Money Management

The U.S. housing market has been starved for inventory. Read on to see why things may not improve anytime soon. [[{“value”:”

There’s a reason the past couple of years have been tough ones for prospective home buyers. Not only have mortgages been expensive to sign due to elevated borrowing rates, but there’s been a massive shortage of homes on the national market.

If you’re a buyer who struggled with limited housing inventory in 2023, you may be hoping for better news in 2024. Unfortunately, inventory might remain stagnant for a while since we’re starting off the year with expensive mortgage rates. Those are likely to keep existing homeowners where they are, since many current homeowners have much lower rates in place than the rates that are available today.

Of course, existing homes aren’t the only option for would-be buyers. As new construction hits the market, buyers could have added opportunities to make offers.

The problem, though, is that new construction slowed down substantially at the end of 2023. And if things don’t pick up, buyers could be in for a very frustrating 2024.

Housing starts fell in December

Housing starts, a measure of new construction activity, fell by 4.3% in December compared to November, according to the Census Bureau. That means new construction slowed down at the end of 2023, which doesn’t bode all that well for 2024.

Now, the good news is that permits ticked upward in December, rising 1.9% from November. But housing starts are a measure of active construction, whereas permits are more of an indication that there’s construction being planned. So all told, this isn’t the best of news for people who are looking for a near-term increase in real estate inventory.

How to buy a home when there’s limited inventory

Buying a home in a low-inventory market can be a huge challenge. But it’s one you may be able to overcome.

First, consider being open to different neighborhoods if you’re not seeing homes come up in your most desired ZIP code. Being a bit flexible with where you live could open the door to more opportunities.

Also, consider a home that needs work if the issues in question are ones that are fixable over time. In other words, if you want a home with a large backyard and the only available property in your preferred neighborhood and price range has a yard the size of a postage stamp, don’t make an offer. You can’t magically turn a tiny yard into a large one.

But let’s say your dream home has a finished basement, and you’re only seeing homes in your area with basements that are unfinished. That’s a solvable problem. It may take time — and savings — to address it, but it’s an issue that’s fixable. So don’t write off a house with some flaws if they’re things you can work on over time.

It’s not an easy thing to be a home buyer at a time when housing inventory is limited. But that doesn’t mean you’re doomed. Be open to different neighborhoods and properties.

Also, think about it this way: The longer it takes you to find a home, the more opportunity you have to pad your down payment. That could lead to more affordable housing costs once you’re able to buy.

Remember, that in time, mortgage rates are apt to come down, which could lead to an uptick in inventory. And those construction permits we talked about earlier? They’re apt to eventually lead to more homes on the market once that work gets off the ground. So for now, your best bet may be to exercise patience if you really can’t find a suitable home to make an offer on.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

Early retirement has become a popular goal. Discover how many Americans achieve it and what to do if you want to be one of them. [[{“value”:”

The dream of retiring early has been around for decades — many of the ideas behind it come from the 1992 book Your Money or Your Life. In recent years, online communities have popularized what’s now known as the FIRE movement, with FIRE being short for “financial independence, retire early.” One financial independence subreddit currently has 2.2 million members.

It’s understandable why the movement appeals to so many people. Being able to call it quits on a career at a young age gives you more time to enjoy life, without the daily grind of working for a living. But how many people actually make it happen? Here’s the answer.

Only a small percentage of Americans retire early

Few Americans retire early, but the exact amount depends on your definition of early retirement. Here’s the percentage of retired Americans in four age ranges, according to retirement data from 2016 to 2022 gathered by The Motley Fool:

40 to 44: 1%45 to 49: 2%50 to 54: 6%55 to 59: 11%

So, if you count early retirement as retiring in your 30s or 40s, that’s rare. Only 1% of Americans from 40 to 44 are retired, and only 2% of those from 45 to 49. We don’t have data on how many people in their 30s are retired, but it’s presumably far less than 1%.

If you want to retire in your 50s, that’s more common, although still far from the norm. Even among Americans who are 55 to 59, only a few years away from claiming Social Security, about 9 out of 10 are still working.

Early retirement hasn’t become more common, despite its increased popularity. In fact, it’s less common than it used to be. From both 2002 to 2007 and 2008 to 2015, retirement rates were higher among people in their 40s and 50s.

What does it take to retire early?

Early retirement and traditional retirement have the same ultimate goal: Save enough money to last you the rest of your life. The difference is that early retirement involves doing it much sooner. For that reason, the FIRE movement is all about maximizing your savings rate — the portion of your income you save and invest.

For most people, a savings rate of 15% to 20% is a smart goal. Early retirees typically save at least 25%, and often much more. Some manage to save 50% or more of what they make.

It’s hard to reach and maintain these kinds of high savings rates. The people who do it usually either earn a large income, cut back heavily on spending, or both. You’ll have a much easier time if you earn a high income. If not, you can still do it, but you’ll need to be strict about how much you spend.

Save for retirement, but make sure to enjoy the present

Everyone needs to plan for retirement. If you’d like to retire earlier than most, then you’ll need to save accordingly.

Be careful not to let goals of early retirement ruin your quality of life in the present. Some people practice extreme frugality, cutting practically everything they don’t need to raise their savings rate. There are even those who live in vans so they can save on rent.

You don’t need to cut spending relentlessly to save for retirement. There are other ways to speed up the process, including:

Invest heavily in the stock market. Historically, the stock market has an average return of about 10% per year. Make sure to invest in stocks with most of your portfolio to maximize growth.Save through tax-advantaged retirement accounts. Anyone can open an individual retirement account (IRA), and you can deduct contributions from your taxable income. If you meet the income limits, you could also open a Roth IRA, which allows you to make tax-free withdrawals in retirement (but doesn’t allow you to deduct contributions on your taxes).Make the most of your 401(k), if your employer offers one. Another popular way to save is a 401(k), a workplace retirement plan. Many employers will even match contributions up to a certain amount, so take full advantage if yours does.Increase your income every year. If you want to increase your savings rate, the best option is making more money. Negotiating a raise, finding a new job, and starting a side business are all options that can help you earn more.

There’s nothing wrong with being careful about your spending, within reason. But it doesn’t make sense to spend years suffering, just so you can retire as soon as possible. It’s better to take a more balanced approach. Find a plan that works for your retirement timeline and allows you to enjoy life in the here and now.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

“}]] Read More 

A writer shares a costly blunder she’s still kicking herself over. Read on to avoid repeating her mistake. [[{“value”:”

There are certain mistakes I made in my 20s that I’m not proud of. Not only did I date some pretty questionable humans, but I also made some financial choices that weren’t really excellent.

For one thing, I waited a couple of years to start funding a retirement account when I could’ve contributed to one a bit sooner. Granted, part of that was to focus on my emergency fund, which I don’t regret, but part of it was stubbornness on my part that I didn’t need to part with cash at 22 when retirement was decades away.

Another mistake I made in my 20s was putting a big chunk of money into bonds. It seemed like a good idea at the time, but it was honestly one of the biggest financial blunders I’ve ever made.

When playing it too safe comes back to haunt you

For about a 10-year stretch, I had a good $20,000 invested in bonds. And the reason I chose bonds when I did was that I didn’t know a ton about the stock market and was essentially afraid of it. I figured that with bonds, I could enjoy a guaranteed, safer return and minimize my risk.

The flaw in that plan, though, was that staying out of the stock market severely limited the extent to which my money was able to grow. See, over the past 50 years, the stock market has averaged an annual return of 10%. But that 10% accounts for years of really solid growth in the market as well as years of pretty steep losses.

What this tells us is that if you invest in stocks over a long period, you’re likely to see a solid return on your money. You may not see the returns you want year to year, or every year, but over time, you’re likely to get rewarded.

What I did was put my money into bonds paying 5%. So over a 10-year period, that took my $20,000 investment up to about $32,500. Had I opted for stocks and scored a 10% annual return on my money during that time, I would’ve been sitting on more like $52,000.

Thankfully, I realized my error in my 30s and corrected it. I started building a stock portfolio in a brokerage account and have maintained a mix of investments in that account since.

But here’s the problem. Even though I set myself up for higher returns in my 30s, I was starting with less money at that point than what I would’ve had with a stock-heavy portfolio to begin with.

Case in point: If you invest $32,500 for 30 years at an average annual 10% return, you stand to end up with about $567,000. If you invest $52,000 for 30 years at an average annual 10% return, you stand to end up with more like $907,000. That’s a $340,000 difference.

Invest in stocks from the start

I can’t go back in time and force my 20-something self to go heavy on stocks. But if you’re in your 20s and are first starting to invest, take a lesson from me and consider going heavy on stocks when you’re young and have the option to take on some risk.

And if you’re afraid of risk, consider that your fear might cost you hundreds of thousands of dollars in lost gains over time. That’s something you might end up kicking yourself for later.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

By age 50, you may be looking ahead toward retirement. But that doesn’t mean you can’t benefit from life insurance. Read on to learn more. [[{“value”:”

There are certain financial moves it pays to make once you turn 50. For one thing, it’s a good idea to increase your IRA or 401(k) contributions, as savers aged 50 and over are allowed to make catch-up contributions in these accounts. It’s also a good idea to sit down with a financial advisor and make sure you’re on track for retirement.

But if you don’t already have a life insurance policy in place, you may want to add that to your list of must-dos at age 50. Not only is it not too late to buy life insurance at 50, but you may find that it brings you and loved ones a world of peace of mind.

You’re not too old to get protection

The purpose of life insurance is to provide your loved ones with a financial benefit in the event of your passing. If you’re truly on the cusp of retirement age without life insurance, you may decide to just skip it. After all, if your spouse is eligible for Social Security in a year, and you’re both at an age where you can tap your IRA or 401(k) penalty free, then you may decide to just save your money instead.

However, when you’re 50, there’s still a pretty big gap between where you are and when retirement might begin for you and your spouse (assuming you’re roughly the same age). So it’s a good idea to buy life insurance to potentially bridge that gap for your spouse in the event of your passing. A life insurance policy might also come in handy if you have older kids whose college you’re hoping to pay for in the coming years.

How much life insurance should you get at age 50?

The amount of life insurance you decide to buy at 50 should hinge on your personal circumstances. Let’s say you know your spouse wants to wait until age 70 to tap your retirement savings and file for Social Security (that’s generally considered the latest age to sign up and it gives you the maximum monthly benefit). It could pay to put a 20-year term life insurance policy in place so that if something happens to you during that time, your spouse would get a payout that enables them to be able to stick to their original retirement plans.

Also, let’s say that at age 50, you have one child who’s first starting college and another who’s a junior in high school. You may decide to buy added coverage to pay for tuition in case you’re not around to earn the money for it.

As far as the cost of life insurance goes, as you might imagine, you’ll likely spend more for coverage in your 50s than you would’ve spent earlier on. Forbes Advisor puts the average cost of a 20-year, $250,000 term life insurance policy for a 50-year-old man at $487 a year or $41 a month. A 40-year-old man looking for that same coverage might spend $226 a year or $19 a month.

But if you can swing the cost of life insurance, it could pay to buy some at 50. It could really end up sparing your loved ones a world of financial stress. And it might give you the peace of mind you need to enjoy your 50s and beyond with less worry.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

“}]] Read More 

Amazon Prime is undoubtedly convenient, but I realized that for me, it wasn’t necessary. Take a look at how I came to that decision. [[{“value”:”

At the start of 2020, I decided to let my Amazon Prime membership lapse. The price of an annual membership had gone up a couple years prior from $99 to $119, and something about that extra digit made it feel like a little too much of a yearly credit card charge, even though it wasn’t even an extra $2 per month. I wanted to see how I’d get by without Amazon Prime, so I let it go.

Four years later, and I’m doing just fine.

Shopping just to make the fee worthwhile

One of the main tipping points in my decision was when I realized I was buying things from Amazon just because I had the membership and I wanted to make sure the fee I was paying was carrying its weight. I found I was looking to buy things online that I could have just as easily purchased in person, whether it was sunscreen or hair products or laundry soap.

A lot of what I was buying on Amazon were items I could easily find in a local store. Buying them in person meant I wouldn’t have to wait the two days of shipping to start using them, and I could avoid the higher carbon footprint (and associated guilty conscience) that comes with having such basic products delivered to my doorstep. Even during that first year of the pandemic when we were all scared to go to the store and shop in person, I never felt like I needed to bring back my Prime membership.

Sure, there are plenty of random or obscure items on Amazon that I can’t find in a local shop, and I’m happy to have a place to buy those. But I don’t live in a super remote area, I have a car, and my schedule is flexible. It’s easy for me to shop for basic items in person, so why was I paying a fee to shop for them online?

I haven’t sworn off Amazon entirely

Every once in a while, I get an offer from Amazon for a free trial of Prime, usually for 30 days. Especially if the holidays are coming up, I’ll snag this offer and do a good amount of gift shopping to take advantage. A lot of my loved ones live out of state, so using this free trial saves my bank account since I don’t have to pay to ship individual items to a bunch of different locations.

I’m also a fan of the wish list feature on Amazon, where you can publicly or privately save items that you’d like to get in the future. It’s an easy way to shop for gifts for people, since they’re telling you exactly what they want. But it’s also a good way for me to bookmark particular items for myself that I don’t need but might want.

Then, when I know there’s something I want to buy and can only find it on Amazon, I have a list of bits and bobs I can sort through and add to the order. That way, I’m able to reach the free-shipping threshold without randomly adding things to my cart on a whim. I feel better about making a few conscious orders on Amazon a year rather than lots of one-off orders whenever the mood strikes, even if the standard shipping takes a few days longer.

Just because it’s convenient doesn’t mean it’s worth it

If you’re assessing your personal finances and trying to find some places to cut back, take a look at the memberships you’re paying for. There’s no denying that Amazon Prime is convenient, and it includes plenty of entertainment options in the fee, from books to music to TV shows. If you find that you get a lot of use out of your Prime membership (or other streaming platform, or music service), then no need to strike it from your budget just to save money.

But if you think you’re using that membership mainly to justify its cost, then maybe that’s something you could do without. The cost of an annual Prime membership went up to $139 in 2022. That means that by going without Prime these last few years, I’ve saved $655. I’m more than happy to pocket that cash and live with slightly slower shipping.

Alert: our top-rated cash back card now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a lengthy 0% intro APR period, a cash back rate of up to 5%, and all somehow for no annual fee! Click here to read our full review for free and apply in just 2 minutes.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

“}]] Read More