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To effectively build wealth, we not only need to save but also spend wisely.
In his new book, “The Art of Spending Money,” Morgan Housel talks about the tradeoffs we all face between immediate gratification and taking care of our future selves.
“Wealth is always a two-part equation — it’s what you have minus what you want,” Housel told CNBC.

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When it comes to how we approach money, “no one is crazy,” Morgan Housel wrote in his bestselling 2020 book on building wealth, “The Psychology of Money.”
And when it comes to the way we spend money, the decisions we make are just as personal, Housel, a partner at Collaborative Fund, writes in his new book, “The Art of Spending Money.”

“It’s an art because it’s subjective,” Housel told CNBC.com in an interview ahead of the book’s Oct. 7 publication.
Those decisions are crucial to building and maintaining wealth, he says: “Wealth is always a two-part equation — it’s what you have minus what you want.”

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How people aspire to spend their money is often strongly influenced by society, marketing or social media, Housel said.
But those spending habits may not actually make you happy in life, he said. And what you value today may not be what you value 20 years from now.
“I think the biggest aspect is that you have to figure it out for yourself,” Housel said.

CNBC spoke with Housel about how to balance social expectations with personal values, and the questions we need to ask ourselves to better align our spending and values.
The conversation has been edited and condensed for clarity.

‘If nobody was watching, how could I live?’

Morgan Housel, author of “The Psychology of Money” and partner at the Collaborative Fund.
Morgan Housel

Lorie Konish: You write about external versus internal benchmarks when it comes to spending. What are some examples of that?
Morgan Housel: Buying a bigger house might make you happier if it makes it easier to have your friends and family over. But it’s the friends and family that are making you happy. That’s the internal benchmark. Spending money on a vacation might make you happier if it’s the only time that it allows you to detach from your daily life and from your job so that you can spend time with your friends and family. But you have to acknowledge that it is that that is making you happy.
The external benchmark would be trying to get the attention, mainly of strangers. And a lot of people do that. I do this. It’s a very normal and natural thing, the assumption of, if I had this car, if I was wearing these clothes, if I lived in this house, if I posted these pictures on social media, other people will respect and admire me.
It’s not that it is black-and-white false in that situation, it’s that we overestimate how much strangers are paying attention to you. Because the truth is, most of the time they are thinking about themselves. They’re thinking about their own car, their own clothes. And if they do look at you and say, “Wow, she has a really nice car,” they’re probably not admiring you. They’re imagining themselves in that car and daydreaming about the respect and admiration they would receive.
LK: It’s like that choice between utility and status that you write about, with utility making your life better and status changing other people’s opinions of you. Should you be striving for one over the other?
MH: I think we have to acknowledge that status is not a bad thing. I engage with it. We all do in our own way. If you were to dress exactly as you wanted to, that fits your personality, it might exclude you from certain social groups and job opportunities.
So, having a certain level of status signaling is not bad. The point is, we overestimate the respect and admiration we’re going to get from it.
If nobody was watching, how could I live? If nobody except maybe my immediate family could see the way that I was living, how would I choose to live? I would not want a fancy sports car. I would probably want a nice pickup truck that gave me a lot of utility. I would not want a house in the most exclusive, expensive zip code. I would want a house with a beautiful view, wherever that might be. If nobody was watching, I would just want to do X, Y and Z that really feeds my soul and makes me happy.
The knee-jerk reaction is to lean more towards the social signaling side, because so much of the modern world is geared towards that. It’s always a balance. It’s just that our balance tends to be in the wrong direction.

‘What actually matters in terms of building wealth’

LK: You write that FOMO, the fear of missing out, is one of the most dangerous financial reactions to exist. How can we avoid that?
MH: If I see somebody getting wealthier, that’s only a small part of what’s going on behind the scenes. And there’s a great quote from [entertainer] Jimmy Carr where he says, “Everyone is jealous of what you’ve got, no one is jealous of how you got it.” And so even if you can see somebody getting wealthier, you can’t see the quality of their relationships, you can’t see their health, you can’t see their confidence. You can’t see all these other things that make an enormous impact and the quality and the happiness of their life.
What actually matters in terms of building wealth over the course of your life is not how quickly you got rich this year, it’s how long you can keep your compounding going. If you can earn nearly average returns for an above-average period of time, you can do extraordinarily well. The normal intuition among even very smart people is that if you want to get rich, you need to do it fast, very quickly. And it is not intuitive, even if it is accurate and right, that the way to actually get rich is to be merely average for a very long period of time.
That’s why FOMO can be so dangerous. It pushes us towards the wrong end of the equation. It pushes us towards getting rich fast, whereas I think the much more durable way to actually build a big fortune is to get rich slow.
LK: We’re constantly making spending decisions that will influence our futures versus what we enjoy today. How do we strike a balance there?
MH: It’s never as simple as, spend your money today, live for today, like the YOLO attitude. And it’s never as simple as, save for tomorrow, you need to compound your money and build your wealth. It’s always just a balance of, what are you going to regret in the future?
Everyone’s propensity for regret is going to be different. Yours is different from mine, and vice versa. Looking back at your life at some point in the future, whether that’s a year from now or 50 years from now, what are you going to look back on and say, I wish I did that differently?
This was an idea I got from Daniel Kahneman, the late psychologist, where he said if you want to be a good investor, you need a very well-calibrated sense of your future regret. Volatility in the stock market is only a risk to the extent that you’re going to regret it at some point in the future. If you ask most investors today, “How much do you regret the fact that you experienced the bear market of 2011?”, they’re going to be like, “What? I forgot that even existed. I don’t even think about it anymore.” So it wasn’t actually a risk.

‘Wealth is always a two-part equation’

LK: You write about the parable of the Mexican fisherman, who works only a few hours a day. He then meets an American businessman who advises him to work hard for 10 years and invest and grow his business so that he can then retire and work for a few hours a day. The irony is that he already has that lifestyle. We have this concept of always needing more, but when do you have enough? And how do you get comfortable with that?
MH: I want to live in a society in which the vast majority of people wake up every morning and say, “This is not enough,” because that’s the seed of innovation. That’s the seed of progress. The reason that I think my kids and grandkids will live in a much better world than you and I do today is because they and their peers will wake up every morning and say, “It’s not enough. I need to go solve more problems, build more wealth.”
This is not a societal problem. This is a societal benefit. But at the individual level, it can create a situation where your dreams are always one step away and you never get any kind of fulfillment in life.
Wealth is always a two-part equation — it’s what you have minus what you want.
Almost all of our emphasis and effort in the financial world goes towards the former, how can you have more? How can you build more? I think the second half of that equation is actually more important part, because some sense of control over it. I have no control over what the stock market’s going to do this year, but I do have control over what I want and my ability to be a little bit more content.

When people daydream about having a bigger house or a nicer car, by and large what they are doing is they are imagining themselves being content with those things in the future. You imagine yourself in that house saying, “This is all I want. I don’t need anything else.”
So a lot of times when people are chasing happiness with money, part of the problem is that happiness is always a fleeting emotion. No one is happy for extended periods of time. If I tell you a funny joke, you don’t laugh for 10 years, you laugh for 30 seconds.
What we’re going for is contentment, just getting to a point where we say, “I’m good and I appreciate what we have.” It’s much easier said than done. A lot of my material aspirations are to impress strangers. And when I remind myself that no one’s paying attention, then those desires tend to drop. No one’s thinking about you as much as you are.
When you come to terms with that, you can use your money for something that is actually way more valuable to you, which is independence. More

About 71% of U.S. adults surveyed say monthly debt payments prevent them from building wealth or savings, according to a recent survey by the National Foundation for Credit Counseling.
“It’s a reality of where we are,” said Rod Griffin, senior director of consumer education at Experian.
Here are five steps experts say you can take now to evaluate your options to pay down debt.

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A version of this article first appeared in “CNBC’s Money 101 newsletter with Sharon Epperson,” an eight-week series with monthly updates to help improve your financial well-being. Sign up to receive the series, straight to your inbox. It is also available in Spanish.
Mounting debt has been hindering savings for many Americans. 

About 71% of U.S. adults surveyed say monthly debt payments prevent them from building wealth or savings, according to a recent survey by the National Foundation for Credit Counseling. The NFCC survey of 2,010 U.S. adults was conducted by Harris Poll this spring.
Federal Reserve Bank of New York data shows credit card balances reached a collective $1.21 trillion in the second quarter of 2025 — up 2.3% from the previous quarter and in line with last year’s all-time high.

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“It’s a reality of where we are,” said Rod Griffin, senior director of consumer education at Experian. “Some of it is a lack of knowledge and understanding of how credit works. Some of it is, in some cases, just our desire to have stuff, and some of it is the reality of the financial world we’re living in right now.”
While reducing debt is a top priority for many Americans this year, according to a survey by the CFP Board, most respondents have not been taking advantage of programs and strategies designed to provide relief, such as debt consolidation. The CFP Board polled 806 adults in October 2024.
Here are five steps experts say you can take now to evaluate your options:

1. Know where you stand

Creating a budget is step one. Review credit card bills, invoices and other receipts. Gather details of your debts, including your outstanding balance, your minimum or required monthly payment and the interest rate on the debt. Then gauge how those fit into your cash flow.
“Understand what you can afford, and what you can not afford to pay,” said Mike Croxson, CEO of the NFCC, a member organization of 50 nonprofit credit counseling agencies.

2. Ask for a lower interest rate

See if your credit card issuer or lender will negotiate your interest rate. Most credit card holders — 83% — who asked for a lower rate in the past year received one, according to a recent LendingTree survey. 
However, experts say even with a lower rate, you must be disciplined in making timely payments that exceed the minimum amount due to ensure you pay off the balance more quickly and avoid incurring additional debt. 

3. Explore consolidating balances

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If you qualify for a credit card that offers a promotional 0% interest rate for a specific period, you can consolidate and pay off higher-interest debt with that card. 
Aim to pay off the balance in full before the promotional rate ends. If you transfer a $6,000 credit card balance to a card with a 0% interest offer that lasts 15 months, for example, divide the balance on the new card by 15 and make payments of $400 a month to pay off the entire balance before the introductory offer expires. 
You can also consider taking out a personal loan to consolidate your debt. The average credit card interest rate is 20%, according to Bankrate. That’s higher than the average personal loan interest rate of 14.48% for consumers with good credit (a credit score of 690 to 719), according to NerdWallet.  

4. Learn how debt settlement companies work

Do not commit to a debt settlement program until you’ve weighed your options, experts say.
If you enroll in a debt settlement program, you may be instructed to stop communicating with creditors and withhold payments while the company attempts to negotiate. This can be a risky move — accounts aren’t always settled as hoped, which could leave you in a worse financial position, some experts say.
The debt settlement process may result in lower interest rates or reduced payment terms in exchange for reporting debt as paid, but “it may be as paid settled or paid settled for less than originally agreed, and that settlement is going to be very detrimental to your credit score,” said Experian’s Griffin. 
Creditors may also charge off the debt, write it off as uncollectible and send it to a debt collection agency, which could sue you for the money, according to the Consumer Financial Protection Bureau. There may also be hefty settlement company fees, and you may have to pay tax on forgiven debt. 

5. Consult a nonprofit credit counselor

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A credit counselor typically asks you to complete a comprehensive financial review to help you evaluate your options.
“When you work with a credit counselor, they’re first going to work with your budget, look at your income sources, where your debts are, and work with you to find, potentially, a way to repay them,” said Griffin. “Then, [they] help you manage your finances going forward so you don’t find yourself in the same situation.” 
The counselor may recommend a debt management plan.
Unlike a settlement program, a debt management plan is designed to help you repay your debt in full through reduced payments and lower interest rates, without penalties or fees from creditors. Debt management plan fees average about $35 a month, according to the NFCC.
By making monthly payments, the debt is typically resolved within four to five years, experts say, which is similar to the time frame for the debt settlement process. However, experts say that a debt management plan generally has a less negative impact on your credit score, as your debt is repaid in full.
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Attending just one wedding and a bachelor or bachelorette weekend can set you back roughly $2,010, according to Zillow.
Meanwhile, the typical monthly rent, which captures rent prices for multi and single-family rentals, was $2,007 in August, up 2.4% from a year ago, the housing site found.

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It’s no secret that many young adults are having a hard time financially, especially when it comes to affording a home purchase. Weddings may be exacerbating the problem for some.
The typical monthly rent, which captures rent prices for multi- and single-family rentals, was $2,007 in August, up 2.4% from a year prior, according to Zillow. 

A separate recent report by the housing site found that attending just one wedding and a bachelor or bachelorette weekend can cost $2,010.
“It really is eye-opening when you put it right next to rent,” said Amanda Pendleton, the home trends expert at Zillow.

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Some renters will go to extremes to attend such milestone events. About 45% of surveyed Gen Z and millennial adults reported making a housing sacrifice to afford such celebrations, Zillow found.
Among those trade-offs: About 11% of those surveyed said they live with roommates, while 9% said they were saving less for a down payment. Still others said they were either renting or buying a smaller home, at 8% and 7%, respectively.
The site polled 1,200 U.S. adults ages 18 to 45 in mid-August. Gen Zers are those aged 18 to 30, and millennials are those aged 31 to 45.

“It’s just a tangible way to show how these celebrations can disrupt housing stability,” said Pendleton.
Receiving multiple invitations in a short period can amplify the effect.

Renters are renting for longer

Housing unaffordability has kept many millennials and GenZers priced out of the for-sale market, making them renters for much longer.
The median sales price of an existing home was $422,600 in August, according to a late September report by the National Association of Realtors. That is up 2% from a year prior, when the price was $414,200.

In 2024, the NAR found that the median age of first-time homebuyers reached an all-time high of 38 years old. In the 1980s, the typical first-time buyer was in their late 20s. 
However, marriages are happening before people become homeowners. In 2025, the average age of marriage in the U.S. is 32, according to The Knot, a bridal site. That average has remained the same since 2023.

How to afford wedding costs

While it’s easy to get carried away with wedding-related celebrations, it’s important to not stress your finances, experts say.
You also want to be careful about relying on forms of credit. In 2024, about 31% of wedding guests had taken on debt to attend a wedding, and 23% of those who did so borrowed $2,500 or more, according to LendingTree.
Luckily, many engaged couples send wedding save-the-dates from six months to a year in advance, said Gloria Garcia Cisneros, a certified financial planner and wealth manager at LourdMurray in Los Angeles.

If you receive enough notice, find ways to reallocate cash you usually spend on discretionary expenses into a separate savings account, said Cisneros, a member of CNBC’s Financial Advisor Council. Cisneros said that saving the money in a separate account to avoid the temptation from using it ahead of time.
To make your savings grow, a high yield savings account generally offers a much higher annual percentage yield than traditional savings accounts. 
While the Federal Reserve recently slashed interest rates, the top 1% of accounts average 4.03%, according to DepositAccounts. The national average for savings accounts is 0.49%.
If you find yourself invited to multiple weddings in a year, and buying a home is a priority, you may need to consider other trade-offs, like deciding which weddings to attend and which to skip.
Between travel, accommodations, attire and gifts, the average cost per wedding guest in 2024 was $610, according to The Knot. That is an increase of $180 over the past five years. More

If you’re retired and planning to give to charity, you could secure a bigger tax break with a so-called qualified charitable distribution, or QCD.
The strategy involves a direct transfer from a pretax individual retirement account to an eligible nonprofit organization.
Taxpayers age 70½ or older can transfer up to $108,000 for 2025. The withdrawal won’t add to adjusted gross income and can satisfy required minimum distributions once you turn 73.

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If you’re age 70½ or older, you can donate up to $108,000 in 2025. For married couples filing jointly, spouses aged 70½ or older can also transfer up to $108,000 from their IRA. The QCD limit now adjusts for inflation yearly, thanks to changes enacted via the Secure Act of 2022.  
Here are the other key things to know about QCDs, and how the move can benefit retirees.

How the QCD tax break works

When filing taxes, you claim the standard deduction or itemized deductions, whichever is greater. For 2025, the standard deduction is $15,750 for single filers and $31,500 for married couples filing jointly.
Your itemized deductions may include limited tax breaks for charitable gifts, medical expenses, and state and local taxes, among other items.  

However, 90% of filers don’t itemize, according to the latest IRS data, which prevents most taxpayers from claiming the charitable deduction.

There’s no tax deduction for a QCD, but “the amount distributed is excluded from income, which is better than a deduction,” CFP Juan Ros, a partner at Forum Financial Management in Thousand Oaks, California, previously told CNBC. 
QCDs won’t increase your adjusted gross income, or AGI, which can boost premiums for Medicare Part B and Part D, as earnings rise. Reducing your AGI can also minimize phaseouts, or benefit reductions, for other tax breaks enacted via President Donald Trump’s “big beautiful bill,” experts say.

Satisfy your required withdrawals

Another benefit of QCDs is that transfers can help reduce your yearly required minimum distributions, or RMDs.
Most retirees must take RMDs from pretax retirement accounts starting at age 73 or face an IRS penalty. Your first deadline is April 1 of the year after you turn 73, and Dec. 31 is the due date for future years. 
RMDs can be a pain point for some retirees, depending on the size of their accounts. You calculate RMDs based on your previous year-end balance and an IRS “life expectancy factor.”
QCDs can be a great way to fulfill charitable intent without increasing AGI, according to CFP Jim Guarino, managing director at Baker Newman Noyes in Woburn, Massachusetts. He is also a certified public accountant.
“For my philanthropic clients, it’s almost a no-brainer,” he said. More

A White House memo suggests not all federal workers on furlough are entitled to receive back pay once the government reopens.
The Government Employee Fair Treatment Act of 2019 requires back pay for federal workers after a shutdown ends.
If you expect a loss in pay, experts say it’s important to assess cash flow first. Once you understand where your money is going each month, cut expenses as needed.

Commuters cross the street near the Federal Aviation Administration (FAA) headquarters on October 1, 2025 in Washington, DC.
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Government shutdowns have historically been an precarious time for federal workers, both for those required to remain on the job without pay and those furloughed. This shutdown comes with added financial uncertainty.
A draft memo from the White House, first reported by Axios and confirmed to NBC News by the White House, suggests not all federal workers on furlough are entitled to receive back pay once the government reopens. Asked about back pay, President Donald Trump said on Tuesday, “I would say it depends on who we’re talking about.”

“It really depends on who you’re talking about,” Trump said. “But for the most part, we’re going to take care of our people. There are some people that really don’t deserve to be taken care of, and we’ll take care of them in a different way.”
Trump has also threatened mass firings, if Democrats won’t agree to the GOP funding proposal.

Back pay guaranteed by law

The memo runs counter to a federal law that requires back pay for federal workers after a shutdown ends, and to recent guidance from the Trump administration.
Congress passed the Government Employee Fair Treatment Act of 2019, and Trump signed it, after the last government shutdown, which lasted for a record 35 days.
“Each employee of the United States Government or of a District of Columbia public employer furloughed as a result of a covered lapse in appropriations shall be paid for the period of the lapse in appropriations,” according to the law.

In prior shutdowns, Congress would pass a bill to provide federal workers with back pay.

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The American Federation of Government Employees, the largest union of federal workers, called the administration’s argument “frivolous” and “an obvious misinterpretation of the law.”
“It is also inconsistent with the Trump administration’s own guidance from mere days ago, which clearly and correctly states that furloughed employees will receive retroactive pay for the time they were out of work as quickly as possible once the shutdown is over,” Everett Kelley, the national president of AFGE, said in a statement.
The Office of Personnel Management, the government’s equivalent of a human resources department, issued guidance dated September 2025 stating that retroactive pay will be available for federal employees affected by a lapse in appropriations “as soon as possible after the lapse in appropriations ends.”

Federal workers may have other legal options

“The federal government’s threat not to pay furloughed federal employees is both alarming and legally questionable,” said Tom Spiggle, a labor and employment attorney and founder of the Spiggle Law Firm in Washington, D.C.
If the administration does not provide back pay, workers may have other legal options, he said, including bringing a case under the Fair Labor Standards Act. They could also appeal through the Merit Systems Protection Board, an independent agency charged with protecting federal employees. A class action lawsuit may also be an option.
“Federal employees should document their losses and preserve records of any communications or threats related to pay,” Spiggle said. Those legal avenues for recourse can take months, if not years, to resolve.
If you’re missing paychecks, here are some strategies to cope with delayed or lost income. 

Focus on cash flow

Start with a vigorous accounting of expenses: “Three things you really need to focus on … cash flow, cash flow and cash flow,” said Mary Clements Evans, a certified financial planner and owner of Evans Wealth Strategies in Emmaus, Pennsylvania.
Many people don’t have an understanding of their monthly expenses beyond the large essentials such as rent or mortgage and car payments, she said. Automatic payments and debit or credit card swipes can also make it harder to gauge discretionary spending. 
“We’re in a world where we’re disconnected from our spending habits,” Evans said.

Once you have a handle on expenses, plan for reduced income. This may mean determining which savings to tap and adjusting your budget.
“It sounds like that’s a financial equation, but it’s not. It’s often emotional and psychological, because they feel they’re losing their identity and their status,” said Evans, who is also the author of “Emotionally Invested.”
Reach out to your lenders. Financial institutions may offer payment deferrals, loan modifications and other forms of hardship assistance. For example, Navy Federal Credit Union is offering a Paycheck Assistance Program with zero-interest loans for eligible members affected by the shutdown.

Prepare for possible unemployment

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The Trump administration’s plan for a “reduction in force,” or RIF, is unique to this shutdown.
“It’s obviously a changing time in terms of the willingness of this administration to take novel views of what has previously been considered, and is from a plain reading, considered clear law,” said John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Employees Association.
During a shutdown, a majority of employees at government agencies funded through the annual appropriations process are typically put on furlough, or unpaid leave, if the agency hasn’t received funding. Those whose work is necessary to protect life or property, or to deliver mandated benefits, are considered essential and required to work, according to the Office of Personnel Management. 
“This is always a difficult situation for federal employees,” Hatton said, “whether they’re working or furloughed or now, adding this new option of receiving a RIF notice, for possible permanent loss of their employment.”
Two federal employee unions, AFGE and the American Federation of State, County and Municipal Employees, have filed a lawsuit to keep the Trump administration from moving forward with RIFs during the shutdown, calling the threat of RIFs unlawful.
There are legal requirements for an RIF: Agencies must provide justification for the layoffs, give written notice to employees 60 days before a layoff and offer an appeals process. During a shutdown, only “essential” functions are supposed to be carried out, and experts say it’s uncertain if carrying out mass layoffs would fit that definition.

To prepare for a possible layoff, federal employees should research unemployment benefits and determine when their health coverage might end.
Research health insurance costs, too. Workers may be able to extend their federal workplace plan for up to 18 months through the Temporary Continuation of Coverage option — but they still must shoulder the full cost of premiums.
For now, a more affordable option could be marketplace coverage under the Affordable Care Act.
“You can go and you can get insurance through them, and that is based on your income,” Evans said.
However, the enhanced subsidies that have kept premiums low are set to expire at the end of the year, unless Congress acts.
The subsidies are a key sticking point in the current government funding debate. Democrats say they want to extend them as part of the current budget negotiations, while Republicans say they want to debate the policy only after averting a shutdown.
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Even amid a federal government shutdown, the S&P 500 climbed to a new all-time high on Thursday.
Yet investors who double down on that index risk overconcentration in big company names.
Here’s how experts say to diversify to avoid those risks.

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The S&P 500 index closed at a new all-time high on Wednesday amid a federal government shutdown. It rose to a new intraday high early Thursday.
Prior to that, the index — which is focused on large-cap U.S. equities — had risen almost 90% since the equity bull market began three years ago, thanks in large part to new AI developments, Morgan Stanley Wealth Management noted in Sept. 29 research.

Nevertheless, experts say it may be time to reconsider the set-it-and-forget-it S&P 500-focused strategy, famously touted by legendary investor Warren Buffett.
“The S&P 500 is broken,” said Michael DeMassa, who is a certified financial planner and chartered financial analyst, and the founder of Forza Wealth Management in Sarasota, Florida.
Many investors assume investing in the S&P 500 index — through ETF ticker symbols SPY, VOO or IVV — is synonymous with diversification, DeMassa said.

Yet that sense of safety is an illusion, he said, since the market capitalization-weighted index means companies with bigger allocations may drag down the fund if their performance suffers. Or the index’s heavy concentration in the technology sector may prompt volatility to ripple through the entire index, DeMassa said.
If you can invest in the S&P 500 index for a long time, you will probably do well, said Deva Panambur, a CFP and CFA, and founder of Sarsi LLC in West New York, New Jersey.

But occasionally the index suffers long periods of underperformance, he said. For example, between 2000 and 2008, the S&P 500 was down by more than 30%.
Wall Street forecasts generally see the index continuing to go up for the foreseeable future.
Still, experts say it’s best to choose a broader investment mix in case there is a pullback.

How to best diversify your investments now

For investors who are seeking a simple approach, it may make sense to opt for a total market index fund instead of an S&P 500 index fund, according to Brendan McCann, associate manager research analyst at Morningstar.
Unlike S&P 500 index funds, total market funds also provide exposure to small- and mid-cap stocks in addition to large-cap companies.
Alternatively, investors may opt to broaden the exposure an S&P 500 index fund already provides in their portfolio. One example may be a fund that tracks a total market index that excludes S&P 500 index stocks, or the Vanguard Extended Market ETF, according to McCann.

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The trick with that strategy is to buy the funds in the right proportion, McCann said.
For investors who don’t want to worry about changing their asset allocations over time, buying a total market index fund may be a better approach, according to McCann. Switching to a total market index fund strategy may be particularly attractive for investors who don’t have to worry about the tax implications of changing funds, such as 401(k) investors, he said.
Other experts have recommended opting for equal-weighted S&P 500 index funds, which hold an equal proportion of each stock. However, the downside with those strategies is that there may be more transaction costs when rebalancing, McCann said.
When the S&P 500’s returns were down between 2002 and 2009, areas like small cap, value, international and even bonds performed better than stocks, Panambur said.
Today, the portfolios he creates for clients have allocations to those areas.
“When I look at the overall allocation, my goal is to make sure it’s more balanced than the S&P 500,” Panambur said.

The set-it-and-forget-it S&P 500 strategy was intended to provide broad market exposure. “That’s no longer the case,” DeMassa said.
As investors seek to diversify, it is important to pay attention to the holdings of each of the funds they own, he said.
If a portfolio has funds tracking both the S&P 500 and Vanguard Growth indexes, for example, the exposure to large-cap technology names will be increased rather than limited, he said. More

A robo-advisor is an automated digital program that creates and manages your portfolio based on your investment preferences and risk tolerance, according to Investor.gov. 
Such programs can come at a lower cost compared to a financial advisor.
But a robo-advisor’s services can only go so far, experts say.

Alvaro Gonzalez | Moment | Getty Images

In some cases, an investor can simply rely on a robo-advisor to manage their portfolios. But some instances may require a human financial advisor to take the lead, experts say.
A robo-advisor is an automated digital program that creates and manages your portfolio based on your investment preferences and risk tolerance, according to Investor.gov. 

Such programs typically come at a lower cost than traditional financial advisor services. In 2024, the median robo-advisor fee was 0.25% of assets per year, according to a recent Morningstar report. Human advisors typically charge around four times that amount, or 1% of assets under management.

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However, a robo-advisor is “not going to look at your entire picture,” said Melissa Caro, a New York-based certified financial planner and founder of My Retirement Network, a financial literacy platform.
Here’s how to understand if you can stick to a robo-advisor, if you need a human financial advisor, or if you can have a combination of both.

A robo-advisor helps during the ‘accumulation phase’

A robo advisor can be suitable for someone who’s still in the so-called “accumulation phase” — when they are starting out and building wealth by saving and investing, and don’t need more intricate services like tax planning, said Caro.
“Things aren’t complicated in your life yet,” she said. 

What’s more, most robo-advisor platforms require low minimum investment balances.
According to the Morningstar report, a quarter of the robo-advisor platforms reviewed have an account minimum of $50 or less for the most basic services. Nearly every other provider has a minimum of $5,000 or less.

Meanwhile, some financial advisors require higher minimum investment balances. Some might require $25,000 while others can be as much as $500,000, $1 million or more, according to SmartAsset.
Still, such investment thresholds can be beneficial for both advisor and consumer, said Caro. For consumers, it helps you discern when a traditional advisor’s services may make sense.
For example, if you’re someone who has their emergency fund set up and has an additional $10,000 to invest, using a robo-advisor platform can be a “great way to just start to familiarize yourself” with investing and how compounding works, she said. 
“You don’t need to nor should you be paying a percentage of assets under management fee for your $10,000,” she said.

‘Ceiling of complexity’

On the flip side, there comes a time where investors reach a “ceiling of complexity” and may benefit from a a person sitting across the table, said Dennis Morton, a CFP and the founder and principal of Morton Brown Family Wealth in Allentown, Pennsylvania.
In addition to managing investment portfolios, a financial advisor can also offer other areas of expertise, such as insurance analysis, estate planning and multi-year tax planning, said CFP Zach Teutsch, the founder and a managing partner at Values Added Financial in Washington, D.C.
“A robo-advisor may be doing none of that,” said Teutsch, a member of CNBC’s Financial Advisor Council.
When discerning what’s the best approach for you, it’s important to ask yourself what questions or problems you’re trying to solve, who’s best equipped to solve it and at what price, he said.

Hispanolistic | E+ | Getty Images

If you’re simply looking for investment management and trading services, “robo-advisors can be less expensive,” said Morton.
But if you’re somebody who needs specialized financial planning, a human financial advisor can provide a tailored approach, experts say.
Whether you decide to go with a robo-platform or an advisor, make sure to research and compare the different services that are offered and at what costs, said Morton. 
“There’s a lack of uniformity in what you can get,” he said. More

If you expect a loss in pay, experts say it’s important to assess cash flow first.
Once you understand where your money is going each month, cut expenses as needed.
Consider health insurance costs if you lose coverage in a layoff.

The United States Capitol building is seen in Washington D.C., United States on October 4 , 2023. 
Yasin Ozturk | Anadolu Agency | Getty Images

Congress has until midnight on Tuesday to pass a funding bill and avoid a shutdown of the federal government. If lawmakers can’t agree, hundreds of thousands of federal employees could be without a paycheck — or worse.
While federal workers are typically put on unpaid leave during a shutdown, President Donald Trump has threatened mass firings if a budget deal isn’t reached.

If your paycheck is at risk, now is the time to plan for delayed or lost income. 
Government shutdowns have historically been short, with many lasting just a few days. But if you’re living paycheck to paycheck, any pay gap is challenging, especially as everyday costs increase.
“The last time we had something like this, it wasn’t the entire government, but it was 35 days, and that went up to close to three paychecks for people,” said John Hatton, staff vice president for policy and programs at the National Active and Retired Federal Employees Association.  

Focus on cash flow

Start with a vigorous accounting of expenses: “Three things you really need to focus on … cash flow, cash flow and cash flow,” said Mary Clements Evans, a certified financial planner and owner of Evans Wealth Strategies in Emmaus, Pennsylvania.
Many people don’t have an understanding of their monthly expenses beyond the large essentials such as rent or mortgage and car payments, she said. Automatic payments and debit or credit card swipes can also make it harder to gauge discretionary spending. 

“We’re in a world where we’re disconnected from our spending habits,” Evans said.

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Once you have a handle on expenses, plan for reduced income. This may mean determining which savings to tap and adjusting your budget.
Figuring out where to cut back is easier while you still have a paycheck coming in. 
“It sounds like that’s a financial equation, but it’s not. It’s often emotional and psychological, because they feel they’re losing their identity and their status,” said Evans, who is also the author of “Emotionally Invested.”
Reach out to your lenders. Financial institutions may offer payment deferrals, loan modifications and other forms of hardship assistance. For example, some credit unions are preparing to offer zero-interest loans for federal workers whose pay is affected in a shutdown.

Prepare for possible unemployment

Andreypopov | Istock | Getty Images

The Trump administration’s plan for a “reduction in force,” or RIF, in the event of a shutdown is a new wrinkle for federal workers.
“We are in uncharted territory,” Hatton said.
During a shutdown, a majority of employees at government agencies funded through the annual appropriations process are typically put on furlough, or unpaid leave, if the agency hasn’t received funding. Those whose work is necessary to protect life or property, or to deliver mandated benefits, are considered essential and required to work, according to the Office of Personnel Management. Employees are promised back pay when the government reopens.
“This is always a difficult situation for federal employees,” Hatton said, “whether they’re working or furloughed or now, adding this new option of receiving a RIF notice, for possible permanent loss of their employment.”
It’s unclear how a massive RIF would be carried out under a government shutdown, experts say.
There are legal requirements for an RIF: Agencies must provide justification for the layoffs, give written notice to employees 60 days before a layoff and offer an appeals process. During a shutdown, only “essential” functions are supposed to be carried out, and experts say it’s uncertain if carrying out mass layoffs would fit that definition.

To prepare for a possible layoff, federal employees should research unemployment benefits and determine when their health coverage might end.
Research health insurance costs, too. Workers may be able to extend their federal workplace plan for up to 18 months through the Temporary Continuation of Coverage option — but they still must shoulder the full cost of premiums.
For now, a more affordable option could be marketplace coverage under the Affordable Care Act.
“You can go and you can get insurance through them, and that is based on your income,” Evans said.
However, the enhanced subsidies that have kept premiums low are set to expire at the end of the year, unless Congress acts.
The subsidies are a key sticking point in the current government funding debate. Democrats say they want to extend them as part of the current budget negotiations, while Republicans say they want to debate the policy only after averting a shutdown.
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Correction: This story has been revised to reflect that enhanced Affordable Care Act subsidies are set to expire at the end of the year. A previous version misstated how the subsidies would change. More