Rich People Follow These 3 Borrowing Rules. Do You? (2024)

Could CD Yields Hit 7% in 2024?

The interest rates you can get from deposit accounts at banks have soared over the past two years. It wasn't too long ago where a 2% APY on a "high-yield" savings account or CD was considered a great find. But as of this writing, it's not difficult to find CDs with 5% or greater yields, thanks to the recent inflationary environment that has led to rapid increases in benchmark interest rates.This raises the question -- how high could CD rates go? Could we see 7% CD yields before the end of 2024? While nobody has a crystal ball that can predict the future direction of interest rates, here's what we know and what you can expect going forward.Where CD yields stand todayBefore we get into a discussion of where CD interest rates could go, here's a bit about where things stand right now. As you might expect, the best CD yields can be found at online banks (for the most part), and here's what you can get as of Dec. 11, 2023:Our top-ranked 1-year CDs have yields ranging from 4.25% to 5.61%, with most in the low-5% range.Our top 18-month CDs have yields as high as 5.6%.2-year CDs with yields as high as 5.5% can be found.Most of our top online banks have 5-year CDs with yields in the 4% ballpark.Be sure to check our best CD rates page for the latest offers from our top-ranked banks.Using the high end of the 1-year and 18-month ranges as a guideline, this means that CD yields would need to increase by about 140 basis points (1.4%) from current levels to produce 7% CD yields.It's worth noting that historically, the longer your CD's maturity length, the higher the APY you could expect to get. But the opposite is generally true right now. I don't want to turn this discussion into an economics lesson, but the general idea is that when short-term CDs pay more than longer-term ones, it indicates that interest rates are expected to decline going forward (you may have heard the term "inverted yield curve" on the financial news, and this is a form of one).Interest rate projections for 2024With that last point in mind, let's take a look at what experts think interest rates are going to do in 2024.The short version is that most experts expect rates to fall. But there is little agreement when it comes to the magnitude of a potential decline.The latest version of the Federal Reserve's economic projections (by the people who actually make policy decisions) calls for a single 0.25% rate cut, compared with current levels, in 2024. However, it's worth noting that this is from the September Fed meeting, and the inflation data since then has generally been better than expected.On the other hand, according to the CME FedWatch Tool, the futures markets are pricing in a median of five quarter-point rate cuts by the end of next year (a total of 1.25%). Some experts think even more cuts will be needed.However, one common theme among all of the predictions I could find from notable experts is that nobody thinks the benchmark federal funds rate will be higher at the end of 2024 than it is today.The bottom lineOne important thing to know is that while CD yields tend to move in the same direction as benchmark interest rates, they aren't usually directly tied to them. In other words, if the Federal Reserve cuts the federal funds rate by one percentage point in 2024, there's no guarantee that CD yields will decline by the same amount -- or at all.Having said that, virtually every expert is predicting that interest rates will go down in 2024, not up. But that doesn't mean the unexpected won't happen. At the start of 2022, when mortgage rates were around 3%, few people would have predicted that they'd more than double over the course of the year. If inflation unexpectedly spikes, for example, it could cause policymakers to raise rates, which would likely move CD yields higher.However, given the information we have now, it is looking more likely that CD yields could fall in 2024, so it could be a smart idea to take advantage of high-yield CDs in the near term. But again, there's no guarantee rates won't rise.

Does Your Income Make You Upper Class, Middle Class, or Lower Class?

Incomes vary widely across the United States, with some people making many times the amount that others earn. If you've ever wondered how your personal finances stack up, and what "class" your income officially puts you in, here's what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here's what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time -- your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It's probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn't mean people who don't make a lot of money can't be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here's how you can improve your standingDon't be discouraged if you aren't in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you're underpaid, it doesn't hurt to make a request for more money -- especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve -- especially if you prioritize saving as much as you can for as long as you can.

Will SNAP Benefits Increase in 2024?

The Supplemental Nutrition Assistance Program (SNAP) is a federal initiative to help families cover their monthly food costs. SNAP has some specific income and work eligibility requirements, but in general, the program can significantly help lower-income families who need extra help buying food.More than 22 million U.S. households -- 12.5% of the population -- receive SNAP benefits, according to Pew Research Center. The program is especially important right now as elevated inflation, rising interest rates, and the generally high cost of nearly everything have strained many Americans' personal finances.Each year, the government decides how much SNAP benefits should increase for the next fiscal year, which begins on Oct. 1, and in 2024, the amount has gone up slightly, but not by much.SNAP benefits have increased for 2024The U.S. The Department of Agriculture (USDA) recently announced that it will increase the SNAP maximum benefits for a family of four in 2024 to $973. And while the increase is likely welcomed by those using the program, it's also a relatively modest increase of 3.6% from the previous year's maximum benefits of $939.The USDA makes an annual cost-of-living adjustment for SNAP benefits, but the problem with this year's increase is that it's not keeping up with the rapid rise in food prices. The USDA cites on its own website that food prices are up by 5.8% on average this year, above the historical average. For example, in 2020, food costs increased by about 3.4%.The USDA may have made the SNAP benefits adjustment based on food cost predictions for 2024 -- which are estimated to rise by 2.1%, instead of looking back on food prices from the previous year. The agency says the average monthly cost for a family of four, using the USDA's strictest food budget, is $974.Still, the increase to $973 per month may not go far enough to help some families, especially given the fact that inflation has soared over the past couple of years. If you want to sign up for SNAP benefits, you can do so through your state. You can find local SNAP offices, contact information, eligibility requirements, and online applications on the USDA website.Food is just one part of a monthly budgetWhile receiving any type of food assistance is likely welcomed by some families, there's no getting around the fact that most Americans' monthly budgets are strained right now. The latest Consumer Price Index figures show how much prices have risen in the following categories over the past year:Shelter costs are up 7%Gas prices are up 3%Electricity prices have risen 2.6%Transportation services are up 9.1%With all those expenses rising, it's unsurprising that Americans aren't feeling optimistic about their finances right now. Nearly 70% of Americans say the economy is getting worse and not better, according to a recent Suffolk University and USA Today poll. And 49% say rising food prices are one of their biggest concerns.Keeping track of a month's worth of expenses is complicated enough on its own, and it's even harder when prices rise. A budgeting app can be a helpful tool to track where your money is going and even to track how much your spending in specific categories has changed.There's no telling what will happen with the economy in 2024. Right now, the job market remains strong, and thankfully, inflation is slowing. But many Americans' budgets will likely remain strained as their savings rate has fallen and credit card debt has topped $1 trillion.That may keep demand for SNAP benefits elevated, and it remains to be seen whether the latest increase in benefits for 2024 will be enough.

3 Reasons I Don't Shop at Dollar Stores

Does it feel as if everything is so much more expensive than it used to be? Well, you're not imagining it. We're still coping with higher inflation than usual (thankfully lower than it was during summer 2022, at least). As of the last Consumer Price Index Summary report, inflation was holding steady at 3.2% between October 2022 and October 2023. So if you're hoping to spend less money on your everyday purchases (and who among us isn't?), shopping at dollar stores seems like the natural choice.Dollar stores are everywhere -- Statista reports that there were over 37,000 of them in the U.S. last year. Plus, shopping at dollar stores comes with some perks -- for example, they can be a great place to buy low-cost gift wrap and greeting cards (why spend more for something that will be thrown out in short order?).If dollar store shopping works well for you and your personal finances, I absolutely get it, and think you should keep saving money in any way you can. But my own issues with dollar stores supersede my desire to save money. Here's why I avoid dollar stores.1. I have concerns about product safetyChances are good that you've been impacted by a product recall at least once in your life -- manufacturers and sellers implement these to get potentially unsafe products out of the hands of consumers. Earlier this year, Family Dollar undertook a recall of almost 300 drugs and other medical products that had been stored improperly and then sold at stores in almost two dozen states.The fact that so many different products, from toothpastes to allergy medicines to painkillers, were affected is extremely concerning and points to bigger issues with how dollar stores handle their supply lines and distribution. (Some of this relates to staffing problems; see below for more on that.) Dollar stores certainly aren't the only retailers who occasionally have to recall products for safety issues, but it's definitely a reason I would never buy medication or similar items from a dollar store.2. I don't like the way they operateDollar stores have a nasty habit of moving into rural areas of our country and undercutting local small businesses with their seemingly lower prices on essential items. In some places, they can even push out grocery stores, making dollar stores the only place to buy grocery items. And since the number and types of items sold are limited (particularly the selection of fresh produce, assuming it's available at all) at dollar stores, this can be extremely limiting for consumers.Going beyond the impact on local businesses and the food supply, dollar stores have also gotten in trouble with the federal government for not providing a safe working environment for staff members. As recently covered by Last Week Tonight with John Oliver (as well as other outlets), dollar stores can be severely understaffed, terribly disorganized, and even beset by rats and violent criminals. I've lived and worked in small rural towns, and the residents there deserve better. In some places, locals are fighting back -- NPR reported that 50 communities in the U.S. have put limits on new dollar stores opening in their area.3. I'd rather spend more upfront for items that lastWhile paying less for an item you buy is a more straightforward way to find savings, dollar stores don't always sell the highest quality of a given item. I'm fortunate that I am able to put a bigger charge on my credit card for a purchase and in exchange, have it last for longer. Batteries, tools, and toys are all examples of items best avoided from dollar stores because they just aren't as well made or long lasting as items you might pay more for from brands you've heard of.I can buy an eight pack of AAA batteries from Dollar Tree for $1.25. But if those batteries end up leaking, or even just not lasting very long, I'll use them up more quickly than I would if I sprung for Duracells from Amazon. There are other ways for me to save on higher-quality items, such as waiting for holiday sales or buying in bulk, rather than buying them at dollar stores.Personal finances are just that -- personal. So just because dollar store shopping isn't a fit for me doesn't mean it isn't for you. I do recommend taking the time to compare prices using product sizes, however, as this is one way you might be fooled into thinking dollar store prices are lower. That way, you'll be able to tell in real numbers whether you're saving money.

3 Reasons to Cancel Your Costco Membership in 2024

If you're a member of Costco, you're in good company. As of September 2023, the warehouse club giant had an impressive 127.9 million cardholders and 71 million member households.You may be well aware that a Costco membership has the potential to result in a lot of money for your savings account. But if these things apply to you, you may not want to keep your Costco membership in the new year.1. You really haven't been using itIf you spend a lot of money on grocery purchases at Costco, then it can be pretty easy to justify the cost of a membership. But if you only visited Costco a handful of times this year, then it may be that you're not saving enough money to make that membership worth paying for.Be realistic about how often you're likely to use your membership in 2024. If you only tend to visit Costco a couple of times a year, it could be worth seeing if you could just tag along with a family member or friend when you need to go rather than pay for a membership yourself.2. You're downsizingOne of the benefits of having a Costco membership is getting to reap savings by buying household essentials in bulk. But if you're making plans to downsize your living space in the new year, then having a Costco membership might stop making sense.Buying things like cleaning supplies and paper towels in bulk really only works if you have a place to store them. You don't want to end up having to house your supplies in the middle of your dining room because you no longer have the storage space to keep them tucked away.Also, sometimes, a smaller living space means a smaller kitchen -- and a smaller fridge to go along with it. That could make it harder to buy large quantities of perishable food.3. You're moving someplace where there's no Costco nearbyCostco has an impressive 600 warehouse club locations across 47 U.S. states and Puerto Rico. But if you're moving in 2024 and your new home won't be located anywhere close to a Costco store, then it could make sense to cancel your membership.Let's say a typical Costco trip saves you $20 compared to what you'd spend at a regular supermarket. If you move far away from a Costco location, you might spend that $20 in gas back and forth just to get there. Plus, you're spending lots of time on the road.Now, you could decide to keep your Costco membership for online shopping purposes. That's not necessarily a poor choice. But do know that Costco prices tend to be higher online than in stores. And sometimes, there's a considerable price difference. So you'll need to decide whether you're willing to still spend that money if it means saving less.You may have loved having a Costco membership until now. But if these factors apply to you, then you may be better off canceling your Costco membership in the new year rather than continuing to pay.