Smart Money Podcast: Social Media Shopping Tips, and Investing Spare Cash

Welcome to TWP’s Good Cash podcast, the place we reply your real-world cash questions.

On this episode: Study professional ideas for buying on social media with out overspending, and good methods for investing your spare money.

This Week in Your Cash: Private finance Nerd Kimberly Palmer joins hosts Sean Pyles and Liz Weston for a have a look at how your social media feed could also be main you to spend extra money than you must. To steadiness all of the prompts pushing you to spend, attempt utilizing browser extensions to check costs and see offers. Verify buyer critiques, too, and concentrate on how the setting and a false sense of urgency can result in spending an excessive amount of and or maybe sharing an excessive amount of private data.

At present’s Cash Query: Investing Nerd Sam Taube joins Sean and Liz to reply a listener’s query about the way to make investments extra cash at present sitting in a high-yield financial savings account. The Nerds take a deep look into the significance of emergency funds and the way to set real looking monetary objectives, providing sensible recommendation on beginning your personal emergency fund and discussing how your value of residing can affect the quantity to save lots of.

Additionally they clarify how utilizing on-line banks could make financial savings objectives extra tangible, after which change gears and dive into the world of funding choices, together with the mutual funds, alternate traded funds, particular person shares, high-interest financial savings accounts and cash market accounts.

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Sean Pyles: Ever really feel such as you simply aren't certain the place to take a position the cash sitting in your checking account? Properly, this episode, we have you lined. Welcome to TWP's Good Cash Podcast, the place you ship us your cash questions and we reply them with the assistance of our genius Nerds. I am Sean Pyles.

Liz Weston: And I am Liz Weston. Listener, we all know you've gotten questions on cash, and we've got the solutions, so tell us what's in your thoughts.

Sean Pyles: You'll be able to depart us a voicemail or textual content us on the Nerd hotline at 901-730-6373. That is 901-730-NERD. You can too electronic mail us at [email protected].

Liz Weston: On this episode, we're answering a listener's query about investing the cash that is sitting of their checking account. However first, we're joined by private finance Nerd Kimberly Palmer, who's going to offer us some good ideas for buying on social media. Welcome again to Good Cash, Kim.

Kim Palmer: Thanks for having me.

Sean Pyles: Hey, Kim, you latterly wrote about the way to store on social media in an period of scammers and ever-appealing impulse purchases. On-line buying is the norm for therefore many people. So, why do you suppose now is an effective time for a refresher about being a savvy shopper, notably on social media?

Kim Palmer: I believe it is as a result of so many people are doing it proper now. We have truly seen an enormous uptick in retailers placing some huge cash into their social channels, particularly the power to buy straight by means of social media, so you do not even have to depart social media to make your purchases. And about half or nearly half of U.S. customers truly say they've already made a purchase order on social media. So, it is positively occurring an increasing number of. I believe we have in all probability all seen our favourite influencer or model promoting on Instagram, I do know I've. So, it is only a good time to speak about it.

Sean Pyles: Yeah. Are you interested by issues like Instagram Lives, Fb Lives, in addition to posts in folks's feeds?

Kim Palmer: Sure, kind of all the above. What we're speaking about right here contains any sort of social buying or buying straight on social media. So, that may embrace when you've gotten an influencer saying, “Hey, I really like this product. Here is my particular code for a reduction. You should buy it proper right here. Hyperlink is within the bio.” Or it additionally contains dwell occasions the place you truly are kind of buying with an influencer and so they're sending up the codes you could click on on and make your buy. Principally, something the place you are on social media and buying on the identical time.

Sean Pyles: Yeah, it is like these influencers have their very own QVC channels on their platforms at this level.

Kim Palmer: Sure, it is precisely like that.

Liz Weston: Properly, overspending will be all too straightforward on any media, not to mention social media. So, how do you pump the brakes?

Kim Palmer: I believe the massive problem with social media is that every little thing feels so pressing, since you'll typically see the influencer say, “Hey, there is a restricted time when this deal works,” or, “There is a restricted variety of product.” So, you're feeling a lot stress to make your buy instantly, and the important thing as a consumer is to comprehend, no, you do not have to purchase it proper now, you'll be able to step away, take time to consider it, and you will in all probability discover one other low cost code later when you actually need it.

Sean Pyles: Mm-hmm. Yeah. We speak lots about scammers on this podcast and one among their go-to instruments is to create a way of urgency and stress you into sending cash as quickly as attainable as a result of one thing unhealthy will occur. On this case, it is not fairly as drastic, however they're saying, primarily, “You might have a really restricted time to get this one factor that is going to completely repair your life, and when you do not do it, then every little thing's going to be crappy for you, so ship this cash now.” I am simply cautious of this complete playbook. So, I believe it is necessary for folks to take a step again, perhaps, when they're buying on-line and understand they in all probability truly do not want that factor that is in entrance of them.

Kim Palmer: Yeah, that is so true. I believe loads of occasions, too, we're typically scrolling at night time. We see these tempting offers pop up, and so we do not have all of our automated filters turned on absolutely whenever you're drained, and so I believe it is further laborious to step away, however so necessary to take action.

Liz Weston: Properly, value evaluating and checking your critiques are sort of par for the course with on-line buying. Is that straightforward to do when individuals are buying on social media?

Kim Palmer: It's straightforward to do so long as you give your self that area and time to do it. So, you do not need to get sucked into buying immediately by means of the app. You need to depart the app, do some searches exterior of it, simply open up a browser and see what costs are for the product you are different locations. You additionally need to lookup buyer critiques, due to course you do not need to purchase one thing with out checking what different folks have mentioned about it. And so that you simply have to ensure you take that point to check costs and examine buyer critiques.

In the event you skip that course of, that is the place it is simpler to get into hassle. After all, I at all times say, I really like utilizing apps to do a few of this give you the results you want. So that you would possibly need to have a value monitoring browser extension to be scanning within the background, do a few of that comparability buying, so you do not have to do all of it manually.

Sean Pyles: OK. You might have a few go-to apps that you simply use for this, proper?

Kim Palmer: I do. I actually just like the Honey browser extension. It comes from PayPal. It's extremely straightforward to obtain and use and have it run within the background. It could pull in low cost codes.

In the event you're a giant Amazon shopper, The Camelizer browser extension is a good go-to one to make use of as a result of it offers you the entire value historical past, you'll be able to arrange value alerts for particular merchandise, so that you simply need to ensure you're utilizing one thing.

Sean Pyles: Mm-hmm. OK, that is good recommendation.

So, I need to return to the thought of scams, as a result of in a current episode, Liz and I talked in regards to the prevalence of scams on-line, notably round buying on social media. How do you counsel folks keep protected after they're buying on these platforms?

Kim Palmer: It is actually all about remembering that you're nonetheless amongst strangers and to probably not get sucked into that mentality that you must overshare since you're with like-minded folks. Particularly on the dwell buying occasions, you see lots of people commenting and generally they're even sharing private issues, what precisely they buy, perhaps even the place they dwell or the place they are going to be sporting the merchandise they simply purchased. You simply need to be a little bit cautious with that since you do not actually know who these individuals are, although you do really feel such as you're sort of mates, chatting in particular person, they're nonetheless strangers. So, you simply need to watch out of oversharing.

Then additionally take into consideration whenever you do share your bank card or your cost data to truly make a purchase order. You need to ensure you're not truly leaving the social media app and getting into it right into a third-party web site that you simply're not aware of. You additionally need to think about using a bank card as a result of, after all, bank cards do offer you further fraud safety.

Liz Weston: Increasingly I am simply defaulting to utilizing Apple Pay, and I believe Google Pay or Samsung Pay is analogous, as a result of I exploit a bank card inside that app, but it surely tokenizes the entire transaction so the service provider cannot see my bank card data.

Kim Palmer: I believe some folks do join their debit playing cards to these issues. You simply need to be certain in the end you are utilizing a bank card.

Liz Weston: OK, yeah, that is sensible.

Sean Pyles: That is good to know.

Liz Weston: However on the finish of the day, social media buying will be loads of enjoyable. Given all that we simply talked about, how can folks nonetheless discover pleasure after they're buying on social media platforms?

Kim Palmer: I believe you are proper in that it may be so enjoyable, particularly since you're interacting with folks you're keen on: influencers, celebrities, they're making private suggestions to you that you simply is likely to be enthusiastic about, and there is nothing fallacious with that so long as you are taking some further precautions simply to guard your self. So, you'll be able to nonetheless get pleasure from it so long as you are taking that point to check costs and hold your self protected.

Sean Pyles: All proper. Properly, Kim, thanks a lot for speaking with us.

Kim Palmer: After all, thanks.

Sean Pyles: Earlier than we transfer on, we've got an thrilling announcement. We're working one other guide giveaway sweepstakes forward of our subsequent Nerdy E-book Membership episode. Subsequent month, we're speaking with Cameron Huddleston, writer of “Mother and Dad, We Must Discuss,” which guides us by means of tough however actually necessary monetary conversations that we have to have with our dad and mom.

To enter for an opportunity to win our guide giveaway, ship an electronic mail to [email protected] with the topic guide sweepstakes in the course of the sweepstakes interval. Entries have to be acquired by 11:59 PM PT on August ninth. Embrace the next data: your first and final title, electronic mail tackle, ZIP code and cellphone quantity. For extra data, please go to our official sweepstakes guidelines web page. With that, let's get into this episode's cash query section.

This episode's Cash query comes from Uli who despatched us an electronic mail. Here is their electronic mail as learn by Good Cash producer Rosalie Murphy.

Rosalie Murphy: “Hello, TWP, love the podcast. I've about $68,000 whole in a excessive curiosity financial savings account, with $10,000 devoted to an emergency fund. I am at present maxing out my 401(ok) and Roth IRA, and investing about $500 each month in a basic funding account by means of index funds. My query is, I do not know what I ought to do with the additional cash. I dwell in L.A., and can't afford a house right here, but it surely additionally feels prefer it's an excessive amount of cash simply sitting there. Ought to I put extra of my cash in index funds? Thanks in your time. Sustain the nice work. Greatest, Uli.”

Liz Weston: To assist us reply Uli's query on this episode of the podcast, we're joined by TWP investing author Sam Taube. Welcome again to Good Cash, Sam.

Sam Taube: Nice to be again.

Sean Pyles: Nice to have you ever, Sam. Earlier than we get into the dialog, a fast reminder for our listeners: We won't let you know what to do together with your cash. We're not monetary or funding advisors. Our job as Nerds is to offer you data so to make your monetary choices with the utmost confidence.

All proper, nicely, with that out of the best way, let's begin by speaking emergency funds. Our listener is in a reasonably candy place with $10,000 put aside for emergencies, however I am questioning, given the place they dwell, whether or not that might be sufficient. So, Liz, are you able to begin us off by giving some basic guidelines of thumb round emergency funds?

Liz Weston: Yeah. Usually, it is a good suggestion to start out with not less than a small emergency fund, say, $500. Even saving that, after all, can take a while, however it might in all probability be sufficient to cowl loads of small emergencies like a flat tire, shedding your keys and having to have a locksmith come to allow you to into your house, issues like that.

From there, what you need to purpose for is three to 6 months of your fundamental bills. You in all probability need not think about issues that you can reduce on, like supply, consuming out 3 times per week, no matter your indulgence is. However when you lose your supply of revenue for no matter cause, you may need to work out what's your nut, what you completely have to cowl, shoot for one month to start out after which ultimately construct it to 3 months. And if you will get to 6 months, even higher.

Sam Taube: It happens to me within the context of this reader residing in L.A., that housing generally is a very tough factor to chop again on. I appeared up some numbers, and it looks as if the common hire in Los Angeles proper now's about $2,400 a month for a one bed room. That is as of June 2023. So, when you do the maths on that, three months of hire is about $7,200.

So, I believe on this case, given the rule of thumb of three to 6 months bills, you can make an argument that this listener ought to put aside $20,000 and even $30,000 for an emergency fund, given the L.A. value of residing. On condition that they've nearly $70K of their high-yield financial savings account, it appears like reallocating a few of that cash is probably attainable.

Sean Pyles: I believe it is likely to be useful for them to undergo that train that Liz talked about of actually getting clear on what three or six months of fundamental bills would imply. That is going to cowl issues like hire, groceries, however perhaps not every little thing you'll get on the grocery retailer when you've gotten a gradual revenue. So, in my case, that might be slicing again on issues like smoked salmon or different little indulgences, however simply know what would get you thru period of time if you did not have an revenue coming by means of.

Liz Weston: Yeah, precisely. You probably have different sources you could faucet, like if in case you have, I do not know, one other revenue coming in, if in case you have beneficiant dad and mom, perhaps you want a skinnier emergency fund. If you're by yourself, when you would not need to faucet these choices, then perhaps a bigger emergency fund could be a good suggestion.

Sean Pyles: All proper. Properly, now, let's get to the enjoyable half. What to do when you've gotten tens of hundreds of {dollars} simply burning a gap in your pocket or, within the case of Uli, of their high-yield financial savings account. A part of it comes all the way down to how to decide on short-, medium- and long-term objectives. What do you guys take into consideration that?

Sam Taube: Yeah. Some examples of long-term objectives may embrace shopping for a home, or beginning a household, or beginning a school fund for your loved ones and even retiring early, whereas the short-term objectives we're speaking about right here could be issues like a dream trip or a brand new automotive.

Normally, long-term objectives are issues which are going to be greater than 5 years out, whereas short-term objectives are going to be issues which are lower than one yr out, and there are medium-term objectives which are someplace in between these.

Sean Pyles: What strikes me about Uli's query is that they do not appear to know what they need to do with this massive chunk of cash. I believe one thing that is likely to be useful for them could be organising financial savings buckets. That is one thing we discuss lots on Good Cash, and it is primarily a strategy to have totally different sub financial savings accounts inside your high-yield financial savings account that you've arrange already for various objectives. I've about half a dozen proper now, I believe. I've one that's my fence fund. I've one which's a marriage fund. I've one for taxes, one which's my emergency fund. And I simply put cash into these accounts both all of sudden, if I get a giant windfall, or I additionally do common automated deposits from my paycheck into these totally different financial savings buckets. That helps me construction my financial savings for these short-, medium- and long-term objectives that I've.

Liz Weston: And when you're new to the podcast and you have not heard us discuss this earlier than, you need to use on-line banks, which usually have the choice of organising these financial savings buckets or sub-accounts, they name them various things, however you'll be able to truly put names on them and you do not have to pay further for having extra accounts. That is one thing that is totally different from brick and mortar banks, which is nice, there isn't any minimums, there isn't any month-to-month charges. So, it actually helps you get the psychological benefit of with the ability to label these buckets, so you retain your mitts off it when, you already know, you do not seize cash from one bucket to pay for one thing else.

Sean Pyles: And it might probably make the sting of getting an expense a little bit bit simpler to endure. I lately had a automotive restore that was round $500 and it is sort of bizarre, however I felt some gratification that I had the cash saved in my automotive fund account that I may put towards this. It did not actually damage as badly as if it was simply in a basic pool of money that I had, as a result of I knew, “OK, that is cash I have been setting apart for this particular goal.” The blow does not actually hit me as laborious as a result of I've already ready for it.

Liz Weston: Sure. And if Uli is having hassle determining what their objectives needs to be, what can they do, Sam?

Sam Taube: Properly, speaking to folks is at all times possibility. Having conversations with family and friends and monetary advisors. Now, granted, in that scenario, you must take any recommendation with a grain of salt, particularly if it comes from non-professionals like family and friends. However listening to what other people would do on this scenario, notably of us you relate to, can assist decide what you do and do not need to do together with your cash.

Sean Pyles: Mm-hmm. Generally I will have a dialog with a cherished one round cash and what you'll do with any kind of windfall, and the issues that I hear generally make me scratch my head. And that is how I do know that I simply have totally different priorities from them, and that is completely OK. However that helps me get actually clear on what I do need to do with my cash, as a result of I do know what I do not need to do.

Liz Weston: Yeah, precisely. So Sean, how do you deal with balancing totally different monetary objectives and saving for them?

Sean Pyles: I'm a giant advocate of attempting to do many issues concurrently, as a result of I'm a multitasker, and I am sort of impatient.

So, I may give a current instance the place I had a windfall earlier this yr that left me feeling like I had some extra cash, like Uli, and so I made a decision to separate the cash that I received throughout just a few totally different objectives. I spent 10% on stuff that I wished. I received myself a brand new dresser, I received myself a brand new laptop computer. After which I put some into a marriage fund that I've, some into my dwelling restore fund, then I put some right into a brokerage account. Once more, that helps me really feel like I am conducting loads of various things concurrently. I haven't got to funnel every little thing towards one particular aim.

Liz Weston: Properly, I am all for blowing not less than 10% of any windfall that is available in. I believe that is the enjoyable cash that you simply get to do no matter you need with.

I am the identical manner, Sean. I wish to be making progress on totally different objectives, however I do know it is very satisfying to funnel all of your cash in a single factor, however that usually is not one of the simplest ways, in my opinion, to deal with monetary objectives.

I simply wished to throw in that perhaps our listeners ought to take into consideration their bucket listing for his or her lives, issues that they need to do, and making progress on that as nicely. As we have talked about right here earlier than, I've taken a number of sabbaticals in my profession and I am actually pleased I did it, since you by no means know what the longer term's going to carry and also you should not put every little thing off until the longer term. I believe these of us who've a financial savings orientation are very seemingly to do this. Hats off that a lot cash is being saved. I imply, Uli is doing a terrific job of placing cash apart. However simply ensuring that they are additionally spending cash on in the present day and creating recollections and having experiences, as a result of that is necessary to our happiness as nicely.

Sean Pyles: Yeah, it goes again to the concept I discuss lots on the podcast of residing for in the present day whilst you're planning for tomorrow. I believe each are crucial to do, in order that you do not end up 20 years from now considering, “I actually want I would gone on that trip,” or, “I may have gone backpacking,” whenever you had been a little bit extra able-bodied. So, that is one thing to think about too for our listener.

Liz Weston: Yeah. Now, we in all probability ought to discuss how Uli ought to take into consideration investing the cash. We talked about long-term, medium-term and short-term objectives, and people have totally different investing steering, proper?

Sam Taube: Completely. The Securities and Trade Fee truly solely recommends investing cash in shares when you do not want it for not less than 5 years. The reply about the perfect factor for Uli to do with the additional cash goes to rely on the aim for that cash.

The explanation why the SEC recommends this five-year rule of thumb is as a result of generally the market tanks, and also you need to be sure that your cash has an opportunity to get better from a possible downturn earlier than you want it. So, the common bear market restoration time, primarily based on historic knowledge, will be about 27 months, and some of them have been so long as 5 years.

Sean Pyles: Sam, Uli is enthusiastic about investing extra in index funds specifically on high of the $500 a month that they are already investing. Are you able to clarify why these are a preferred funding possibility and in addition what some alternate options is likely to be?

Sam Taube: Yeah. Index funds are in style as a result of they're arms off. There's little or no administration concerned in holding an index fund. And so they can generate a reasonably dependable return over lengthy durations of time. Typically, after we discuss index funds, we're speaking about an S&P 500 index fund.

The S&P 500 has a long-term common annual return of about 10% earlier than inflation. That common has held for 100 years or so. In some years, it returns greater than that, and in some years, it returns much less. Generally folks can beat the S&P 500 by means of inventory buying and selling. However a roughly 10% annual return from an index fund is admittedly loads for lots of economic objectives, and it simply requires so little effort: You simply purchase it and maintain it.

Liz Weston: After all, index funds are a passive funding. You are simply attempting to match the benchmark just like the S&P 500. What if you wish to be a little bit bit extra lively?

Sam Taube: Yeah, there are sort of totally different ranges you'll be able to go to when it comes to exercise. If you wish to be only a tiny bit extra lively than an index fund, you too can purchase mutual funds or exchange-traded funds that concentrate on a specific section of the market. So, when you suppose that tech shares are coming again after the crash that they went by means of in 2022, you can purchase a tech inventory ETF. Or when you suppose the healthcare business goes to do nicely within the coming years, you can purchase a healthcare ETF.

Then, if you wish to be extra lively than that, you can purchase particular person shares. Blue chip shares, one thing like Apple, might be going to supply a little bit extra stability than a small cap inventory, however they serve totally different wants, and there is a probability of outperforming the indexes whenever you're shopping for particular person shares.

However the catch with particular person shares is that researching them can take an entire lot of labor. You must actually extensively lookup the numbers and the information round a specific inventory earlier than you are shopping for, and also you also needs to monitor it fairly carefully. That may be a reasonably substantial value, each when it comes to time and when it comes to psychological bandwidth and nervousness. In the event you're shopping for loads of particular person shares, which is an effective factor to do for diversification, then the upfront greenback value is likely to be lots larger than an index fund, which may mean you can put money into a whole lot of shares for one comparatively low value.

Liz Weston: Properly, and every little thing you've got simply mentioned, Sam, is the explanation I am a passive investor. I simply haven't got the bandwidth to do all of the analysis, and truly being really diversified can take a whole lot of hundreds of {dollars} when you're investing in particular person shares. So, that is one thing to bear in mind.

The opposite factor is all of the analysis we've got displaying that most individuals who attempt to beat the market fail, so that you wind up trailing the market. While you fold all that in, I am like, OK, passive is the best way to go, however everyone's received to sail their very own ship, because it had been.

Sean Pyles: And every little thing that we have simply been discussing round ETFs, index funds, mutual funds, shopping for particular person shares, that might be extra for longer-term objectives, such as you mentioned a little bit bit earlier, Sam. What are some choices for placing cash into autos for shorter-term objectives?

Sam Taube: One in style possibility is a high-interest financial savings account, and a cash market account is one other related possibility for that sort of factor. The returns you may get in an account like that are not as excessive as what you may get with shares on common, however they're fairly excessive proper now, as a result of rates of interest have been going up for the final yr. A few of these accounts are yielding greater than 4%. The opposite factor that you simply get with a financial savings account that you do not get with shares is insurance coverage. The cash in a excessive yield account or a cash market account goes to be insured by the Federal Deposit Insurance coverage Company as much as $250,000 per account. So, you do not have to fret about all of it evaporating in a downturn.

Liz Weston: Yeah, that is level.

Only for readability, there's two varieties of cash market accounts, truly. There's cash market financial savings accounts, that are FDIC insured, after which there's cash market mutual funds, which haven't got that insurance coverage.

In case your aim is someplace between short-term and long-term, nicely, you'll be able to attempt laddering CDs, which implies shopping for CDs with totally different maturities. So, that provides you the FDIC insurance coverage that Sam was simply speaking about. Perhaps short-term bonds might be an possibility as nicely. It is a little bit bit squishy in that medium-term space, however you'll be able to analysis it a little bit bit extra and see what your choices is likely to be.

Sean Pyles: Properly, Sam, thanks a lot for approaching and sharing your insights with us.

Sam Taube: Thanks for having me.

Sean Pyles: With that, let's get onto our takeaway ideas. Liz, will you please begin us off?

Liz Weston: Sure. First, know the way to save for emergencies. Beginning with even just a few hundred {dollars} can assist you climate many surprising bills. Finally, work to save lots of three to 6 months of important prices.

Sean Pyles: Subsequent, carry within the buckets. Saving buckets are a simple strategy to arrange your financial savings for various objectives.

Liz Weston: Lastly, weigh your funding choices. Investments like index funds or exchange-traded funds are usually higher for long-term objectives, whereas cash market accounts and financial savings accounts generally is a higher decide for short-term objectives.

Sean Pyles: That is all we've got for this episode. Do you've gotten a cash query of your personal? Flip to the Nerds and name or textual content us your questions at 901-730-6373. That is 901-730-NERD. You can too electronic mail us at [email protected] Go to nerdwallet.com/podcast for more information on this episode. And bear in mind to comply with, price and evaluation us wherever you are getting this podcast.

Liz Weston: And this is our transient disclaimer. We're not monetary or funding advisors. This nerdy data is supplied for basic academic and leisure functions and will not apply to your particular circumstances.

Sean Pyles: This episode was produced by Liz Weston and myself. Kaely Monahan blended our audio. And a giant thanks to the parents on the TWP copy desk for all their assist.