Month: May 2022

How to Protect Your Spending Power From Inflation

Posted on by Hal M. Bundrick

Inflation — the rise in consumer prices — is a slow erosion of your money over time. Before 2021, the United States hadn’t seen annual core inflation much above 3% for the better part of 25 years, says Michael Ashton, managing principal of Enduring Investments, a consulting and investing firm in Morristown, New Jersey.

So the 7.5% spike seen over the past year in the costs of fuel, used vehicles, groceries and just about everything else is the kind of sudden and systemic rise that can give a jolt to most peoples’ everyday spending.

Ashton also says that the COVID-19 pandemic stimulus checks and tax relief, combined with the reopening of the economy, fed consumer demand but didn’t replace product inventories. The result: shortages that lead to higher prices.

“Having supply chain difficulties is part of what inflation looks like,” Ashton says.

With inflation chipping away at your spending power, how can you protect yourself?

Examine your spending

  • Trim discretionary spending, voluntary spending in categories like entertainment or travel, by just 5%. This is one of those incremental changes that isn’t that difficult to do and goes directly to your personal bottom line.
  • Don’t delay a major purchase; prices will likely rise.
  • Shop strategically. Buy more generic brand products and prescriptions. Save on necessary expenses by using coupons and store loyalty programs. Use membership cards (like Walmart+ and others) to pay 5 cents less per gallon for gasoline.

Look for savings

  • Eliminate any fees you pay for credit cards or bank accounts (late fees, monthly or annual service fees, ATM fees, etc.). Many banks are waiving such fees and credit cards often have fee-free options.
  • Renegotiate bills like cable, streaming or cell phone for any possible savings.  “I can say from my own personal experience – it’s amazing how easy this is,” Ashton notes. He says that every time he would call his cell phone provider, it would offer him a plan that was far better than his current one. “And it doesn’t happen unless you call,” Ashton adds. He now makes a habit of calling once a year and asking, “What’s the best plan you have and should I be on that?”
  • Reduce the number of subscriptions you have, even if by just one. “You should do an audit of those from time to time because sometimes they sneak in a price increase, and it just shows up on your credit card,” Ashton says.

Try to bring more money in

  • Search for financial institutions that pay higher interest rates than you are earning now (if you are earning anything at all). Online banks and credit unions often offer high-yield savings accounts that sweeten returns, especially as interest rates rise.
  • Perhaps the most powerful idea of all: Ask for a raise. If you haven’t received an increase in salary in a few years, you’ve likely experienced what amounts to a pay cut because of inflation, Ashton says.

The inflation-matching savings account

Another inflation-fighting idea: Series I savings bonds. They were created specifically to protect consumers’ purchasing power against inflation, says Zvi Bodie, professor emeritus in finance at Boston University. Bodie holds a doctorate in economics from the Massachusetts Institute of Technology and has become an avid proponent of I bonds.

I bonds rates are keyed to the rate of inflation, which lately has been over 7%, he notes. They are a perfect safe haven for near-term savings. And not a bad addition to your long-term nest egg, too.

A minimum investment in I bonds through TreasuryDirect.gov is only $25, and an individual can put up to $10,000 annually into the savings bonds with electronic purchases. The bonds pay fixed interest plus the inflation rate, adjusted twice per year.

You can withdraw your savings without penalty after one year, but if you cash them in before five years, you’ll lose the last three months’ worth of interest.

“So what you get is essentially a savings account that can’t go down, and that’s going to go up with inflation,” Bodie adds. “Do I need to say more?”

Inflation is not the same for everyone

Inflation hit a 7.5% national average in January, but that’s not likely to be your inflation rate, says Ashton.

You may consume different items than the average person and you may not live in an average place, so your particular rate of inflation quite likely varies from the average, according to Ashton.

So, rather than agonizing over a single number as a spending power loss to recoup, use the small money moves above to improve your financial position slowly but surely.

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The article How to Protect Your Spending Power From Inflation originally appeared on NerdWallet.

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Interest Rates on New Federal Student Loans Going Up for 2022-23

Posted on by Colin Beresford

Two years ago, federal student loan borrowers enjoyed the lowest interest rates ever on their loans. This fall, rates for undergraduate borrowers will be nearly double what they were in 2020-21.

The interest rates for new undergraduate direct federal student loans are set to increase to 4.99% for the 2022-23 academic year, up from 3.73% last year and 2.75% in 2020-21. The interest rates on graduate direct loans are also set to increase to 6.54%; parent and grad PLUS loans will rise to 7.54%.

Since the new interest rates go into effect beginning July 1, any new loans taken out before then will carry the interest rates from the 2021-22 academic year.

2021-22 interest rates

2022-23 interest rates

Undergraduate direct loan

3.73%.

4.99%.

Graduate direct loan

5.28%.

6.54%.

PLUS loan

6.28%.

7.54%.

Rising rates make college more expensive

Higher interest rates mean paying off loans will be more costly. For a dependent first-year undergraduate student, a $5,500 loan — the maximum this student could borrow — will cost $6,997 over the standard 10-year repayment term with an interest rate of 4.99%. At the 2020-21 rate of 2.75%, this loan would cost $6,297.

Those taking on graduate direct and PLUS loans will see the cost of borrowing swell even more. On top of higher interest rates, PLUS loans carry an origination fee of 4.23% and don’t have any borrowing limits.

According to the Hechinger Report, a nonprofit focused on education issues, the average PLUS loan in 2019 was around $14,000. That loan amount, taken on with the standard 10-year term and next year’s interest rate of 7.54%, will cost $19,977 over the life of the loan, including $5,977 in interest.

Interest rates for federal student loans are set by the Treasury Department’s May auction of 10-year notes. The interest rate on the May 10-year notes, 2.94%, is added to margins set by Congress, and those margins differ between types of federal student loans.

For undergraduate direct loans, 2.05 percentage points are added to the interest rate; graduate student loans have 3.6 points added and 4.6 points for PLUS loans.

Submit the FAFSA and consider the payoff

Increases to the federal student loan interest rates make it even more important to consider the payoff of college and whether any debt you take on is worth it.

Nonetheless, even with increased interest rates, federal student loans are the best option to finance your education if you need loans. Submit the Free Application for Federal Student Aid, or FAFSA, to be eligible for federal, state and school-based aid.

Submitting the FAFSA also allows you to be considered for grants and other aid you don’t have to repay, such as the Pell Grant. Once you’ve taken advantage of any aid you don’t have to repay, exhaust all of the federal student loans offered to you before opting for private student loans. Federal student loans offer more borrower protections.

The payoff of attending college will vary based on your major, the cost of attendance and the amount of debt that you have to take on to finance your education. If the payoff isn’t clear for you, consider alternatives to college or starting at a community college before transferring to a four-year school to attain your bachelor’s degree.

Colin Beresford writes for NerdWallet. Email: cberesford@nerdwallet.com.

The article Interest Rates on New Federal Student Loans Going Up for 2022-23 originally appeared on NerdWallet.

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How Debt-Related Stress Affects Body and Mind

Posted on by Sara Rathner

Being in debt feels like you’re always a step behind. It doesn’t help that debt is spoken about as something that’s your fault — too much online shopping, or too many pricey pitchers of mimosas at brunch.

“In our culture, in our country, we have a lot of noise about debt,” says Lindsay Bryan-Podvin, an Ann Arbor, Michigan-based financial therapist and author of “The Financial Anxiety Solution.” “We make it mean a lot about who we are, our character, our willpower.”

In reality, debt isn’t always the result of things you can control. For example, 58% of debts in collections as of 2021 were medical debts, according to the Consumer Financial Protection Bureau.

Regardless of the reason you’re in debt, it hangs over everything, affecting how you feel physically and mentally, and how you interact with others. Here are stories of people who’ve tackled debt and managed the stress that comes with it.

‘I can’t sleep, thinking about it’

Debt-related stress can be the source of several physical concerns, like elevated heart rate and blood pressure, insomnia and digestive issues. Over time, it can worsen. “The research shows that long-term stress can lead to depression,” says Thomas Faupl, a licensed marriage and family therapist in San Francisco.

Claudia McMullin’s business, Hugo Coffee Roasters, suffered financially as a result of the pandemic. “COVID hit and I lost all my businesses overnight,” she says, referring to her coffee shop and roasting company, both based in Park City, Utah. “I did not have a cushion to survive. I had to immediately raise funds as fast as possible.”

McMullin got some help from Small Business Administration loans, like the Paycheck Protection Program, that became available at the onset of the pandemic. In a moment of desperation, she applied for a loan from a financial technology company. The company offered loans that were easy to qualify for, but it charged a high interest rate. McMullin estimates she owes around $18,000 a month on her debts.

“I’ll get in the car and go to the office, and my stomach will clench,” she says. “I can’t sleep, thinking about it.”

McMullin is taking drastic action to pay down her debts as soon as possible. She decided to cash out her IRA, a move that can result in taxes and penalties. Still, her decision left her feeling liberated, so she’s at peace with any resulting financial consequences.

“I haven’t had as many stomach aches this week now that I’ve made that decision,” she says.

‘I knew that this is something I was going to fight for’

Junaid Ahmed and his wife experienced a roller coaster of emotions when they learned that not carefully reading their mail cost them thousands. Her student loan provider put her on an interest-only payment plan several years ago, which the couple didn’t initially notice when they reviewed loan statements.

“Admitting that I didn’t look at the mail isn’t something to be proud of, but a lot of people are in the same situation,” says Ahmed. While his wife felt embarrassed, he got mad. “I knew that this is something I was going to fight for,” he says.

Ahmed is running for Congress to represent his Chicago-area district. He advocates for canceling student debt.

‘We both were finally crumbling under the weight’

Debt can get in the way of maintaining relationships. For Kristin Stones, debt was a dark cloud that hung over her marriage from the outset. “My husband and I got engaged like five seconds after we started dating and neither of us had anything to our names,” says Stones, the founder of Cents + Purpose, described as “an online community dedicated to sharing practical personal finance content.”

They struggled to afford their bills, using credit cards to bridge the gap before paychecks came in. After having kids, they worked opposite shifts so one parent was always home. “We had a moment. Things were really, really bad. I think we both were finally crumbling under the weight,” she says. Her husband broached the subject of divorce. “That was the first time in 15 years that either of us had said that word.”

They enrolled in Financial Peace University, a course developed by personal finance personality Dave Ramsey, putting the enrollment cost on a credit card because they couldn’t afford it. Over time, they paid off all debts except for their mortgage.

Ways to reduce debt-related stress

  • Find your people: Talk to friends and family, a nonprofit credit counselor, or even strangers on social media and online forums. Accountability partners can be a source of support. For Stones and her husband, enrolling in a financial course gave them the tools they needed to tackle debt. “Finding a community of other people helps to normalize and validate that you are not a bad person,” Bryan-Podvin says.
  • Know the numbers: Listing your debts and monthly bills can bring up a lot of bad feelings. But it can also help you spot opportunities, like expenses you can trim or debts you can negotiate (which is sometimes the case with medical debt). For Ahmed, it even spurred him to run for office.
  • Focus on self-care: An expensive yoga studio membership may not be in the cards, but there are free ways to indulge in self-care, like meeting a friend for a walk or trying meditation apps. If debt-related stress is making you physically ill, make time for your health.

This article was written by NerdWallet and was originally published by The Associated Press.

Sara Rathner writes for NerdWallet. Email: srathner@nerdwallet.com. Twitter: @sarakrathner.

The article How Debt-Related Stress Affects Body and Mind originally appeared on NerdWallet.

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The 15/3 Credit Card Hack Is Nonsense — Here’s What to Do Instead

Posted on by Gregory Karp

The 15/3 Credit Card Hack Is Nonsense — Here’s What to Do Instead

Sometimes a grain of truth about a financial topic can morph into something that’s just plain misleading. One example is the 15/3 credit card payment trick — or hack — that you might have seen touted on the internet and social media as a secret tactic for improving bad or mediocre credit.

The 15/3 hack claims you can dramatically help your credit score by making half your credit card payment 15 days before your account statement due date and the other half-payment three days before.

Problem is, it doesn’t work.

“Every few years some nonsense like this gains some momentum, but there’s no truth to it,” John Ulzheimer, an Atlanta-based credit expert, said in an email. Ulzheimer has worked for FICO and credit bureau Equifax.

The number of payments you make in a credit card billing cycle — a month — does not help your number of on-time payments, a factor in widely used credit-scoring models. You’ll get credit for just one on-time payment during that month. And there’s nothing magical about 15 days and three days before your due date. In fact, it’s too late by then. At 15 days before your due date, your statement is already closed and your credit card company has likely already reported your information to the credit bureaus.

What is true about credit card payments and what can help? Making multiple payments in a month could help your credit scores temporarily by making it look like you’re using less credit, but not in the way the 15/3 hack describes.

What the 15/3 credit hack claims

Many YouTubers, blog posts and short videos on TikTok claim 15/3 is a secret sure-fire method for elevating credit scores.

We weren’t able to identify the originator of the 15/3 credit card payment method, but this is generally how it is retold in those spaces. Your credit scores will supposedly grow significantly if you:

  • Make half a payment 15 days before your credit card due date. If your payment is due on the 15th of the month, pay it on the 1st.
  • Pay the second half three days before the due date.

Some versions of the 15/3 rule swap in statement closing date for payment due date. The statement closing date comes about three weeks before the payment due date. Targeting the closing date could mean making three payments.

  • Make a payment 15 days before the statement closing date. (Not necessarily half because you don’t yet know what half is. You’re still using the card during the billing cycle.)
  • Make a payment three days before the statement closing date.
  • Pay off whatever is left after the statement closing date but before the due date so you don’t pay late fees or interest. This amount would be whatever you charged during the final three days of the billing cycle.

Why the 15/3 credit hack is wrong

The main problems with the 15/3 hack:

  • Wrong date peg. Typically, on or near your statement closing date — not the payment due date — your credit card company reports to the credit bureau or bureaus with such information as your balance and credit limit. It does this only once a month. Your due date comes about three weeks after that. So targeting the due date makes no sense. Making a payment 15 days and three days before the credit card due date, as the 15/3 hack suggests, is too late to influence credit reporting for that billing cycle.
  • Multi-payment myth. You don’t get extra credit, so to speak, for making two payments instead of one, or making a payment early. Your creditor only reports to the bureaus once a month.
  • 15/3 is random. If you use the 15/3 definition pegging payments to your closing date, that can help, for reasons we’ll discuss below. But 15 and 3 are irrelevant. You might as well make a single payment prior to the closing date. The creditor is just reporting what your balance is at the end of the billing cycle.

“There’s no relevance to when you make the payment or payments prior to the statement closing date,” Ulzheimer said. “You can make a payment every single day if you like. Fifteen and three days doesn’t do anything different than paying it off one or two days before the statement closing date.”

What’s the truth?

The grain of truth in the 15/3 hack is that credit utilization matters to credit scores.

Credit utilization is simply how much credit you’re using vs. how much credit you have. Scoring models award you a higher score if you have lots of available credit, but use very little of it.

Your credit score is a snapshot in time reflecting your creditworthiness. Purposefully lowering your utilization on a certain date is like applying lipstick before the photo is taken.

But your effort to pretty-up your utilization only lasts one month — until the next month when your creditors report your balances and limits again and you have a new utilization ratio. So unless you were going to apply for a loan or otherwise needed to show a handsome credit score on a specific date, your effort was wasted.

It’s like you put on a fine suit but sat home alone. Nobody saw it, or cared.

Credit utilization ratio details

For a single credit card, the relevant dollar figures are your last-reported balance compared with your last-reported credit limit. If you’re using $1,000 of a $2,000 credit limit on the card, you have a 50% credit utilization, which is considered somewhat high.

Generally, credit scores react best to utilization below 30%, and below 10% is ideal. With our example of a $2,000 credit limit, that means keeping your balance under $600 or $200, respectively. Of course, that’s not possible for everybody, especially not for those with relatively low credit limits. A $500 credit limit can get used up fast in a month.

Credit utilization accounts for nearly one-third of your credit score — 30% in the popular FICO score model. So lowering your utilization can, indeed, polish your scores. But with credit cards, your utilization bounces up and down during the month as you make charges and pay them off.

Overall, the 15/3 hack attempts to make your utilization look better, which is a fine goal and standard advice. It just misses the mark by offering the wrong time peg and irrelevant numbers of days before that time peg.

“This is neither novel nor some sort of a secret hack to the scoring system,” Ulzheimer said.

What really helps your credit score

Your credit score is affected by these factors, and generally in this order of importance, according to FICO:

  • Payment history.
  • Credit utilization.
  • Length of credit history.
  • Mix of credit types.
  • Recent applications for credit.

While the 15/3 hack won’t help your credit directly, it could indirectly if it keeps you disciplined to pay your credit card bill on time. Or, for example, maybe it helps you time your payments to coincide better with your paychecks.

But paying early according to the 15/3 rule generally has no merit.

“The truth is paying your bill before the due date will never, ever increase your scores by some drastic amount,” Ulzheimer said.

Gregory Karp writes for NerdWallet. Email: gkarp@nerdwallet.com. Twitter: @spendingsmart.

The article The 15/3 Credit Card Hack Is Nonsense — Here’s What to Do Instead originally appeared on NerdWallet.

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Do You Need a Grad Degree to Compete Right Now? Probably Not

Posted on by Anna Helhoski

More U.S. workers than ever hold a graduate degree. Years of intensifying job requirements and headlines declaring a master’s “the new bachelor’s degree” nudged a record number of students into grad school.

And yet more well-paying jobs no longer require a college degree at all. In this tight labor market, do college grads need a master’s degree to compete? Maybe not.

“We have all reduced our almost obsession with the master’s degree,” says Johnny C. Taylor Jr., CEO and president of the Society for Human Resource Management.

Anecdotal and statistical evidence shows employers were already pulling back degree requirements even before the pandemic: Data from a job market analysis done by the Burning Glass Institute show a reduction in middle-skills and high-skills requirements — jobs that require more education than a high school diploma — from 2017 to 2019.

If fewer employers are requiring grad degrees to gain entrance to good jobs, prospective students should assess whether advanced degrees are worth taking on debt.

Some fields still require advanced degrees

Advanced degrees are still the key to entering certain professions: Medicine, law and teaching come to mind. In other fields, as long as you can convey you have the skills an employer is looking for, you can get a job without an advanced degree, says Brad Hershbein, senior economist and deputy director of research for the W.E. Upjohn Institute for Employment Research in Kalamazoo, Michigan.

Advanced degrees could hedge against a recession

Employers are likely reducing education requirements to fill slots, which can be difficult in a tight labor market like this one, experts say. But that doesn’t mean it will last.

“Nobody can quite explain what we’re going through now; I think everyone thinks it’s temporary,” says Gordon Lafer, a professor in the Labor Education & Research Center at the University of Oregon.

Holding an advanced degree could provide a safeguard for the future. If the economic tide turns, Taylor says, the degree becomes a differentiator.

Advanced degrees tend to correlate with lower unemployment rates compared with bachelor’s or associate degrees. But generally, any degree acts as a buffer against unemployment.

During the Great Recession, those with bachelor’s degrees and higher were more likely to keep their jobs, according to 2014 research by the Georgetown University Center on Education and the Workforce. The same goes for job retention during the early days of the pandemic, according to June 2020 data from The Federal Reserve Bank of San Francisco.

Graduate programs don’t always pay off

What consumers need is data that show program-specific outcomes like graduates’ employment rates and average salaries. These are woefully difficult to find. For example, the College Scorecard, a data tool from the U.S. Department of Education, which provides information on outcomes like graduation rates and post-graduate salaries, doesn’t include graduate-level data by major.

The lack of transparency makes it harder for prospective students to make an informed decision. And that could lead some to end up with debt they’re unable to repay.

“Not everyone realizes there’s a risk that it’s a bad financial investment,” says Hershbein.

Graduate loan debt has reached an all-time high, according to data from the federal government and think tanks like the Center for American Progress and Brookings. Unlike undergraduate loans, which have stricter limits on the amount of debt students can take on annually, federal Grad PLUS and private graduate loans allow students to borrow up to the cost of attendance, so it’s easier to rack up debt.

Your earnings after attaining a grad degree will largely depend on your field and employer. Outcomes in some fields are easier to predict than in others, says Hershbein.

“Teachers’ master’s degrees are carefully calibrated; based on union contracts they know what the pay is going to be,” says Hershbein. But outcomes for master’s in areas like public policy or fine arts are more of an unknown, he adds.

Master’s programs are not all equal

Where you get your degree also matters. “If you’re getting an online master’s degree from the University of Phoenix it will pay off less than a master’s degree from the University of Pennsylvania,” Hershbein says.

Taylor says the nature of remote learning during the pandemic erased some of the bias around online programs, but employer preference is still skewed toward degrees from elite colleges.

“I think we have to be honest with ourselves: There’s always an elitism that plays itself into the hiring process,” says Taylor.

For graduate students, attending a highly selective university might help them make professional connections to more easily get a job. And grad programs are “cash cows” for universities, says Hershbein. Universities count on the prestige of their undergraduate degrees to attract graduate students into expensive programs.

Students then rack up exorbitant debt for degrees that might not pay off.

An estimated 40% of master’s degree programs do not pay off at all, according to February 2022 data from the Foundation for Research on Equal Opportunity, a nonprofit think tank.

The uncertainty means prospective students will need to do some legwork to prevent graduate school from harming their finances more than it helps their employment prospects. That means graduate applicants should:

  • Start with the graduate program costs on a school’s website.
  • Search earnings and entry-level degree requirements for occupations using the Bureau of Labor Statistics Occupational Outlook Handbook.
  • Scour other tools that list program types and outcomes by degree level including the Wall Street Journal and the Georgetown Center on Education and the Workforce.

This article was written by NerdWallet and was originally published by The Associated Press. 

Anna Helhoski writes for NerdWallet. Email: anna@nerdwallet.com. Twitter: @AnnaHelhoski.

The article Do You Need a Grad Degree to Compete Right Now? Probably Not originally appeared on NerdWallet.

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How to Save More When Inflation Makes Your Money Count Less

Posted on by Chanelle Bessette

The investing information provided on this page is for educational purposes only. NerdWallet does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments.

When it comes to spending power, inflation means that things cost more and that your money becomes less valuable. When a period of high inflation hits — like right now — you may want to consider changing up the way you handle your finances to help protect the value of your cash.

“Inflation is a time for investors and savers to reevaluate their strategies,” says Walter Russell, CEO of financial advisor firm Russell and Company.

Through the Federal Reserve, the government tries to combat inflation on a large scale by raising the federal funds rate, which is the interest rate that commercial banks use to borrow and lend money to each other.

When the cost of borrowing becomes more expensive, higher interest rates trickle down to consumer products such as loans and mortgages, making them more expensive. But higher interest rates may also apply to deposit accounts, meaning that banks start to offer higher interest rates on checking, savings and certificates of deposit.

No one knows what the future will bring, but by making changes to how you spend and where you keep your money, you may be able to weather times of inflation more easily.

Here are some ways to save more during periods of inflation.

Look for high-yield interest rates

It can be frustrating to not be able to get loans for big purchases as easily during periods of high inflation. Still, consumers can take advantage of higher interest rates on bank accounts to fight the effects of inflation on their cash. Bank account interest rates usually don’t totally beat the rate of inflation, but these accounts can help hedge against inflation far better than keeping cash at home or in a low-rate account.

The national average annual percentage yield for savings accounts is 0.06%, according to the Federal Deposit Insurance Corporation, but there are plenty of financial institutions that offer rates that are much higher — some even 1.00% APY or more. To find these rates, you can research high-yield or high-interest accounts and choose the bank that works best for you.

Find ways to keep costs low

If you haven’t looked over your budget in a while, now may be a good time. During the pandemic, you may have subscribed to multiple streaming services that you don’t use anymore, or you might be spending more money dining out or paying for more convenience services now.

Some people are taking even more radical steps to save money. Amanda Claypool, a financial blogger based in upstate New York, has recently made larger lifestyle changes to keep her costs low in the face of inflation. She spent 2021 living out of her car while driving around the country and plans to return to that way of living soon to save on housing costs. She’s also been trying to trim her budget by biking 16 miles round-trip to work and by eating more rice and beans, a cheap but healthy meal.

“I’m concerned about rising food costs and the impact that will have on the entire supply chain,” Claypool said through direct message. “I’m using the time now to prepare for future food insecurity by learning what food my body actually needs compared to what I enjoy eating. This might seem drastic, but it’s helping me save money and eat better in the short term.”

Not everyone can or wants to move into their car, but Claypool’s money-saving tactics can work on a smaller scale. You can bike more often instead of driving everywhere, and you can reevaluate your food budget to add more cheap healthy meals. For a bigger change, you could downsize your housing to save even more money.

Consider investing or buying bonds for long-term savings

It’s a good idea to keep short-term cash — like an emergency fund — accessible in a savings account, but if you have savings that you don’t expect to need for a year or more, you may want to consider investing those funds or buying a treasury bond.

“For someone who has a lot of cash sitting on the sideline, [investing] could help you not lose money,” Russell says. ”More people might be willing to take on more risk because they want a higher rate of return.”

Russell also recommends that consumers look into getting TreasuryDirect Series I savings bonds, which can give an interest rate of over 7% on up to $10,000 for a one-year term. These bonds are basically like a certificate of deposit: You put your money in one for a year, and by the end of the year you have a guaranteed rate of return that hopefully stays higher than the current rate of inflation — so your money won’t lose value.

The government will continue to review inflation data and make appropriate changes to the federal funds rate. However, there are other factors that may slow inflation in the coming year, such as changes to global supply chains that might free up inventory and lead to lower prices for goods. No matter whether inflation goes up or down, though, it’s a good idea to keep an eye on ways to optimize your savings.

This article was written by NerdWallet and was originally published by The Associated Press.

Chanelle Bessette writes for NerdWallet. Email: cbessette@nerdwallet.com.

The article How to Save More When Inflation Makes Your Money Count Less originally appeared on NerdWallet.

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To Fight Inflation, Take Down Food Expenses

Posted on by Kimberly Palmer

Like many shoppers, I’ve noticed my grocery bill getting bigger each week: February food prices were 7.9% higher than they were a year ago, according to the U.S. Department of Agriculture’s Economic Research Service. To compensate for my family’s busy spring schedule, I’d also been turning to shortcuts like prepackaged snacks and meal kits, which further added to our total bill.

To counteract these pressures, I applied all my go-to savings tricks: opting in to my grocery store’s loyalty program for extra discounts, using a credit card that gave me bonus cash back on grocery purchases, and planning our weekly menus around sales. Still, shopping for my family of five continued to give me sticker shock.

For extra guidance, I turned to budgeting and cooking experts with experience making food spending more manageable, as the USDA predicts food prices will continue to increase, growing 4.5% to 5.5% in 2022. Here are their best tips for saving money on food:

Control what you can

While so much about the economy can feel completely outside of our control, including rising interest rates, inflation and supply chain challenges, our food spending is actually one area where we hold a lot of sway, says Erin Lowell, a Bowdoin, Maine-based lead educator at You Need a Budget, a budgeting app. By spending more time cooking or substituting cheaper ingredients, you can feel an immediate savings impact, she says, unlike with other costs, such as bills or rent, which can be harder to change.

Lowell suggests assessing how much effort you’re currently putting into minimizing your food spending and taking that effort up to the next level. For example, if you currently order pizza for delivery, then consider buying a nice frozen pizza for a quarter of the cost. If you already buy frozen pizza, then consider making your own from scratch for just a few dollars’ worth of ingredients.

Plan your meals

“When people are overspending on food, it’s almost always because they’re eating out too often,” says Jake Cousineau, a personal finance teacher in Thousand Oaks, California, and the author of “How to Adult: Personal Finance for the Real World.” He says planning ahead is key to combating the temptation to order takeout at the last minute.

“If you meal prep on Sunday and make six to seven meals, you’re not faced with that decision of ‘Should I order out or prepare food?’ every night,” Cousineau says. He typically cooks meat for Sunday that he can use in tacos, pasta and salad later in the week, for example. “You can do the heavy lifting Sunday, then mix and match throughout the week.”

Planning also helps you avoid food waste, which is another budget killer, warns Rob Bertman, a certified financial planner and family budget expert in St. Louis. “Buy in bulk for things you know you will go through, but if food sits in the freezer or pantry and gets thrown in the trash, that gets expensive.” He and his wife keep a list of the potential side and main dishes they have on hand in the freezer, fridge and pantry so they don’t forget to use those ingredients.

Be resourceful in the kitchen

Maggie Hoffman, a Brooklyn, New York-based digital director at cooking website Epicurious, suggests substituting recipe ingredients for ones you already have at home. “Be confident in your cooking: If you have farro, use that instead of brown rice. Use hot sauce or vinegar instead of lemon.”

Hoffman also recommends “next-overing,” which is transforming the previous night’s dish into something new. Roast chicken one night can become enchilada fillings the next, for example.

Beans, which are generally inexpensive, are also a flexible staple, she adds. You can serve them on their own or add them to salads or soups. “Beans are still the greatest thing around. Just give them a little marinade, add garlic and make sure they’re seasoned.”

Keep your pantry well-stocked

Investing in staples can end up saving you money because then you can quickly make last-minute meals instead of ordering in. “I try to keep five to 10 easy, budget-friendly meals in the house at all times,” Lowell says. For her, that list includes ingredients for homemade pizza, frozen fish with fries, and a pasta dish. “It’s never expensive, and I’m always happy to eat it.”

Lean on your community

While some local food banks have eligibility requirements, many are open to all members of the community who need the support, says Willa Williams, an Orlando, Florida, area financial coach at Trinity Financial Coaching and co-host of “The Abundant Living Podcast.” Some neighborhood gardens similarly offer the community vegetables and other produce at harvest time. “The food is here, so come and get it,” she says. “It keeps you from spending your food budget.”

My grocery bill is still higher than I’d like it to be — even the savviest shopper can’t outsmart this level of inflation — but it’s more manageable with these tips. And my children have learned some frugal habits of their own, such as the simple pleasure of cooking lentil soup for dinner and the savings that come from packing their own snacks.

This article was written by NerdWallet and was originally published by The Associated Press.

Kimberly Palmer writes for NerdWallet. Email: kpalmer@nerdwallet.com. Twitter: @kimberlypalmer.

The article To Fight Inflation, Take Down Food Expenses originally appeared on NerdWallet.

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College-Bound Grads May Share $40K in Debt With Their Parents

Posted on by Elizabeth Renter

This year’s high school graduates could take on nearly $40,000 in student loan debt in pursuit of a bachelor’s degree, according to a NerdWallet analysis. And with this debt stretching across federal, parent and private loan sources, the final cost of their education will grow far beyond tuition and fees.

Today, it’s nearly impossible to work your way through college. Because of this, taking on debt for higher education in hopes of greater earning power is generally accepted as a worthwhile cost. But the data shows the amount of debt is increasing and spreading across multiple sources.

2022 college-bound grads could amass thousands in debt

A 2022 high school graduate could borrow as much as $39,500 in student loans by the time they complete their bachelor’s degree, according to NerdWallet’s projections. With 1.3 million high school graduates projected to enter a four-year college and 42% of college graduates taking on debt, this is a significant burden for young professionals entering the workforce.

The average cost of attending a four-year public university, including room and board, reached $22,700 this most recent school year, according to The College Board. Growth in these costs has (fortunately) slowed considerably over the past decade — climbing 12% from the fall semesters of 2012 to 2021 after rising 22% from the fall semesters of 2002 to 2011. But the burden of student loan debt is still significant.

During the repayment period, students who take out loans can expect to pay thousands of dollars in interest on top of the amount they borrow. Federal loans to dependent students pursuing an undergraduate degree are capped at $31,000 total. Students who max out this cap are looking at roughly $350 monthly payments and about $7,000 in interest during a standard 10-year repayment period on their federal loans alone.

And barring “free money,” such as scholarships or need-based grants, they’ll have to turn elsewhere to cover any remaining costs. Parents who haven’t been fortunate enough to amass a college fund are increasingly shouldering those costs as debt.

Parents increasingly picking up debt tab

The share of parents taking out federal parent PLUS loans to help cover the costs of their children’s college education has grown significantly. So has how much they’re borrowing. From 1996 to 2016, the most recent year for which this data is available, the share of dependent students relying on these federal parent loans at public four-year institutions grew from about 7% to 12%, according to the National Center for Education Statistics.

The amount they’re borrowing has also increased, more than doubling from $5,000 to $11,200 during that 20-year period.

Even parents in the lowest income brackets — where students are most likely to benefit from need-based aid — are taking on debt at an increasing rate. The share of dependent students in the lowest income quintile relying on parent PLUS loans rose from 3% in 1996 to 11% in 2016.

Parents may reason that they’re better equipped than their children to cover the added cost of borrowing, but some may think they have no choice. The Pell Grant, the largest source of need-based grant aid, has failed to keep up with the rising cost of education, or even with the pace of inflation, according to an earlier NerdWallet analysis.

The costs of these loans can be far more than the principal and interest — more than one-quarter (26%) of Americans with parent PLUS loan debt say the loans have affected their retirement plans, according to a July 2021 NerdWallet survey. And about 1 in 5 (21%) regret taking out the loan(s) in the first place.

Private student loans, also on the rise, lack protections

College students are also increasingly relying on private loans. In 1996, less than 1% of dependent students at public colleges and universities relied on private loans to cover education costs. Twenty years later, in 2016, nearly 9% did.

Private student loans can be tapped when federal student loan limits are reached and when parents can’t qualify for or don’t want to take out parent PLUS loans. But they’re missing some of the protections and benefits of federal loans.

For example, private loans generally come at a higher interest rate, lack income-based repayment options and are less forgiving when borrowers have trouble making monthly payments. In addition, private student loans weren’t included in the federal interest-free forbearance period recently extended through Aug. 31, 2022.

How families can manage costs of student loan debt

Students hoping to earn a college degree may develop a graduate-at-all-costs attitude, but being strategic and cautious about these costs could make their entry into the professional working world easier.

Maximize grant and scholarship eligibility

All students should fill out the Free Application for Federal Student Aid each year, and early. Not only does the FAFSA qualify you for federal grants and loans, but many states and institutions also use this data to determine additional potential aid. Also, keep an eye on scholarship opportunities beyond freshman year — make it an annual or biannual practice to search for scholarships and apply.

Explore work-study opportunities

Work study is a government-funded program that helps students with financial need find work, often on campus, to help pay for education expenses. Your FAFSA application will ask if you’re interested in the program, then gauge your eligibility.

Tap federal student loans

Before turning to private and even parent PLUS loans, use federal student loans. Above all, these have protections that aren’t provided by the other loan types.

Borrow only what’s needed

It can be tempting to accept all of the loans you’re allotted, but you would only be digging yourself into a deeper hole than necessary. When you receive your financial aid package from the school, only accept enough to cover your expenses.

Stick it out when the going gets tough

Repayment of student loans, no matter the type, is made easier with a higher income. And graduating with a degree makes that income more attainable. The most recent graduation rate among first-time undergraduates is 63%, according to the Department of Education, suggesting many students leave college with debt but without a degree.

If your goal is to graduate, talk to your advisor or student services department when you’re facing challenges or are at risk of dropping out. While getting a degree might not be the right decision for everyone, walking away should be done only after careful consideration of all of the implications.

Elizabeth Renter writes for NerdWallet. Email: elizabeth@nerdwallet.com. Twitter: @elizabethrenter.

The article College-Bound Grads May Share $40K in Debt With Their Parents originally appeared on NerdWallet.

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