first. You’ll save more by paying off credit card balances than you can realistically expect by investing those dollars in the stock market instead. A credit card balance can also bring down your credit score.

64. Take advantage of debt that works in your favor. Low-interest, installment loans like mortgages (especially those that are fixed and below 5%) and auto loans can help you build credit. 

65. Don’t pay more than the minimum required for low-interest, fixed-rate loans. If your fixed rate loan is low enough, invest the extra dollars for a higher return. 

66. Pay extra attention to variable interest rates to avoid fluctuating payments that are out of your control. 

67. Considering a new debt? Practice paying for it. Set aside a monthly payment for a few months for insight into how a new financial expense will impact your finances. 

68. A car payment doesn’t have to be an indefinite expense. Try to keep a 60 month loan or less, and continue to drive the car once it’s paid off. 

69. Zero-percent interest car loans may mean the car price itself is marked up or there’s some other catch. 

70. Beware of credit card rewards. Avoid spending more than you would typically spend just for the rewards. Buy the perk with cash—save your bottom line.

71. Refinance. When your credit score goes up or your cash flow improves, you may be eligible for a better rate on your existing loans. Run the numbers to see if it makes sense—this strategy may have upfront costs but could lower your monthly payments.

Credit

72. Not sure how to build good credit? You’re not alone. Consider using a secured credit card, which requires payment upfront. Make sure to understand the fees.

73. Lean on family or friends to build your credit. Asking someone with strong credit to cosign for you can help you obtain a better rate, or faster approval, than what you may be able to secure on your own. 

74. Build better credit in a short amount of time when you are added as an authorized user on someone else’s account. Note: Credit scores become intertwined, and both can be negatively impacted if someone doesn’t pay the bill on time. 

75. Take good care of your credit to be eligible for loans with more favorable rates. Pay bills on time and keep your outstanding balances low compared with your limits (this metric is called credit utilization). 

76. Remember that your credit score isn’t private. Think of it as a financial report card that can be shared with future employers, landlords, and lenders. 

77. When you open a credit card, use it responsibly. Charge at least one expense per month, like gas, and pay it off in full if possible. Then continue to pay it off in full every month. 

78. Carrying debt does not benefit your credit. Credit card interest compounds daily, working against you because the debt adds up rapidly. 

79.Set a reminder to check your credit report for free once a year with these three credit bureaus: Experian, Equifax, and Transunion. Or check annualcreditreport.com, which is a one-stop-shop. 

80. Dispute credit report errors. If there’s any incorrect information, contact the credit bureau directly.

81. Ask for a credit line increase. A good repayment history, higher income and/or higher credit score can warrant an increase. A higher limit can help your credit too, as long as you don’t spend more and raise your average balance. 

Homebuying/Home ownership 

82. Renting may be smarter—most homebuyers don’t break even for five years. If you expect to move sooner, consider renting instead.

83. When thinking about home-buying, cap your housing costs. Target a total monthly payment of no more than 28% of your gross monthly income towards a home. This should include principal, interest, taxes and insurance (PITI). 

84. Know what you have available for a down payment, and what you can afford monthly for your mortgage. Keep both in mind when trying to determine your price range. 

85. Negotiate your interest rate, and shop around. The process can be tedious, but every point negotiated down on your mortgage can be a huge cost savings. 

86. Do your research before making an offer. One tried and true way to value a home is looking at “comps,” which are comparable homes in the area that recently sold.

87. Understand PMI. Private mortgage insurance is an additional monthly cost assessed by a lender in the event you put less than 20% down. It may not be a reason to wait until you can afford more, but you’ll want to budget for the extra monthly cost, which is usually 0.5–1.5% of the cost of the mortgage each year.

88. Don’t overlook closing costs, which usually range between 3-5% of the purchase price. Example: if you want to make a 10% down payment, you’ll need between 13-15% of the purchase price in cash to complete the transaction. For a more exact estimate use a closing cost calculator specific to your state. Don’t forget moving costs.

89. Get pre-qualified and include it in your offer. Obtaining pre-qualification (not to be confused with pre-approval) can start the process of determining what you can afford, and it should not impact your credit or require underwriting. 

90. Build a home emergency fund for the things you need to repair and replace, ongoing costs, and one-time costs, too. Plan for overages when setting a budget for home renovations. 

Taxes

91. Keep track of deductible expenses throughout the year to maximize your tax deductions, especially if you’re self-employed. A standard deduction is applicable to everyone; other deductions—like large medical expenses and charitable donations—are relevant only if you decide to itemize your deductions. 

92. Know the tax implications of different retirement accounts. Investing into a traditional 401k or IRA can reduce your current taxes, which saves you money now, but in retirement, you’ll have to pay taxes on your withdrawals. Compare that to a Roth 401k or IRA, which won’t reduce your current taxes, but investments will grow tax free and you’ll save on taxes in the future.

93. Consider investing into a 529 plan for your children’s education. In some states, 529 plan contributions are tax-deductible and your investments grow tax-free.

94. Save on childcare. If you have kids and pay for daycare or camps, save on your taxes by contributing to a Dependent Care Flexible Spending Account (DCFSA.) Money is added directly through your paycheck pre-tax and can be used to reimburse you for your childcare related costs.

95. Self employed and/or experience a major life event? Tax professionals are a worthy investment. Not only can they make sure you file your taxes accurately, they can also help you make strategic money decisions throughout the year. Make sure their expertise is relevant to your situation. 

96. A large tax refund isn’t necessarily something to celebrate, as it typically means you overpaid the government during the year. Think of it as an interest-free loan to the government—not the prize you’re hoping for. 

97. Getting a tax refund year after year after year? Adjust your tax withholdings with your employer to keep more of it each paycheck. 

98. Use tax software to simplify the filing process. Depending on your income, you may be able to use some services at no cost. Find more information at irs.gov.

99. Keep copies of your tax returns for reference (digital is okay!). Up to seven years is suggested if you worry about being audited. Lenders typically only ask for a two-year history when applying for a loan.   

100. Make tax filing easier. Create a physical or digital folder and collect all tax related documents over the course of the year and you’ll stress less in spring. 

BONUS: Holiday

101. Set and stick to a holiday season budget. In addition to gifts, include travel and transportation, new clothes, holiday bonuses, decorations, and fun activities (like ice-skating). Be specific. 

102. Make a list of gift recipients and a spending limit per person.

103. Shop early. You’ll avoid rush delivery costs and needing to search for last-minute, expensive alternatives.

104. Book travel as soon as you can and be flexible with your schedule for better deals. 

105. Hosting doesn’t have to be expensive. Price shop and avoid recipes with too many new ingredients. Consider a pot-luck option instead of trying to do it all yourself.

106. Shop online. You’ll avoid impulse purchases, and it’s easier to search for discounts and price comparisons. Many online retailers offer free shipping during the season. 

107. Get creative. Thoughtful gift giving doesn’t have to cost you a lot of money. You can make gifts, like art, a note or baked goods, or you can gift time by offering to babysit/pet sit or help someone with other household chores. 

108. Suggest a gift exchange. Suggest a white elephant or secret santa so everyone only needs to buy one gift that will likely be more thoughtful and exciting to receive. 

109. Avoid (or limit) self-gifting. Retailers will be bombarding you with “deals.” Resist sales and unneeded purchases. Unsubscribing works wonders.

110. Celebrate late. Consider doing your holiday gatherings a few weeks later, allowing you to book less expensive travel and buy up gifts at post-holiday sales. 

111. Be selective. You don’t have to say ‘yes’ to every invitation, or include everyone on your guest list. Keep gatherings intimate, and choose only the events you want to attend most when choosing how to allocate your dollars.  

112.  Reflect and evaluate what worked this holiday season, then eye January as an amazing time to commit to new financial goals. 

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While the exact parameters that distinguish an economic downturn from a true recession are debatable, the National Bureau of Economic Research (NBER) defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.” The typical rule of thumb for determining whether a period constitutes a recession is whether it includes two or more consecutive quarters of decline in a country’s gross domestic product (GDP). Often, these periods aren’t officially labeled as recessions by economists until they are already well underway or have ended entirely. It’s important to remember that recessions are natural and temporary phases in the business cycle, and though they may come with hardships, they are typically succeeded by periods of economic growth.

In this article, we’ll cover:

• What happens in a recession
• Downturns vs. recessions vs. depressions
• What causes recessions
• Recessions and the business cycle
• Signs of a recession
• How a recession may affect you
• How to invest in the face of a recession

What happens in a recession

Recessions are complex events that can be triggered by various factors, from financial crises to external shocks. While each recession has distinct characteristics and causes, varying in length and severity, a few trends are common across all of them.

• GDP falls: GDP, which measures the total value of goods and services produced in a country, typically drops during a recession, indicating a weakening of the nation’s overall economic health.
• Economic activity declines: Businesses might reduce production due to decreased demand, leading to a slowdown in various sectors of the economy.
• Unemployment rate rises: As companies cut back on production or even shut down, job losses become more prevalent, leaving a higher percentage of the population without employment.
• Interest rates may decrease: The Federal Reserve might choose to lower interest rates in an effort to boost economic activity.
• Consumer spending shrinks: Uncertainty and financial concerns during a recession often lead consumers to cut back on their expenditures, further slowing down the economy.

Economic downturns vs. recessions vs. depressions 

Economic downturns, recessions, and depressions are all periods of economic contraction. Ultimately, their differences lie in their duration, intensity, and impact on the broader economy.

• Economic downturns: These are short-term declines in economic activity, often accompanied by bear markets. While they can lead to recessions, it’s possible for the economy to recover before that happens. The U.S. has experienced a number of downturns throughout history, with bear markets lasting an average of about 9.5 months, though many are much shorter. 
• Recessions: Going into a recession means that an economic downturn extends into a more prolonged and pronounced drop in economic activity. Since 1980, the U.S. has faced five recessions of varying durations, with the shortest lasting just six months and the longest extending to 18 months. On average, U.S. recessions have lasted about 11 months.
• Depressions: Depressions are the most extended and severe economic contractions. The U.S. has experienced only one depression, known as The Great Depression, which began with a profound stock market crash in 1929 and lasted for about a decade. This period was marked by extreme unemployment, a significant drop in consumer spending, and widespread bank failures.

Examples of past recessions

Each recession in the U.S. has been unique in its cause, duration, and impact on the global economy. Three significant recessions identified by the NBER in the recent past have left a lasting mark on the country’s economic landscape.

• Dot-Com Recession: Occurring between March and November 2001, this seven-month-long recession was a result of the bursting of the dot-com bubble of the 1990s. The overvaluation of tech companies led to a sharp stock market decline, impacting the broader economy.
• The Great Recession: Spanning from December 2007 to June 2009, the Great Recession was primarily caused by the subprime mortgage crisis, leading to significant job losses and a global banking crisis. Lasting 18 months, it’s the longest recession the U.S. has experienced since World War II.
• COVID-19 Recession: Triggered in early 2020 by the global outbreak of the COVID-19 pandemic, this recession saw a sharp decline in economic activity due to lockdowns, travel bans, and business closures. While its exact duration is still debated, the most severe stages occurred between February and April 2020.

What causes recessions

No two recessions are identical. They often arise from a unique combination of factors that work together to turn a mild economic downturn into a pronounced economic contraction. A few factors often contribute to the onset of a recession. 

• Sudden economic shocks: Unexpected events that disrupt the normal flow of the economic cycle,  like natural disasters, terrorist attacks, or health crises, can shake consumer and business confidence, triggering a reduction in spending and investment.
• Excessive, widespread debt: When households, businesses, or governments take on too much debt, they may need to cut back on spending in order to pay it off, leading to a significant dip in overall economic activity.
• Asset bubbles: Bubbles occur when the prices of assets, like real estate or stocks, soar far above their fundamental value. Asset bubbles often arise in a specific industry or sector. When these bubbles inevitably burst, those who invested heavily can face significant losses, companies go out of business, and a ripple effect may impact other sectors of the economy as well, leading to an overall economic slowdown.
• Excessive inflation: During periods of high inflation, prices of goods and services rise too quickly, eroding consumer purchasing power. The Federal Reserve may then choose to raise interest rates in an effort to curb inflation, which can result in reduced borrowing and spending.
• Runaway deflation: The opposite of inflation, deflation is a prolonged drop in prices. While it might seem like a good thing, deflation can lead to reduced consumer spending as people wait for prices to fall further, causing a vicious cycle of economic contraction.

How recessions fit into the business cycle

The business cycle is a natural ebb and flow of economic activity, characterized by periods of growth and decline. Recessions are a pronounced form of natural contractions, representing a significant dip in the cycle. The NBER plays a pivotal role in determining the start and end dates of U.S. recessions by breaking the business cycle into four primary phases:

• Expansion: Marked by increasing economic activity, the expansion phase is a period of economic growth and prosperity. This is an ideal economic stage for business growth, often featuring rising employment rates and bolstered consumer confidence. As demand increases, businesses raise prices, causing inflation.
• Peak: The peak of the business cycle is the zenith of the expansion phase, where economic activity reaches its maximum, right before starting to fall off. This phase is characterized by high levels of production, employment, and the highest prices, with no room for further expansion.
• Contraction: Following a peak, the economy starts to slow down. This period sees a decline in GDP, employment, and other economic indicators. If this contraction is prolonged and severe, it can lead to a recession.
• Trough: The trough is the lowest point of the contraction phase, when economic activity bottoms out before starting to rise again. From here, the business cycle moves back into the expansion phase, marking the beginning of economic recovery.

Signs of an impending recession

While it’s impossible to predict recessions with absolute certainty, economists and financial experts often turn to specific indicators that hint at economic turbulence ahead. 

• Inverted yield curve: Typically, long-term bonds have a higher yield compared to short-term bonds. But when short-term bonds yield more than long-term ones, it’s called an inverted yield curve. Historically, this inversion has preceded recessions, as it indicates a lack of economic confidence.
• Declining consumer confidence: When consumers are pessimistic about the future of the economy, they tend to spend less and save more. A sustained drop in consumer confidence can lead to an economic contraction.
• Increasing unemployment: A rising unemployment rate can be a sign that businesses are cutting back on staff due to decreased demand or revenue. Persistent high unemployment can contribute to reduced consumer spending, which may exacerbate an economic slowdown.
• Stock market drops: While stock markets can be volatile regardless of the larger economic landscape, a prolonged and significant drop in stock prices overall can sometimes precede a recession and might be a sign of continued decline.

How a recession may affect you (and how you can prepare)

A recession affects the average person in a variety of ways. You might feel a financial pinch, as job security becomes uncertain and daily expenses seem to loom larger. While it’s natural to be concerned, there are proactive steps you can take to navigate challenging times and prepare for an impending recession.

• Build an emergency fund: An emergency fund acts as your financial safety net, ensuring you have funds to cover unexpected expenses or income loss. Especially during uncertain times, having three to six months’ worth of expenses can provide peace of mind and financial stability. 
• Pay off debts: Reducing debt, especially high-interest credit card debt, can free up income and reduce stress on your personal finances. By tackling your debt, you’re not only improving your financial health, but also making yourself less vulnerable during an economic downturn. 
• Start saving money: Plan for what a recession would do to your current budget and savings goals and take action ahead of time. By cutting down on expenses and setting aside a portion of your income regularly, you’re building a buffer that can be invaluable during tough times.

How to invest if you’re worried about a recession

When economic clouds gather, it’s natural to feel uneasy about your investments. Remember that market fluctuations are a part of the investment journey, and before making any hasty decisions, you might want to consult with a financial advisor who can provide tailored advice for your situation. Instead of panicking when the stock market dips, consider these strategies to safeguard, and possibly even grow, your portfolio during a recession.

• Ride out the downturn with long-term investing: Historically, markets have shown resilience over extended periods. Focusing on long-term investing may allow you to weather short-term volatility and potentially benefit from the average stock market return over time.
• Seek out “recession-proof” stocks and funds: Some sectors tend to be more resilient during economic downturns. Identifying and investing in stocks that tend to hold value in a recession might help shield your portfolio against market turbulence. 
• Consider defensive stocks for your portfolio: Defensive stocks are shares in companies that provide essential goods and services, like utilities or consumer staples. Because of their relatively stable demand, adding them to your portfolio may reduce your vulnerability in the face of economic flux.
• Capitalize on inflation before it drops: Some securities can actually benefit from inflation. Investing in things like Treasury Inflation-Protected Securities (TIPS), I-bonds, and value stocks when inflation is rising before a recession might offer a hedge against decreasing inflation rates later. 
• Evaluate short-term investment options: If you’re apprehensive about locking your money into long-term investments during uncertain times, consider short-term, lower-risk options. Instruments with fixed interest rates, such as CDs and T-bills, can be a way to secure higher interest rates before they potentially drop in a recession. 
• Diversify your portfolio: Spreading your investments across various asset classes and economic sectors can reduce risk. Especially during a recession, a diversified portfolio can help mitigate losses and position you for growth when the economy recovers.

Holding steady in the face of a recession

Economic downturns and recessions are inherent phases of the business cycle. Though they present challenges, remember that they’re followed by seasons of growth and rejuvenation. When you understand what a recession is, you’ll be more prepared to anticipate downturns and prepare.

As an investor, maintaining a clear strategy, staying informed, and resisting the urge to make impulsive decisions can help you pave the way for long-term success. With a good grasp of the cyclical nature of the economy, you can navigate the turbulence of recessions with more confidence.

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However, with some guidance and discipline, it’s possible to overcome these challenges. This guide is designed to help you gain a better understanding of your credit card debt and develop the strategies and motivation you need to pay your debt off faster. With careful planning and discipline, you can take the first step toward your life without credit card debt today and start focusing on your other financial goals sooner.

In this article, we’ll cover:

• Knowing what you owe
• Debt repayment strategies
• Making more and spending less
• Negotiating with creditors
• Staying motivated

Understanding your credit card debt

Taking control of your credit card debt starts with an understanding of your current debt situation. Once you have the full picture, including the amount you owe and your monthly expenses, you can build a budget conducive to getting out of debt. 

Evaluate your current debt situation

Knowing what you owe is the first step to eliminating debt. Whether you’ve accumulated debt on one credit card or ten, start by understanding the total amount of money you owe across all your cards. Then, consider details like interest rates and minimum payments for each credit card. 

Here’s how to get started:

• List all your outstanding balances: Your most current statements show you what you owe on each account. Make a list that includes the name of each card and your outstanding balances.
• Determine your interest rates: The average credit card interest rate as of 2023 is between 23% and 24.5%, which can have a significant impact on how much your debt grows every month. Check the interest rate for each of your cards to help determine how much additional debt you’ll incur each month you carry a balance. Interest rates can vary widely based on the credit card issuer, the individual’s credit score, and other factors.
• Know your minimum monthly payments: List the minimum payments for each account and add them up to determine your total minimum debt payment each month. You’ll need to budget for the minimums to avoid racking up fees, and likely need to pay more than the minimums to eliminate your balance entirely.  

Track your expenses and create a budget

It’s important to know how much money you have coming in and going out each month so you can make a budget. If you don’t already track your expenses, now is the time to start. Analyzing your spending habits can help you identify areas where you might be able to cut back and reallocate funds to debt repayment. Once you understand your habits, you can build a budget that includes plans for paying more than your minimum credit card payments. Online banking tools and budgeting apps are both useful ways to monitor your expenses in real-time and make sure you’re sticking to your budget.

Strategies for debt repayment

Now that you know what you owe and have a monthly budget, it’s time to choose a debt repayment method. Here are three popular strategies to consider.

Debt snowball method

With the debt snowball method, you organize your debts from smallest to largest and dedicate as much of your monthly income as possible toward paying off your smallest debt first. Once that’s paid off in full, you tackle the next-smallest balance. The theory behind this strategy is that you’ll gain confidence and momentum as you pay off these smaller amounts more quickly. The snowball method doesn’t take interest rates into account, just the account balance, so it isn’t always the fastest method for paying off your total debt. But if you’re motivated by small but meaningful victories, the debt snowball method could be right for you.

Debt avalanche method

Unlike the debt snowball strategy, the debt avalanche method is all about interest rates. Start by listing all of your credit card debts by interest rate, from highest to lowest. Then focus on paying off the card with the highest interest rate first, followed by the next highest, and so on until you’re debt-free. It might take longer to pay off one balance entirely with the debt avalanche method, but by eliminating your higher interest rate debt first, you can often save yourself money in the long run. 

Debt consolidation

Debt consolidation rolls all of your credit card bills into one easy-to-manage monthly payment, which can be helpful if you’re carrying a balance on multiple cards. There are a few options available. These include using a debt consolidation service, taking out a personal loan, tapping into your home equity, or using a balance transfer card. In general, debt consolidation could be advantageous if the interest rate on your new card or loan is lower than the rates on your existing cards

Be aware that your credit score could impact the options available to you and the interest rates you can get. In addition, debt consolidation services and balance transfer credit cards often come with fees, so be sure you fully understand all the costs before you go this route. 

Increase your income and reduce expenses

Finding ways to increase your income and reduce your expenses can allow you to put more money toward paying off your credit card debt. And the good news is that there are concrete actions you can take to make it happen.

Generate additional income sources

If it fits in with your current lifestyle, consider exploring a side hustle, like a part-time job, freelancing, or even starting a small business. Start by identifying the skills, talents, and interests you have that could be monetized. Offering freelance services in your area of expertise or taking on gigs like pet sitting or making deliveries could help generate the additional income you need to reduce your credit card debt. Several online platforms and apps offer part-time, hourly, and on-demand work opportunities that can put more cash in your pocket.

Reduce your expenses

Finding ways to save money can give you extra money to put toward eliminating your credit card debt. Review your monthly expenses and prioritize your needs over your wants. What non-essential items or services can you cut back on? Consider finding alternatives to any pricier habits, products, or services. For example, you could cancel your unused subscriptions or commit to cooking and making coffee at home instead of dining out. It may also pay to research competitive rates and leverage your findings to request discounts, promotions, or price negotiations with service providers. If possible, consider using a debit card exclusively to limit your spending to the money you actually have in the bank and avoid incurring more credit card debt. 

Negotiate with creditors

Although it might seem intimidating, it is possible to negotiate with your creditors for lower interest rates or more manageable payment plans. Proactive, honest communication and a friendly attitude can go a long way. You may also consider seeking professional credit counseling to assist you with debt management.

Contacting credit card companies

Many creditors will be open to adjusting how you repay your debt when you’re facing financial difficulties. Approaching your credit card company with transparency about your current financial situation allows them to offer alternative payment options or other assistance. Though this may not work in every case, it’s always worth a try, and you might be surprised by the results. Here are a few tips for successfully negotiating lower interest rates or payment plans:

• Research competitive interest rates and mention them during negotiations.
• Highlight your positive payment history or loyalty to the credit card company.
• Explore balance transfer options to lower interest rates.
• Discuss payment plans with reduced monthly payment options.
• Stay persistent and assertive, but always respectful, on the phone. 

Seeking professional help

Credit counselors are professionals with specialized training in debt, credit,  budgeting, and other financial matters. Not only can they advise you about personal money management, but they can also work on your behalf to arrange debt management plans and lower interest rates. But keep in mind that professional debt counseling services usually aren’t free. So while you may benefit from your credit counselor’s knowledge and negotiation skills, you may be charged for the service. Look for reputable credit counseling businesses by reading reviews online and checking companies’ ratings with the Better Business Bureau. 

Stay motivated and avoid further debt

Remember that paying off your credit card debt is a process, and it may not be a quick one. But you’re not alone on your debt repayment journey: Americans have accumulated over $986 billion in credit card debt, averaging about $2,700 in unpaid balances per person. If you stay focused and motivated, it is possible to become free of credit card debt. Here are some tips to help you stay the course and accomplish your debt repayment goals:

• Set realistic goals and milestones
• Commit to budgeting and tracking your spending
• Celebrate small victories along the way
• Seek support from family, friends, or support groups
• Develop healthy financial habits to prevent future debt accumulation

There is life after credit card debt 

By prioritizing debt repayment today, you can take control of your financial situation and create hope for the future. It may not be the easiest thing you’ve ever done, but it’s likely to be one of the most rewarding.

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The burden of debt can cause stress, tighten your budget, and hinder your ability to save for the future. However, if you’re grappling with numerous loans and looking for a path to become debt-free, the debt snowball method could be your ideal strategy. It provides not just a blueprint for debt repayment, but a journey that transforms your financial outlook, making the goal of a debt-free life tangible and achievable.

In this article, we’ll cover:

• How the debt snowball strategy works
• An example of the debt snowball strategy
• The debt snowball vs. avalanche method
• Debt snowball method pros and cons

How the debt snowball strategy works

When employing the debt snowball method, you factor in all your debts, including credit cards, auto loans, personal loans, medical debt, student loans, and mortgages. Here’s how it works:

1. Begin with a budget: Create a budget that reflects your monthly income and expenses, including minimum payments on your debts, and look for ways to save money so you can put more toward debt repayment. You might want to try the 50/30/20 budget rule as a starting point 
2. Organize your debts: List your outstanding balances from the smallest to the largest debt. This is the order in which you’ll tackle paying off your debts.
3. Pay off your smallest debt first: Make the minimum payment on all your debts each month, and allocate as much money as possible to making more than the minimum payment on your smallest debt.
4. Pay off one debt, then move to the next: Once you’ve completely paid off your smallest debt, start paying more than the minimum payment on the next-largest account. Put the same amount of money you’d been paying on the smallest debt toward this next one.

Debt snowball strategy example

To illustrate the debt snowball strategy, let’s look at a hypothetical example in which you aim to get out of $30,000 in debt. 

First, break down your outstanding balances, from the smallest debt to the largest debt:

Using the debt snowball method, you would first focus on paying down your smallest debt: credit card #1. Let’s say you can afford to put an extra $75 each month toward getting out of debt. Here’s what your debt payments would look like each month:

1. Credit card #1: $115; ($40 monthly minimum payment plus an extra $75) 
2. Credit card #2: $50 (monthly minimum payment) 
3. Car loan: $100 (monthly minimum payment)  
4. Student loan: $130 (monthly minimum payment) 

Once credit card #1 is paid off, it’s time to tackle credit card #2. Add the total amount you’d been paying toward credit card #1 ($115) to the monthly minimum payment for credit card #2 ($50); you’ll now be paying $165 toward credit card #2 each month. Continue the process until all your debts are paid off.  

Debt snowball vs. avalanche method

The avalanche method is another popular strategy for paying off debt. With this approach, you tackle your debts in order of highest to lowest interest rate in order to minimize your overall interest payments and get out of debt faster. Neither approach is necessarily better; it depends on your particular needs and goals. The avalanche method may help you pay off $30,000 more quickly and save on interest, but the snowball method could be more helpful in keeping you motivated.

Debt snowball pros and cons

As you evaluate methods for getting out of debt, consider the debt snowball method’s advantages and disadvantages.

Advantages of a debt snowball strategy

It can be difficult to stay optimistic when you owe money on multiple accounts. This is where the snowball method can come in handy, providing you with a sense of accomplishment as you progress through your debt payment. 

• Gain confidence and momentum: Completely paying off a debt feels great. Tacking your smallest debts first gives you that feeling more quickly, spurring you on to keep up your efforts. 

• Reduce the number of debts more quickly: By eliminating smaller debts, you’ll have fewer monthly payments, which can reduce stress and make it easier to manage your bills.

• Easy to implement in your budget: Once you figure out how much extra money you can put toward getting out of debt, the snowball method is simple to work into your budget.

Downsides of a debt snowball strategy

While the debt snowball method offers its advantages, it’s important to consider the potential downsides as well. 

• You may pay more interest over time: Prioritizing smaller debts based on balances rather than interest rates means that higher-interest debts may accrue more interest in the long run.

• It may take longer to pay off all your debt: While the snowball method provides psychological benefits, it may not be the most efficient approach for paying off all your debts in the shortest possible timeframe.

Is the debt snowball method right for you?

If you’re still wondering if the debt snowball method could really work for you, consider the following factors. If any of these statements apply to you, you might benefit from this strategy:

• You want a sense of accomplishment and momentum quickly. If quick wins give you the motivation you need to stick with your debt-payoff plans, the snowball method can give you that mental boost.

• You want to reduce the number of debt payments faster. By eliminating smaller debts, you’ll have fewer monthly payments to manage, streamlining your financial management.

• Your debts have close to the same interest rates. When the interest rate differences between your debts are minimal, the snowball method won’t necessarily lead to you paying more in interest over time.

• Your smallest debts have the highest interest rates. If your smallest debts are also your highest-interest debts, the snowball method would allow you to spend less on interest overall in addition to its psychological benefits.

When dealing with debt, a repayment strategy can be critical in climbing out of the hole. Whether you choose the debt snowball method, the debt avalanche method, or another strategy, don’t discount the importance of creating and maintaining a budget. By taking consistent steps and making informed decisions, you can gain control of your money and work towards a debt-free future.

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So what does it take to retire by the age of 55, or even 45? Knowing the average retirement savings by age can help set benchmarks for you, but the answer to how much you actually need depends on your unique circumstances and financial situation. There are a number of steps you can take if you’re serious about learning how to retire early. 

To that end, consider this your ultimate how-to-retire-early guide. In this article, we’ll cover important steps, including how to:

1. Envision your ideal lifestyle during retirement 
2. Make a draft retirement budget
3. Know your current financial standing
4. Level up your investments
5. Assess your current lifestyle for savings opportunities 
6. Identify your fixed income streams—and know how to manage them
7. Enlist the help of a financial advisor
   

Read along to learn how to retire early. 

1. Envision your ideal lifestyle during retirement

Before diving into nitty-gritty financial considerations, spend some time envisioning the type of lifestyle you want to lead in retirement. This will inform the concrete plan and budget you’ll need to support the life you envision.

Maybe you want to spend time traveling abroad or buy a vacation home. Whatever your dreams are, get clear on the cost considerations associated with each. Figuring out the best way to retire early starts with affirming your ideal lifestyle during that time. 

Be sure to consider key future life events, too. If you’re planning to move to a new state, for example, factor in cost-of-living differences for that city. Will you want to live near family or future grandchildren? Will that require you to move? Thinking about these things ahead of time will help you make more informed decisions when crafting your retirement budget.

Here are some common key life events to consider: 

• World travel 
• Starting a business post-retirement 
• Committing to volunteer work 
• Moving to a new city or state (or country!)
• Funding your kids’ or future kids’ college education
• Caring for aging parents 

2. Make a draft retirement budget

An important aspect of early retirement planning is getting specific about the projected budget you’ll need to live off when the time comes.

An easy way to do this is by creating a mock monthly retirement budget to determine how much money you’ll need to live off each month. 

Then, list your expected monthly spending. Many of your expenses will stay more or less the same in retirement, so take a look at your current costs (food, utilities, medical, insurance, internet, car, etc.) and use those numbers as a baseline.

Adjust each item as needed based on your personal retirement goals. For example, if you know you want to buy a new car for retirement, estimate the monthly payments required for the new car versus the one you currently have.

It’s also important to plan for medical expenses during retirement. Medicare eligibility doesn’t go into effect until the age of 65, no matter when you retire. Unless you know your employer allows you to keep your current health plan after retirement, you’ll need to have a plan in place for where you’ll get health insurance and how much it will cost. For many, this might mean buying private insurance, which can greatly impact your overall budget. 

3. Know your current financial standing

If your goal is to retire early, you need to take stock of where you currently stand financially and how far you have to go.

Be sure to assess the following areas when evaluating your current financial standing: 

• Emergency fund savings
• Outstanding debts 
• Mortgage payments 
• Contributions to retirement accounts (Roth IRA or 401(k))

If you’re 40 and want to retire in the next five years but only have $30,000 stashed in savings, you might struggle to have sufficient funds by the time you hope to retire.

Assessing your current financial situation provides crucial insight into the true feasibility of early retirement, revealing any adjustments you might need to make or goals you should work more aggressively toward (like paying off debt) to make it happen. 

4. Level up your investments

Once you’ve taken action on your existing long-term wealth goals—like paying off debt, having a robust emergency fund, and paying off your mortgage—you should ideally be investing at least 15% of your income for retirement.

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But if your goal is to retire early, you’ll want to find ways to put more dollars toward that goal—especially if you’re utilizing tax-advantaged retirement accounts like 401(k)s or IRAs, since those funds can’t be withdrawn until you’re 59 ½ (unless you want to pay a hefty early withdrawal fee). 

So how do you fund the gap between early retirement and when you can begin to lean on your retirement accounts? By utilizing returns from other investments! 

Once you’re contributing the maximum amount to your 401(k) or IRA, expand to other investments like exchange-traded funds (ETFs) to create a portfolio positioned for long-term growth. An ETF can passively track an existing index (like the S&P 500), making it a lower-cost option (as opposed to an actively managed mutual fund) that can compound your money over time. 

You might think that a shorter time horizon until retirement means you should make less risky investments. But remember to account for the years you’ll spend in retirement—ideally, your money will continue to grow during this time. 

When your retirement date draws near, you can plan to incrementally withdraw funds as needed, while also adjusting your risk levels down to mitigate short-term losses in periods of downturn. For example, you may allocate your taxable investments more conservatively while still contributing the maximum to your 401(k)s/IRAs. That’s because the investment funds you’ll be withdrawing—your taxable investments—are still subject to market fluctuations, so you’ll want to adjust your portfolio allocations accordingly. 

When your retirement date draws near, you may plan to cash out on a year or two’s worth of those compounded funds so you have access to more liquid savings. If this is the case, leave the remaining funds invested—simply cash out funds as needed and let the rest compound over time. 

5. Assess your current lifestyle for savings opportunities 

The earlier you retire, the longer the length of time you’ll need to fund. One of the best tips to retire early is to be honest about what sacrifices you need to make now so you can realize that goal. It all depends on how early you want to retire and what you’re willing to do now to make it happen. 

For instance, can you table your annual family vacation and invest the extra funds instead (or even just cut your vacation budget in half)? Or maybe you buy a used car in full instead of paying a monthly lease for the brand-new model you wanted.

Whether you make drastic cuts to your budget or simply stash away an extra $100 a month is up to you—just know that how much you put away now directly affects how quickly you can reach early retirement. 

6. Identify your fixed income streams—and know how to manage them

Managing your income during early retirement requires understanding how much money you have and when you can take that money out.

Your income streams are anything besides your emergency fund, such as:

• 401(k)s or IRAs
• Cash
• Dividend-paying stocks
• Real estate investment funds
• High-yield bonds 
• Any other investments you have, like ETFs or mutual funds 

If you’re retiring early, you’ll need to be strategic when it comes to planning your cash flows, since certain accounts don’t allow you to start receiving funds until you reach a certain age. The earliest you can claim Social Security benefits, for example, is age 62. And even then, you’ll only receive partial benefits, since full benefits aren’t offered until you reach age 65–67.

The rules and regulations for different accounts all vary. A financial advisor can be a valuable resource in ensuring you understand the timing and stipulations of yours. 

7. Enlist the help of a financial advisor 

While realizing your early retirement goals is ultimately in your hands, enlisting the help of a professional is a smart move. You don’t want to make a wrong move and realize you didn’t time your savings correctly or be forced to pay hefty fees because you didn’t understand the stipulations of certain accounts. A financial advisor can answer your questions and provide advice that’s in your best interest.

The answer to how to plan for early retirement is nuanced, but the steps above can expedite the process regardless of your financial standing. 

And if you’re looking for further support, an investing platform like Stash not only makes it easy to invest what you can afford, but also provides all the personalized financial education you need to move the needle on your long-term wealth goals. 

Learning how to retire early is one thing, but committing to making it happen requires some dedication. While early retirement isn’t for the faint of heart, it’s certainly possible if you’re committed to saving and know how to invest and grow your money over time—especially if you start early! 

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If you’re not sure how to build credit, you’re not alone. The Consumer Financial Protection Bureau (CFPB) reports that approximately 1 in 10 American adults lack a credit record; that’s 26 million people. Another 19 million Americans have a credit record but no credit score because their credit history is either out of date or too thin to show up on a credit report. 

If you’re starting from scratch, figuring out how to build credit doesn’t have to be complicated. Here are some simple credit-building steps you can take to get started.

In this article, we’ll cover:

• How to build credit with credit cards
• How to build credit without credit cards
• How to monitor your progress

Build credit with a credit card

Opening a credit card can be one of the fastest ways to build credit if you use your card wisely. But how can you get approved if you have little to no credit history? There are a few options to make it more accessible:

• Get added as an authorized user: A family member or significant other can add you as a user on their credit card; that card’s payment history will then be added to your credit report
• Open a student credit card: Many financial institutions offer this type of card for college students
• Open a secured credit card: This type of credit card is backed by a cash deposit you make upfront 

If you’re not a college student and it’s not practical for you to become an authorized user on a family member’s card, that’s okay. Those solutions aren’t available to everyone. So let’s focus on building credit with a secured credit card.

Get a secured credit card

A secured credit card functions like a standard unsecured credit card, with one major difference:  you deposit cash when you open the card, which serves as collateral if you’re unable to make your payments. Generally, your secured card’s credit limit will be equal to the amount of your deposit. A secured credit card is not the same as a debit card; any money you charge to your card is a debt you have to pay back, and you’ll have to pay interest on any balance you don’t pay off each month.

Because the card issuer shares information about your credit usage with credit reporting agencies, regular responsible usage can help build up your credit history. Visa, Mastercard, and nearly all of the leading credit card lenders offer a secured card option. You can also inquire at your bank or credit union about applying for a secured credit card.

Keep your card balance low

Your card’s credit limit is the maximum balance you can have at any given time, but just because you can borrow up to the limit doesn’t mean it’s a good idea. One factor that credit agencies use to calculate your credit score is credit utilization. That’s the amount of credit you have available compared to your balance. Generally speaking, using more than 30% of your available credit at one time can hurt your credit score. For example, if your credit limit is $1,000, keeping your balance below $300 is a good guideline.

Another important reason to keep your balance low is to avoid spending money on interest or running up debt you can’t pay off without squeezing your budget. Think of your credit card as a convenient way to pay for everyday things you know you can pay off within your billing cycle, not a long-term loan. 

Best practices for keeping your card balance low:

• Keep your credit utilization at 30% or less
• Make more than one payment per billing cycle
• Don’t use your card to buy more than you can afford to pay off every month  
• If you can’t pay your full balance each month, at least pay more than the minimum

Set up automatic monthly payments

Payment history makes up about 35% of your credit score, so delinquent payments can quickly turn your efforts to build credit into creating bad credit. Additionally, late credit card payments are often subject to fees or penalties, so you’ll end up owing even more the next month.  

Setting up automatic monthly payments ensures you won’t miss the crucial deadline. Most cards give you several options for autopay, such as the minimum balance, a fixed amount, or the entire credit card balance each month. 

Request a credit limit increase

Increasing your credit limit without increasing your spending lowers your credit utilization ratio, which could benefit your credit score. After you’ve established a track record of on-time payments, your credit card company may be willing to increase your credit limit. If you have a secured card, you might have to add additional funds to your security deposit, but not always. In some cases, the institution might even automatically increase your credit limit after a certain period of time. Since credit utilization is an important part of developing a good credit score, it’s worth calling your institution to ask about your options. 

Open a second credit card

Once you’ve been using your secured credit card responsibly for about a year, you may be eligible to upgrade to an unsecured card. With your credit history established, there might be many more options for cards you could qualify for, so shop around to find the right one for you. Consider factors like the interest rate and whether the card has an annual fee. Some credit cards even offer added benefits like points or cash back that might interest you.

When you open a new credit card, it may be wise to stop using your first card so you don’t have to keep track of balances and bills for multiple credit cards each month. But don’t close that account. Credit reporting bureaus look at the age of your accounts when calculating your credit score; the longer an account has remained open and in good standing, the more it works in your favor. Essentially, older credit accounts give more credence to your credit history than new credit.    

Build credit without a credit card

Responsible use of a credit card is one of the best ways to establish your credit history, but it’s not the only path. It’s possible to build new credit without a credit card through a credit builder loan or by leveraging your rent and utility payments.

Apply for a credit builder loan

A credit builder loan (CBL) is a type of personal loan made specifically to help borrowers build credit history and improve their credit scores. Here’s how it works: Instead of the bank loaning you a lump sum that you repay over time like a standard loan, your lender will hold the loaned money in a secured savings account until the loan is repaid. You make fixed monthly payments and then get the principal back at the end of the loan term. 

Research shows that opening a CBL can increase your likelihood of establishing a favorable credit score by 24% and increase existing credit scores by 60 points or more, depending on your individual financial situation. While CBLs are not as common as other types of loans, you may be able to establish one with your bank or credit union.

Keep in mind that, just like with credit cards, making your payments on time is crucial; late payments reflect poorly on your credit score. And you’ll likely pay interest on the money you borrow, though some institutions will credit you back some of the interest after you’ve paid off the loan.

Leverage your rent and utility payments

If you pay your rent and utilities on time every month, you might be able to use your good payment history to build credit. These kinds of payments aren’t automatically shared with credit reporting agencies, but all three major credit bureaus, Equifax, Experian, and TransUnion, will include rent and utility payment information in credit reports if they receive it. 

You can’t report your payments to the bureaus yourself, and landlords and utility companies often won’t do so on your behalf because they have to pay a fee. The good news is that there are many rent-reporting services that will verify and report your payments. 

The options offered by these services and the fees they charge vary, so comparison shop to find the right one for you. Some just report rent, while others will also include various types of utilities. Some will also report your past payments, which can be a benefit if you’ve always paid on time. You’ll also want to find out which bureaus the service reports to, as not all of them include all three agencies. 

If you use a rent-reporting service to help build credit, remember that consistent on-time payments are essential if you want a positive impact on your credit score. 

Take your time and watch your numbers climb

Building credit takes patience and diligence; after all, it’s called credit history for a reason. It can take six months or more to generate your first credit score after you get started with a credit card or CBL loan. Having only that new credit won’t necessarily get you to a high credit score; keeping accounts in good standing over a longer period of time, maintaining a low credit utilization ratio, and making all your payments on time are key to increasing your score over time.

As you put your plan for how to build credit into action, keep an eye on how your credit score is affected. You can get a free credit report once a year from all three of the major credit reporting bureaus; check it to see your progress and make sure no issues bringing your credit score down. If you want to keep an even closer eye on your progress, a free credit score app will give you a more frequent look at your credit report, and many offer personalized tips for improving your credit score. And remember: building credit is just one piece of the puzzle. Your budget, savings, and investments are also core components of working toward a brighter financial future.     

The post How to Build Credit: Why You Need It and How to Get It appeared first on Stash Learn.

While each individual’s circumstances vary, trends show that, on average, Gen Zers hold the least amount of debt, while Gen Xers shoulder the highest debt burden.

For common types of consumer debt, here’s how the average debt owed per consumer breaks down per category.

Debt’s effect on your life

You may have heard references to “good debt” and “bad debt.” Generally speaking, things that may have a long-term positive impact on your financial health are considered “good debt.” That includes student loans, which may increase your long-term earning potential, and mortgages, which can add to your net worth if your home rises in value over time. When people refer to “bad debt,” they often mean things like money you owe on credit cards or an auto loan: purchases that depreciate in value. 

There’s no shame in being in debt, whether it’s the “good” or “bad” type. The difficulty is that carrying debt over time can have a negative effect on your life in a number of ways, such as:

• Cash flow: Monthly debt payments can eat into the money you have available to spend each month. If your minimum payments are particularly high, it can even be difficult to budget for necessities. 
• Credit score: Having a lot of debt or late payments can lower your credit score, making it more difficult to be approved for a loan or line of credit if you need one. Some employers even look at applicants’ credit scores as part of their hiring process. 
• Saving for the future: Every dollar you spend on debt payments and interest is money you can’t put into savings and investments that could help you work toward your long-term goals or save for retirement.
• Risk of falling behind: Even if you have only “good debt,” it can turn bad if you fall behind on payments. Late payments can lower your credit score and result in fees and increased interest rates; it can also be difficult to catch up later.
• Stress: Worrying about debt and finances can take a toll on your mental health as well as your financial well-being. The American Psychological Association reports that 65% of Americans cite money and personal finance concerns as a significant source of stress.   

But the good news is that you can counter the negative effects by learning how to get out of debt, making a plan that works for you, and taking steps now to start your journey toward debt-free living. 

How to pay off your debts faster

Paying off debt takes planning and discipline, but there are techniques you can use to succeed. Depending on the amount you owe and your current financial position, it may take you a longer or shorter amount of time to pay off your debt than another borrower. But regardless of your situation, the sooner you start figuring out how to get out of debt, the sooner you’ll be able to put the money you spend on interest back in your own pocket.

These six tips can help you make a plan and start taking action now:

1. Stop borrowing money 
2. List all your debts
3. Make a budget
4. Negotiate your interest rates
5. Use a debt repayment method
6. Put extra money toward monthly payments

1. Stop borrowing money

Don’t continue to accumulate debt. It may sound obvious, but your spending habits can allow additional debt to creep into your life, sometimes unwittingly. 

You may wish to take a look at how you use credit cards first. Remember that a line of credit is really a type of loan, and you’re paying interest on the money you borrow each time you whip out your card to make a purchase. By using your debit card instead of your credit card, you’ll only be able to spend the money you have in the bank. This may entail reducing spending on non-essential items in your budget, like entertainment. 

Another sneaky way more debt can accumulate is if you routinely use credit cards to earn points or rewards. If you pay off your credit card balance every month, before interest can accumulate, you won’t add to your debt. But it’s easy to spend more than you’d planned and wind up with additional debt if you can’t pay off the full balance when it’s due. 

Review all your auto-payments to see which ones are being charged to credit cards, and switch them to your debit card instead. That way, you won’t be adding to your credit card debt without realizing it. This is also a good opportunity to check for monthly or annual subscriptions you’ve signed up for but are no longer using; it’s easy to start a free trial and forget to cancel it.

Finally, avoid accruing additional debt in the form of loans. If you need to borrow money to make a larger purchase, like a new car or home improvements, consider whether you can delay those purchases.

2. Gather your debts

To plan how to get out of debt, you’ll need a clear picture of exactly how much you owe. Make a list of all of your debts, including student or auto loans, credit card debt, your mortgage, and any purchases you’ve made on installment plans. Track the amount you owe, the interest rate, and your minimum monthly payment for each debt. Having the complete picture will help you better understand how much you’re actually paying toward your debt each month, and whether you’re able to contribute more toward debt that carries a higher interest rate.  

To ensure you track down all your debts, you might want to take a look at:

• your bank account statements for the last year
• your credit card statements
• records in digital payment apps
• your credit report; you can get a free copy of your credit report without negatively impacting your credit score 

3. Adopt a budget that you can stick to

Creating a budget and regularly tracking your spending is a cornerstone of planning how to get out of debt and managing your money to put that plan into action. When you have a budget, you can see exactly how much money you’re bringing in, plan how to spend it, and track where it’s going. You decide what’s essential and what’s optional, giving you the power to make decisions that help you reach your debt-free goals. 

Making a budget is the first step; sticking to it is another matter. Luckily, there are many different budgeting approaches, and you can choose one that fits best with your lifestyle. 

50/30/20 budget

The 50/30/20 model is a popular approach because it provides clear guidelines for allocating your money. With this method, you divide your spending into needs, wants, and savings/debt, then allocate your after-tax earnings to each category.

• 50% to needs: Things you need for survival, like groceries, utilities, minimum loan payments, insurance, and health care
• 30% to wants: Things you want to make life more enjoyable, such as dining out, vacations, entertainment, and just-for-fun purchases
• 20% savings/debt: Savings, investing, and/or making additional payments on your credit card debt and other loans

4. Negotiate and reduce your interest rates

There may be options to reduce your interest rates for some of your debts. The more you’re paying in interest, the longer it’s likely to take to wipe out your debt, so it might be worthwhile to investigate your options.

• Credit card debt consolidation: You might be able to transfer your balance from one or more credit cards to a card with a lower interest rate. Keep in mind that you must be in good standing with your credit card payments and be able to qualify for the new lower-interest card, and there are often fees when you transfer a balance. 
• Credit card interest rate reductions: Some credit card companies have programs for reducing your interest rate. Some issuers might reduce your rate if you have a history of on-time payments or are facing financial hardship. Others have programs designed especially for people whose debt has become unmanageable. 
• Student loan options: Your student loan issuer may have a variety of options for reducing your interest rates, including debt consolidation if you have multiple loans and deferment if you’re facing financial hardship. There are also a variety of federal programs you may qualify for.  
• Other loan options: Any loan issuer might offer programs or be willing to negotiate a lower interest rate, so it’s worth calling to ask.
• Overall debt consolidation: If you have multiple debts, you may wish to research debt consolidation loans. With these programs, the financial institution provides a loan to pay off all your other debts, and then you pay off that single loan. If you go this route, make sure the interest rate on the loan is lower than the rate of all your other debt.  

Be aware that any debt consolidation or interest-rate reduction programs may have fees associated with them, so do the math to ensure any fees don’t outweigh the savings you’ll get by reducing your interest rate. 

5. Tackle your debts with the snowball method

When you have multiple debts, it may feel overwhelming. One approach that can have a big impact is to start small and work your way up: that’s the debt snowball method in a nutshell. Many people find this strategy effective and encouraging when they start their get-out-of-debt journey. 

Here’s how it works: Take your list of debts and organize them by the total amount you owe, from smallest to largest. Every month, make the minimum payment on each account. Then, pay extra on the smallest debt every month. When that’s paid in full, shift all the money you were paying toward that debt to the next largest one, and continue paying the minimum on everything else. 

Here’s a hypothetical example of how it could work in practice. Pat has the following debts:

• Store credit card: $500 balance, $25 minimum payment per month
• Major credit card: $1,200 balance, $65 minimum payment per month
• Car loan: $5,000 balance, $130 minimum payment per month
• Student loan: $15,000 balance, $190 minimum payment per month

Pat pays the minimum payment for all those loans each month, plus an extra $100 toward the store credit card. When the store credit card is paid off, Pat starts paying an extra $125 a month on the major credit card; that’s the total of the store credit card’s $25 minimum payment plus the extra $100. 

One reason this method is so effective is that you gain a sense of accomplishment each time you completely pay off a debt. And the amount you can put toward paying off debt gets bigger and bigger as you go along, just like rolling up a snowball. 

Try the avalanche method for high interest debts

The snowball method isn’t the only approach you could take. People who have some debts with especially high interest rates might want to try the avalanche method, in which you pay extra on the debts with the highest interest rates first. While the easiest method for getting out of debt depends on your situation, what matters is choosing a strategy that works best for you.

6. Pay more than your required minimum payment

The consequences of making only the minimum payment on your debts each month can add up quickly. Say, for example, you have $5,000 in credit card debt, with a minimum payment of $125 and an 18% interest rate. If you only make the minimum payment each month, it will take you nearly four years to pay off your debt, and you’ll spend a total of $2,013.21 in interest. If you up your payment to $300 per month, you’d accrue around $800 in interest and pay off your debt in less than two years. 

Even if you have a fairly low interest rate, the longer you have debt, the more you spend on interest. Putting extra money toward your monthly payment will help you get rid of debt faster, and you’ll pay less in interest as well. 

Your debt-free future

If credit card and loan payments are straining your budget, the tips above can help ease the burden, no matter how small you start. Even if you have relatively little debt now, making a plan for how to get out of debt may be a smart move so that you don’t wind up further in the hole. 

Whether you have “good debt” or “bad debt,” paying it off sooner rather than later can help you build a stronger financial future. When you get rid of debt, you can put the money you were spending on loan payments and interest into savings and investments that may earn profit over time. The institutions that hold your debt are making money from those loans; imagine how much better it would feel to have that money earning interest and returns for you instead.  

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Debt payment FAQ

What is the easiest way to get out of debt?

It depends on your circumstances and personal preferences for managing money. Both the snowball method and the avalanche method can be helpful strategies. Creating and sticking to a budget can help you put more money toward paying off debt and avoid going into more debt in the future. 

What can I do if I can’t pay my debt?

When what you owe is more than you afford to pay back, you can look for ways to reduce your payments by contacting lenders. Depending on the type of debt and the financial institution, you might have options that will reduce your monthly payments or interest rate, or even get a forbearance that pauses your payments for a period of time. 

You can also look into refinancing options for your mortgage or student loans if current interest rates are less than what you’re paying. A similar tactic can be used for credit card debt by transferring your balance to a card with a lower interest rate.

Some people also find that debt consolidation services can help. Institutions that offer a debt consolidation loan sometimes also negotiate with creditors on your behalf to reduce the balance of your debt.

Finally, you might also consider picking up a side hustle to earn extra income that you devote solely to paying off debt.

Can you remove debt without paying?

Generally speaking, once you have debt, you have to pay it off. Even if you declare bankruptcy, you’ll generally have to sell some of your assets to pay back as much of the debt as possible before the rest of the debt is discharged. And certain kinds of debt, like student loans and child support, cannot be discharged through bankruptcy.

That said, there are a few government programs for student loan forgiveness that apply to certain individuals and circumstances.

The post How to Get Out of Debt in 6 steps appeared first on Stash Learn.

The tech company is introducing a product called Apple Pay Later, which will allow users to split payments into four equal installments without interest or fees. The payment plan can be used anywhere Apple Pay is accepted. 

At online retailers and at registers these days, you may encounter the option to pay with a service known as “Buy Now Pay Later” (BNPL). It’s another way to pay, that doesn’t rely on credit or debit cards, or even cash.

Buy Now Pay Later services provide loans to consumers, letting them pay for something in installments, instead of paying the entire sum at checkout. BNPL companies operate by fronting the money to shoppers, and charging them over the course of a multi-month payment plan that they select. Rather than charging compound interest, as a credit card company might, Buy Now Pay Later companies often charge no interest, or less than credit cards do. 

And that’s one reason they have taken off with younger consumers, such as Gen Z and Millennials, who are looking for alternatives to credit cards. (Learn more here.)

The idea behind these businesses is that they let customers make big, often necessary, purchases without putting them on a credit card and potentially racking up debt. And in fact, they operate much like the layaway plans of old, which thrived before the invention of credit cards. But there are still risks. For example, some BNPL services will hit you with late fees if you miss payments. Missing payments might also negatively affect your credit score if the BNPL service you use reports to a credit bureau.

On the plus side, Buy Now Pay Later companies can also give people without a credit history access to credit. Retailers may benefit too. They often pay Buy Now Pay Later providers to feature them as a payment option on their sites. (In contrast, merchants must pay to accept credit cards.) Stores will reportedly pay even higher fees than they do to credit card companies because they expect consumers to spend more money with BNPL. Services such as Klarna, Sezzle, Afterpay, and Affirm offer point-of-sale short-term loans to consumers, paying the retailer upfront and charging the buyer in installments. 

How BNPL Works

Digital retailers will tell you which BNPL services they offer when you go to checkout. In order to use a BNPL service, you’ll have to download the service’s app on your phone. You’ll then have to provide basic information, such as your name, billing address, and sometimes your social security number. You’ll also have to verify your information with an email or mobile code, and accept terms and conditions. Then you can provide your method of payment, such as a credit card, debit card, or check. At checkout, you’ll make a down payment, and agree to a payment schedule. Payments will then be applied to your debit or credit card, or deducted from your checking account. 

You can also use these apps at the point of sale at retailers that accept them. Getting approval from a BNPL service can reportedly take less than 10 minutes.

How BNPL payments are structured

The payment terms for BNPL companies vary, but are often structured as four equal payments of roughly 25% of the owed amount, including taxes and any fees, with the first payment due at checkout. Some, like Afterpay and Klarna, offer you the ability to pay off your loan in four payments without interest, but will charge fees if your payments are late. Klarna also allows shoppers to pay back a loan interest-free in 30 days, an option known as  “Pay Later,” and offers long-term loans—from 6 months to 36 months—with interest. Others, such as Affirm, may charge interest as soon as you take out the loan, but don’t charge late fees. When you sign up to use Affirm, they’ll typically let you know how much your payments with interest will be, but you won’t pay extra fees if a payment is late.

The interest rates offered by certain BNPL providers can be comparable to those offered by credit card companies. Affirm, for example, charges an Annual Percentage Rate (APR), which reflects the annual interest rate you pay as well as fees, from 0% to 30% depending on how big the loan is, your credit score, and which payment structure you choose. Afterpay and Klarna, meanwhile, do not charge interest but can charge late fees up to 25% of the purchase’s value. 

In contrast, the average credit card rate is reportedly 16.77%, as of June 2022., as of September 2021. Credit card interest typically compounds on a daily basis, which means that if you don’t pay off your balance within your billing cycle, you might owe a much higher amount than you originally did as the interest compounds. 

How BNPL can affect your credit score

For people who haven’t started building credit yet, or are rebuilding their credit, BNPL can be an alternative to credit cards. Afterpay, for example, reportedly instantly approves applicants without checking their credit score. Other options such as Klarna and Affirm perform soft credit checks. A soft credit check appears on your credit report when it’s checked for reasons that are not necessarily related to borrowing money, while a hard credit check appears on your report when you want to borrow money, for example by applying for a credit card, mortgage, or car loan. A hard credit check usually temporarily lowers your credit score, but a soft credit check doesn’t. “This can be an advantage if you don’t have a great credit score or any credit score at all, and it’s fast,” says Ted Rossman, New York-based senior industry analyst at Creditcards.com and Bankrate.com. 

Everyone’s credit situation and financial background is different. You should be aware of how BNPL can affect your credit before you sign-up for it. If a BNPL reports to a credit bureau, your payment history can affect your credit score. “Once you start using [BNPL], if you pay your bill on time, your credit score will….slowly improve,” says Carter Seuthe, chief executive officer of debt management company Credit Summit, based in Austin, Texas. On the other hand, Seuthe says if you fail to pay, your account will be marked as delinquent and that could affect your credit score. “If your account is handed to collections you will see a significant drop in score,” Seuth adds.

Nevertheless, staying on top of your payments if you decide to use BNPL is crucial. In a recent survey, 44% of respondents said that they’ve used BNPL to acquire an item they need. Of those who’ve used BNPL, 34% have reportedly fallen behind on one or more payments and 72% said they believed falling behind hurt their credit scores.

Other considerations before you use BNPL

Keep in mind also that you can earn points as you spend with a credit card, which you can use to pay down your bill, book travel, shop online, and more. You won’t earn those points using BNPL. (Remember that both credit cards and BNPL are forms of debt financing—paying off a loan over time—so you should be careful with both.) A credit card may be a more efficient way to build credit but if you don’t have a strong credit profile or want to avoid a ton of credit card debt, BNPL might be an option worth considering. 

And while BNPL companies often charge little or no interest, there can be hidden fees such as late fees. Missing payments could result in extra costs, and your debt could be sent to a debt collector. If your BNPL payments are taken automatically from your bank account, you should also be mindful of any overdraft fees that your bank charges, in case you don’t have enough in your account to cover the payments. As with anything, it’s important to read any fine print and disclaimers when you apply to use BNPL.

Another potential pitfall with BNPL is that, much like a credit card, it can increase the chances of accruing debt. While it might feel like you’re only paying a small portion of the cost you owe upfront, you will ultimately pay the whole sum over time, plus any fees. 

Follow the Stash Way

Whether you use BNPL or some other financial service to borrow, it’s important to practice good financial habits by budgeting for your essential and non-essential spending. Budgeting is part of Stash’s financial framework the Stash Way, which also includes saving for the short-term and the long-term, and making room in your budget to invest small amounts regularly. 

The post Buy Now Pay Later: How it Works and What You Should Know appeared first on Stash Learn.

While you’re at it, you can also think about ways to spring clean your finances, whether it’s coming up with a new budget, hitting the unsubscribe button on services you no longer need, or simply creating a master list of all your financial accounts. 

Here are some ideas to help you spring forward to a tidier financial future.

Consolidate your accounts 

One of the benefits of spring cleaning is feeling organized. Consolidation can help you keep better track of your money and make managing it easier. Maybe you have an old 401(k) that’s been sitting untouched since you left your previous job. Consider rolling it over into an IRA. Fewer investment accounts means fewer statements each month.  You’ll also cut down on account passwords and IDs, and have fewer tax documents to gather each year. 

If you don’t already have a spreadsheet or list of your accounts, there’s no better time to create one than now. List all the financial institutions, account numbers, log-in info, contact information so that you don’t lose track of any accounts or assets. It can be helpful to remind yourself of old accounts you don’t really use anymore and clean up low balance or infrequently used accounts that generate unwanted statements, extra tax documents, and fees. You also can have your list ready for when you’re putting your estate documents, such as your will, together.

Declutter your expenses 

By going through recent transactions on your bank and credit card statements from the last few months, try to identify unused subscriptions and recurring charges you can get rid of. Look at all the automatic debits for the past few months. Do you actually use your music, TV, or movie streaming service? For example, it may cost less to simply rent an individual movie once or twice a month. If you see things that aren’t useful to you any longer, log into the proper website or call the right customer service number to end your membership. And if you notice a charge you never actually made, alert your bank immediately.

Delete convenience apps and hit unsubscribe

Shopping apps such as Postmates, Doordash, and Instacart make it very easy to hit the buy button, but that convenience comes at cost, such as delivery or other fees. Instead, embrace the cost savings of picking up your own food and groceries. 

Similarly, beware of marketing and sales campaigns in your inbox and online. Unsubscribe from all the promotional emails that come to your inbox, and try to avoid clicking on sales ads on social media. A lot of money winds up going toward unplanned purchases when we see the word sale. Seventy percent off a new pair of shoes is still more than not buying them at all, and a buy-one-get-one-free on something you only need one of is not going to save you money. 

Check credit reports

Review your credit report to ensure it’s accurate. A credit report is a record of all your loan and payment information, compiled by the three reporting bureaus, which are Experian, Equifax, and TransUnion. What’s on your credit report figures into your credit score, so it’s important to see if what’s recorded in your file is accurate. Consumers often find discrepancies, so it’s a great idea to review it at least annually to ensure there aren’t any errors that could be dragging down your credit score. You are legally entitled to three credit reports per year, one from each of the credit bureaus. You can request reports directly from each bureau, or online at AnnualCreditReport.com, which is the only website authorized by the federal government to give you annual access to free credit reports. 

Review beneficiaries 

Maybe you started a new job with a new 401(k), or maybe you set up an Individual Retirement Account (IRA), or have a new life insurance policy. Check to see if you need to add or update a beneficiary on those accounts for peace of mind. The beneficiary is the person, or people, you designate for each of those accounts who receive the money or benefit if you die. Having clear intentions about beneficiaries can create a smoother experience should something happen to you.

Ask for lower rates 

If you have a credit card balance, call your card company and ask them to lower your annual percentage rate (APR). They often can do that at no cost. Also see if you can get cheaper monthly rates from cable, cell phone, and insurance providers. You can often negotiate lower prices if you mention lower rates from competitors. If they won’t negotiate, consider switching providers. 

Shop around—and wait

Learn to compare prices for items online before you purchase. Also learn to rein in impulse spending. Try waiting a day before hitting the buy button or make a significant purchase in a store. A 24-hour “cool down” period could help you make buying less of an emotional decision. It could also give you some time to research cheaper options elsewhere.

Join the gift-sharing economy

In the spirit of spring cleaning, local buy-nothing groups, where members exchange items and services for free, are a great place to give away things that you no longer need. You can also contribute your time and skills in return for another member’s services. For example, you may find someone in the group who is willing to give their time and help sewing or mending clothes, which could save you money on a tailor or new clothes. In exchange, you might be skilled with home maintenance, which could save another group member money on these projects. You can also pool resources, as participants in these groups will often lend out tools, such as kitchenware or items for entertaining. That way you can skip the expense of buying something you may need to use only once.

The post 8 Tips to Spring Clean Your Finances appeared first on Stash Learn.

The original loan payment freeze was part of the $2.3 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which among other things, originally suspended most federal student loan payments through September 30, 2020. That postponement period was then extended six more times. 

Here’s a quick update on where things stand.

What happened to loans during the forbearance period?

As of December 2021, about 43 million Americans had federal student loan debt totaling over $1.6 trillion.

During the federal loan grace period, qualifying student loan borrowers have been able to skip making monthly payments, and their loans have not accrued interest. If you have federal student loans, you may be included in the zero-interest period.  Good to know: Some federal loans, such as those that are part of the Federal Family Education Loan Program, a program that ended in 2010, are actually held by private banks, and are therefore not included. 

What happens on August 31, 2022?

Although the Biden Administration could once more extend the student loan pause beyond the end of August, 2022, it has not yet committed to doing so. 

However, a group of Senators, led by Senate Majority Leader Chuck Schumer (D-NY), Elizabeth Warren (D-MA), and Representative Ayanna Pressley (D-Mass) have long urged the president to cancel up to $50,000 in debt per student. 

In 2021, the decision to continue the student loan zero-interest period got a boost from an unexpected change at the federal level. The Pennsylvania Higher Education Assistance Authority (PHEAA),  which operates one of the largest loan servicers for the U.S. Department of Education, terminated its contract with the government in December 2021. That decision required the movement of 8.5 million accounts to other loan servicers, which gave the federal government an additional reason to keep repayments on pause.

Making a repayment plan

For now, borrowers should plan on making payments again in the fall. If you have managed to save money during the pandemic, consider paying off a portion of your loans before the zero-interest period ends. When you make payments on your debt during the zero-interest grace period, you’ll be paying down principal directly. Typically payments include interest. Making payments now could help you get paid off more quickly. If you have multiple student loans, you may also want to take advantage of the zero-interest period by paying off the loans that have the highest interest rate. 

Either way, consider revisiting your budget. Maybe you’ve been putting the money that you would be spending on your student debt into savings, or maybe you’ve been spending it. Now’s the time to make sure your budget has room for your monthly student loan payments.

If you don’t think you’ll be able to make your payments due to unemployment or some other life circumstance, you should still consider making a plan to pay off your student debt. The Department of Education recommends reaching out to your loan servicer quickly to see if you can change your repayment plan, potentially lowering your monthly payments. You might also look into forbearance, consolidation, or deferment.

Check out the U.S. Department of Education and the Consumer Financial Protection Bureau, a federal agency devoted to consumer financial help, for up-to-date information about student loans during the pandemic.

The post Making a Plan for Repaying Federal Student Loans appeared first on Stash Learn.

Financial literacy means having the ability to assess your financial situation so you can make the right decisions about money on a daily basis. But one in six students in the U.S. don’t meet the baseline level of proficiency in financial literacy, according to the Council for Economic Education. A survey conducted by the council found that on average, people estimate that they’ve lost $1,389  due to a lack of financial knowledge. 

Having a degree of financial literacy can help you manage your current life, while preparing you for unforeseen expenses and emergencies. It will also help you develop a financial plan for the future. That way you won’t be wasting your cash, or getting yourself into debt, or taking unnecessary financial risks. Acquiring financial literacy can also allow you to understand and participate in the economy. 

Achieving financial literacy is especially important in today’s world, where people face the highest inflation rate in decades, and the ongoing pandemic, which has affected everything from the job market to housing prices. 

Stash has assembled four things that financially literate people do  to maintain a solid financial foundation in 2022. 

Learn how to budget with inflation in mind

Building a budget is important no matter what the financial landscape looks like, but it’s particularly important now that inflation has pushed up the price of gas, groceries, and more. As of February 2022, the inflation rate, which is measured by the Consumer Price Index (CPI), was 7.9% for the year ending February 2022, the largest spike since 1982. Gas prices have surged 38% over that same period, while food prices have increased 7.9%. The cost of new vehicles went up 12.4%, and used cars and trucks jumped 41.2%.

Your budget should take your total income into account, and you should make sure there is ample room for your essential expenses such as food and gas, non-essential expenses like going to the movies, and saving and investing. “While you can’t stop prices from going up at the grocery store or when filling your tank, you can still make sure you’re hitting your goals by paying attention to your habits and adjusting where possible,” says Lauren Anastasio, a certified financial planner (CFP), and director of financial advice at Stash. 

Budgeting for inflation can help you make sure you’re not neglecting financial priorities, like saving for a house or retirement. Also, continue to stay informed on what the inflation rate is, and the Federal Reserve (the Fed) is doing to combat inflation. 

Make a plan to pay down your debt

Debt is also an obstacle many consumers deal with. In the last quarter of 2021, credit card debt increased by $52 billion, to $860 billion, the most significant quarterly jump in history. 

Smart use of credit can be an important part of becoming financially literate since it helps you build a credit history, and get a credit score. Your credit score is what banks and other institutions will reference when deciding whether or not to lend you money, rent you an apartment, and more. It’s important to pay down your debt so that you can build strong credit, which can help you reach your financial goals like taking out a loan for a business or getting a mortgage for a house. 

Try to pay off your credit card bill and other debt payments in full each month, since maintaining a balance can hurt your credit score. If you have a chunk of debt you need to tackle, make a plan to do so. You might want to start with the biggest debts, or those with the highest interest rates, which is known as the avalanche method. Or you might want to use the snowball method by starting with smaller payments and working your way up.

Save for emergencies and the future

Being financially literate also means knowing how much money you need to save for what you want, emergencies, and retirement, and building those savings. With the uncertainty brought on by the pandemic, having money in an emergency fund to fall back on is crucial. “The pandemic exposed just how little people were prepared for a loss of income or even their job,” says Brannon Lambert, a certified financial planner at Raleigh, North Carolina-based Canvasback Wealth Management.

Lambert recommends setting up an emergency fund in a savings or money market account. Stash suggests that an emergency fund should have three to six months worth of expenses in it. It should also be liquid, so that you can take it out at a moment’s notice if you need to. You should also start socking away money for future purchases, and for retirement with a 401(k) or an individual retirement account (IRA). You can open an IRA through Stash.

Invest to stay ahead of inflation and stay informed

If you’re able to, one way to stay ahead of inflation and to build your financial literacy (and hopefully savings) is by investing. While you’re not guaranteed a return on any investment, investing your money is a way to try and stay ahead of inflation. Hopefully, your return will outpace the rate of inflation. If the inflation rate is currently 2%, for a simple example, and your portfolio had a return of 5%, your real return would be 3%.

In order to invest wisely, you should also stay up-to-made on market and economic news. Learning about the economy and markets is also a way to increase your financial literacy. Sign up for Stash’s weekly newsletter, The Wallet, to stay informed. 

The post How Financially Literate People Stay on Top of Their Money appeared first on Stash Learn.

Since the beginning of the pandemic, the three biggest credit reporting bureaus—Equifax, TransUnion, and Experian—have offered free weekly credit reports to help consumers stay on top of their credit scores, as many people have experienced layoffs and other difficult financial situations. But on April 20, 2022, that perk will come to an end. Going forward, you’ll be able to request one free credit report from each agency every year. 

Here’s what you should know about checking your credit report. 

What is a credit report?

A credit report is a record of how you’ve handled loans and payments over the course of your financial life. In the report, a credit bureau will consolidate all of your credit information, such as how many credit cards and loans you have, and how you’ve paid down that debt. If you’ve been sued, arrested, or if you’ve filed for bankruptcy, that may appear in your report.  Your credit report will also give you a credit score, which is a points-based rating system that assesses how responsible you are with loans and debt over time. 

Your credit score is determined by a company called Fair, Isaac Co. It’s sometimes referred to as a FICO score. It uses credit history data compiled by credit bureaus Experian, Transunion, and Equifax. Your credit usage information is regularly transmitted to these three agencies. A credit score can range from 300 to 850. The better your credit, the higher your score. Perfect credit is 850.

How to check your credit report

In order to get a copy of your credit report, you submit a request to Annual Free Credit Report Request Service via phone or mail. You can also request one online at AnnualCreditReport.com, which is the only website authorized by the federal government to give you annual access to a free credit report. 

You’ll need to input information, including your full name, your social security number, your date of birth, your phone number, your current address, and any previous addresses from the last two years. Once you do that, you can choose which credit bureau(s) you want to receive a report from. 

You can ask for a report from all three, if you choose, but remember that you only get a weekly free report until April 20, 2022. After that, you may want to space out your requests to the bureaus, depending on how frequently you check your credit report. You can also pay to check your credit report more than once, and the bureaus can’t legally charge you more than $13.50 for the report. 

Why it’s important to check your credit report

Financial institutions use your credit report and your credit score to determine whether or not to lend you money. Additionally, rental property owners, insurers, or employers may look at your credit report. So you want to check your credit report to know where you stand should you want to apply for a loan or get a new job. 

You should also regularly check your credit report for errors, such as incorrect personal information, or accounts that you never opened, or that you already closed, as those things might be indicators of identity theft, which can affect your credit score. Reports of credit card fraud have increased in recent years, surging 44% between 2019 and 2020. With that in mind, you may also want to sign up for a credit monitoring, or identity theft protection service, to keep close tabs on your credit file. 

Your credit score is determined mostly by how timely you are with your credit card payments, and your credit card utilization, which is the percentage of the entire amount of credit that you have available to you, that you’re using at any given time.

In order to achieve and maintain a good credit score, make sure to pay your bills on time and in full, and that you’re not maxing out your credit cards. While common wisdom says you shouldn’t use more than 30% of your credit limit, you probably want to use far less than that percentage to get a good credit score.

The post How to Get a Free Credit Report and Why You Should appeared first on Stash Learn.

And it’s common to clash with your partner over money. Of married or cohabitating couples polled, 70% said that they had gotten into a disagreement with their partner over finances in the last year, according to a survey from the Association of International Certified Public Accountants (AICPA). Those disputes mostly centered around needs versus wants (36%), spending priorities (28%), and making purchases without first discussing them (22%). 

This Valentine’s Day, you might want to reflect on how you and your partner can better handle your money. You might want to wait until after you get dessert to bring it up, but here are five ways you can improve your financial life, together: 

1. Communicate

For any couple looking to work together on their finances, the starting point is good communication. Talking about money, and the way people handle it, is crucial to developing better financial habits with your partner, especially if you hope to build a life with each other. And yet, people don’t always like to talk about money. A little more than half of married or cohabiting couples claim that they feel “very comfortable” talking to their partner about finances. 

To start the conversation, you might consider asking your partner these questions, if you don’t already know the answer: 

• How much money do you make?
• How much debt do you have? And what kind (student loans, credit cards, etc.)?
• Are you comfortable having credit card debt? Do you tend to carry a balance or pay off your bill in full?
• What is your ideal strategy for dealing with money as a couple?

Once you have that initial conversation, you may find it easier to dig into more of the details.

2. Decide whether you want to merge finances

As you start to build a life with your partner, or inch closer to that possibility, you’ll want to consider whether or not you want to merge your money, and how you want to do it. Combining your finances often becomes a central issue once you get engaged or married. You’ll have to decide on a few different items: whether or not to combine bank accounts, whether or not to get joint credit cards, and whether to file your taxes separately or jointly. 

All of these decisions come with pros and cons. “There are benefits and drawbacks to filing jointly or separately,” says Julian Schubach, a Wealth Manager at ODI Financial, based in Rockaway, New Jersey. She recommends working with a certified public accountant (CPA) to talk through best practices for filing as a couple.  Remember, filing your taxes jointly can affect your tax bracket, so you’ll want to make sure you do your research before you file.

3. Collaborate on a budget

Whether you’re single or in a relationship, it’s critical to make a budget and do your best to stick to it. If you are cohabiting or married, you probably want to sit down with your partner to hash out your budget together. There are few different budget templates you might follow, including the 50-30-20 budget, the envelope method, and the zero-sum budget. 

When creating your budget, you’ll want to discuss how much you’re comfortable spending each month, what your priorities are when it comes to saving, and how you want to pay off debt if you have it. You may also want to divvy up your responsibilities, such as keeping track of expenses and paying off bills. “I manage a spreadsheet of all our incomings and outgoings and to budget every month,” says lifestyle and money blogger Victoria Sully, based in Cornwall, England. “This is a shared document with my husband and I update it regularly, always keeping him in the loop to try and make decisions together.” 

4. Talk about debt

Talking about debt and paying it off is a big part of most people’s financial life. The average household debt in the U.S., including credit cards, mortgages, home equity lines of credit, auto loans, and student loans, was $155,622 as of September 2021. As you and your partner budget together, you should determine how you both feel about debt, how much debt you have, and what your plan is for paying it off, separately or together. 

Communicating about debt is critical especially as you combine your financial lives. You don’t want to hide a credit card spending problem from your partner, and you don’t want them to keep a significant amount of student debt from you. One study finds that couples who openly discuss debt may have greater relationship satisfaction and commitment to staying together. 

5. Decide on goals

Another thing that’s likely to come up while you budget is what your goals for the future are. You probably want to make sure you and your partner are aligned when it comes to having kids, buying property, traveling, and where you want to live and work, or if you can work remotely. All of these goals require planning and saving. Together, you can compromise on a list of your goals, and sketch out a savings plan to achieve those objectives. 

Take this time to also think about when you want to retire, and how much money you want to have saved when you do retire. Keep in mind that when you file your taxes jointly, the amounts you can contribute to your retirement accounts change as well. For 2022, you can each contribute up to $20,500 to an employee-sponsored 401(k). People aged 50 and over can make additional catch-up contributions of $6,500.

Marriage can change how much money you can contribute annually to a Roth individual retirement account (IRA). Contributions begin to phase out when you earn more than $129,000 as a single tax filer or when you earn more than $204,000 as a married couple. When you earn $144,000 or more as a single tax filer, you can no longer contribute to a Roth. The same holds true for married couples, who can no longer contribute if their joint income is $214,000 or more.

Within your Stash account, you can set up different Goals such as buying a house, having kids, and retiring, and you can add money to those goals. You can also start investing with a brokerage account and saving for retirement with an IRA. 

The post Love and Money: 5 Ways Couples Can Work Together on Finances appeared first on Stash Learn.

But before you decide how you’re going to adjust your finances in the new year, it might be a good idea to look back on how you handled your money in 2021. Did you budget? Invest? Save? Take Stash’s quiz to see if you followed The Stash Way® in 2021: 

1/10

How Well Did You Handle Your Finances in 2021?

 

Did you create a budget in 2021?

Of course

No, I didn’t get around to it.

2/10

How Well Did You Handle Your Finances in 2021?

 

Did you stick to your budget in 2021?

Yes! For the most part, I followed my budget.

No, I fell off the wagon with my budget.

3/10

How Well Did You Handle Your Finances in 2021?

 

Were you able to establish or maintain a rainy day fund ($500 to $1,000) in 2021?

Yes, I’m set up for a rainy day.

No, I still need to work on that.

4/10

How Well Did You Handle Your Finances in 2021?

 

How about an emergency fund (three to six months worth of expenses)?

Yep, I have an emergency fund to lean on should something happen.

No, I don’t have three to six months worth of savings in case of an emergency.

5/10

How Well Did You Handle Your Finances in 2021?

 

In 2021, did you pay your bills on time and in full?

Yes! I’m looking forward to a healthy credit score in 2022.

No, I didn’t exactly stay on top of my bills all year.

6/10

How Well Did You Handle Your Finances in 2021?

 

Did you pay down your debt (like student loan debt or a mortgage) last year?

Yes, I made a significant dent in my debt last year.

No, I’m entering 2022 with more debt than I’d like.

7/10

How Well Did You Handle Your Finances in 2021?

 

How did you do with retirement savings in 2021?

I regularly put money away into one or more retirement accounts.

I didn’t put away money into a retirement account.

8/10

How Well Did You Handle Your Finances in 2021?

 

Did you invest regularly throughout the year?

Yeah, I invested regularly, even if it was just a little bit at a time.

No, I didn’t stick to a schedule when it came to investing.

9/10

How Well Did You Handle Your Finances in 2021?

 

How well did you diversify your portfolio in 2021?

I was pretty good about diversifying! I made sure to spread my investments across industries, regions, and/or assets.

I could have been better about diversifying my portfolio last year.

10/10

How Well Did You Handle Your Finances in 2021?

 

Did you get the insurance coverage you need in 2021?

Yes, I’m protected with insurance coverage, such as life insurance, health insurance, home or renters insurance, and others.

No, I still need to make sure I’m covered with insurance.

 

How Well Did You Handle Your Finances in 2021?

 

You scored 

Share this quiz with others!

Next Question

Check out Stash’s 2022 Financial Checklist for more ideas about how to manage your money.

The post How Well Did You Handle Your Finances in 2021? appeared first on Stash Learn.

Younger consumers are flocking to a new type of payment called Buy Now Pay Later (BNPL), which allows them to pay in installments for things they need and want.

According to a July 2021 analysis conducted by Stash of more than 700,000 customers, BNPL usage increased more than four times in the seven months from January to July 2021, compared to the same time period in 2020. The amount customers spent with BNPL also surged more than eight times with five of the top BNPL services. 

However, it turns out millennials are the biggest users of BNPL, making up 58% of Stash BNPL customers. Meanwhile, Generation Z customers have seen the biggest surge in BNPL usage, with BNPL adoption climbing 130% among this age group year over year. 

And Stash’s findings seem to mirror more general consumer research. In a 2020 survey by credit card research company Cardify, 44% of respondents said that BNPL is somewhat or very important in helping them decide how much to spend during the holidays, one of the peak buying times of the year. Forty-eight percent of respondents also said that BNPL might prompt them to spend 10% to 20% more than they would on a credit card.

BNPL use and investing habits

Although there may be no definitive correlation, Stash’s survey found that, across all generations, BNPL users have 38% less money invested on average on the Stash platform than non-BNPL users. On average, for customers whose income ranges between $0 and $25,000, millennial BNPL users’ total Stash investments are 28% lower than millennials in the same income bracket who don’t use BNPL. Similarly, for customers whose income ranges between $25,000 to $50,000, total Stash investments for millennial BNPL users are 34% lower than millennials in the same income bracket who do not use BNPL.

Note: This data doesn’t necessarily mean that  BNPL usage directly causes lower levels of investment. Additionally, the patterns Stash found compared data during a time when Covid-19 has been taking a toll on the economy.

Methodology

Stash analyzed Buy Now, Pay Later usage among roughly 770,000 Stash customers from January to July 2020 and from January to July 2021, using anonymized and aggregated data from customers’ external banking transactional information via Plaid. For the purposes of this research, Stash looked at transactions made with leading Buy Now, Pay Later companies Affirm, AfterPay, Klarna, Quadpay, and Sezzle, and compared it with aggregated and anonymized banking transactional data from customers who did not use these services in the given timeframe. 

Why people use BNPL

BNPL can help shoppers plan their spending over the course of a few weeks or months. It can also make it easier for people without credit, or who don’t want to use a credit card, to pace their spending. While most BNPL companies don’t report to credit bureaus, preventing users from building credit with them, some experts say that credit bureaus may start including BNPL data in the future.  

The two biggest reasons why people use BNPL are because it may be easier to make payments, and because BNPL may offer more flexibility, according to data from market research firm C+R Research, based in Chicago, Illinois. BNPL lets people break purchases into installment payments, so they can chip away at an expense over the course of several months at a simple rate of interest. That stands in contrast to credit card charges, where consumers have to pay their balances off at the end of a billing cycle, or potentially pay a higher rate of interest on the remaining charges. This also means you can budget for how much of each paycheck will need to go to a BNPL payment. 

Simple vs. compound interest

BNPL also lets people buy something and pay it off, typically over a period of months, without having to accrue significant interest, in many cases. Some companies, such as Affirm, offer payment plans with simple interest, while others, such as Afterpay and Klarna, offer zero-interest plans. (As a reminder, interest is what a lender charges on a loan. The interest rate dictates how much you’ll pay in interest relative to the original amount lent, the principal.) 

With simple interest, the lender calculates interest based on the principal amount alone. With compound interest, the lender charges interest on the principal amount, as well as any previous interest accrued. So typically, simple interest may be more favorable to the lendee. The longer it takes you to pay off the loan, however, the more likely you are to have to pay interest. 

For people who haven’t had a chance to start building credit yet, or are rebuilding their credit, BNPL can be an alternative to a credit card. BNPL providers can give people without credit access to a loan. Afterpay, for example, reportedly instantly approves applicants without checking their credit score. Other options such as Klarna and Affirm perform soft credit checks. A soft credit check appears on your credit report when it’s checked for reasons unrelated to lending money, while a hard credit check appears on your report when your credit is checked for a new loan, credit card, or line of credit. A hard credit check usually temporarily lowers your credit score, but a soft credit check doesn’t. 

Follow the Stash Way

BNPL comes with pros and cons. Know the details so you can make strong financial decisions to benefit your bottom line.

Find out more about BNPL here.

If you decide to use BNPL, consider practicing good financial habits when you do. Consider only using BNPL for things that are already in your budget, and that you can pay off quickly without accumulating interest or late fees. Make sure you account for payments in your monthly budget, and make payments automatic. If you put your BNPL payments on a credit card, make sure to pay off your monthly credit card in full so that you don’t rack up interest or hurt your credit score.

And consider following Stash’s guidance for financial well-being, called the Stash Way. Build a budget that includes room for your expenses, savings, and investing regularly.

The post Stash Survey Finds More People are Using Buy Now Pay Later appeared first on Stash Learn.