Money Management

Building wealth is a process, but it helps to have the right strategy. Find out exactly what you should do if you want to get rich. [[{“value”:”

Hardly anyone likes to call themselves rich. Even some multimillionaires will say they’re “upper middle class.” But many of us would like to get rich, or at least wealthy enough to where we don’t need to worry about money.

This isn’t easy to do, but it’s possible if you follow the right strategy: Invest consistently and increase the amount you invest regularly. Here’s a step-by-step look at how to do it.

How to build wealth through investing

When done correctly, investing is the most powerful way to build wealth. The stock market’s annual return is about 10% per year on average (over several decades). If you invest $500 per month at an 8% annual return (to be conservative), then after 40 years, you’ll have $1.68 million.

The challenging part is doing it correctly. Some people only invest sporadically, so they end up making a lot less money. Or they invest in high-risk ventures, such as options or crypto, to try and speed up the process. You don’t need to swing for the fences. It’s all about consistently taking a few simple actions.

Invest a percentage of your income

Start by deciding how much of your income you can afford to invest every month. If you already have money saved that you’d like to invest, you can do that, too. Just keep in mind that you’ll get the best results if you invest regularly.

A popular starting point is 10% of your income. If you make $6,000 per month, then you’d invest $600. If you need to do less, such as 5%, that’s fine. What’s important is getting into the habit of investing. And if you want to do more, you’ll get even better results.

See what works with your income and your financial situation. If your employer offers a 401(k) plan, try to at least max out any contribution match it offers. This is as close as it gets to free money, so it makes sense to take full advantage.

Make your investments automatic

One of the best money moves you can make is automating as much as possible. It saves you time and helps ensure you follow through on the financial habits you’re trying to build.

If you need to manually invest $600 per month, you might decide to skip it every now and then because you’d rather use that money elsewhere. If that money is getting invested automatically, it’s a lot more likely that there won’t be any interruptions.

With a 401(k), this is done for you, as your contributions will come right out of your paycheck. That’s not the case with individual retirement accounts (IRAs) and regular brokerage accounts, but you can still set up automatic investments with both of these. All the best online stock brokers give you this option.

Increase the amount you invest every year

This is the secret to building wealth much more quickly. It has worked for me, and I recommend it to everyone. Don’t just invest the exact same amount year after year. Aim to bump up your investments. There are a few ways to do this:

Increase the percentage of your income you invest: If you invested 10% of your income last year, raise that to 11% this year, 12% next year, and so on.Increase your income: Seek out opportunities to get a raise at work, launch a side business, or apply for higher-paying jobs. If your income goes from $6,000 to $7,000 per month, then a 10% investment would go from $600 to $700.Both of the above: The best option is to do both. Increase the percentage of your income that you invest and pursue opportunities to raise your income.

Where to invest your money

Your investment options will depend on the type of account you’re using. For example, if you have a 401(k), the plan administrator determines what you can invest in. Most 401(k)s have mutual funds and target-date funds. With IRAs and brokerage accounts, you can make any type of investment you want.

One convenient option is to simply put your money in a target-date fund. These are designed with a retirement year in mind, so they essentially do all the work for you. If you want to retire in 2055, you just invest in a 2055 target-date fund, and you’re good to go.

You could also invest in an index fund that follows the entire stock market. That’s what I do, and it means your portfolio will follow the performance of the stock market as a whole. As mentioned earlier, the stock market goes up by about 10% per year on average, although it does have its good years and bad years.

Whatever investments you choose, remember that you won’t get rich overnight. Very few people do. But if you make investing a habit and gradually invest more and more, it can deliver incredible results.

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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 positions in and recommends Target. The Motley Fool has a disclosure policy.

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Credit card interest is very expensive — but you can avoid paying it with a few strategic moves. Find out here how to avoid interest forever. [[{“value”:”

The average interest rate on credit cards is higher than you might imagine, at 21.47%. If you are paying this high rate, you are going to waste a lot of money making your creditors richer and yourself poorer.

I don’t want to send my hard-earned money into the pockets of credit card companies. So, to make sure that doesn’t happen, I’ve taken these three steps to ensure I’ll never owe interest on my cards.

1. I keep my credit card balance below what I can afford to pay back

The key way to avoid credit card interest is to make sure you don’t charge more on your cards than you can pay back when your statement comes. If you don’t pay your card in full, the issuer begins charging you — and that’s when you can start getting into debt trouble.

There are a few ways to make sure you keep your credit card balance below what you can afford.

One option is to live on a budget and track your spending to make sure you’re sticking to your limits. I used to do this, but now that I’ve capped my fixed expenses and increased my income, I don’t like budgeting anymore. Instead, I just check my credit card and bank account balances every couple of days to make sure I’m not charging more than I’ll have the cash to pay for.

If you have trouble keeping your spending in check, the budgeting approach may be for you. But if you are pretty good at not overspending, then simply keeping tabs on your balances can be a lot simpler.

2. I have automatic payments set up

In order to make absolutely certain I never end up owing interest charges, I’ve set up my credit cards so the full balance due is automatically withdrawn from my checking account. I don’t even have the option to pay less unless I go to the trouble of turning off the autopay. I absolutely wouldn’t do it, since I’d have to go to a lot of trouble only to incur interest costs I’m trying to avoid.

Setting up automatic payments can be a great way to force yourself to pay your full balance, but you do want to be certain there will be enough money in your bank account when the payments come out, so you don’t overdraft. If you keep a financial cushion in your account or if you keep good tabs on your credit card spending (or ideally, both), then you won’t have to worry about overdrafting.

3. I have an emergency fund so I don’t have to charge unexpected expenses

Finally, saving up an emergency fund is one last big step I’ve taken to make sure I don’t get stuck with credit card interest.

See, many people end up with credit card bills they can’t pay not because they spend too much on stuff they want, but because a surprise expense crops up. If there’s no money to pay for a crucial expense, then putting it on your credit card may be the only option — and then you could find yourself struggling to pay off that charge and owing interest.

To make sure this doesn’t happen, try to save up an emergency fund with several months of living expenses. This can take time, but start socking away any extra funds you have toward this goal ASAP, as even having a smaller fund can protect you from this fate in many situations.

These three steps have helped me avoid credit card interest while benefiting from credit card rewards, and they could do the same for you. Then, you can use your cards without worrying about how much they’ll end up costing you.

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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.
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If you don’t have life insurance, your surviving loved ones might suffer financially in your absence. Read on to learn more. [[{“value”:”

If you have people in your life who depend on you financially, then getting life insurance is a good idea. But what if you’re nearing or at retirement age and you don’t have a policy in place?

You might assume that you don’t need life insurance if you’re older because at that point, you and your spouse will be privy to other types of income. But not having life insurance could leave your loved ones in the lurch to some degree.

The benefit of having life insurance as a senior

There are different types of income you and your spouse may have access to during your senior years, such as Social Security benefits or withdrawals from savings you’ve built over the years. But Social Security only pays a limited benefit. The average recipient today gets just $1,907 a month.

The rules of Social Security survivors benefits dictate that if you pass away, your surviving spouse is entitled to receive the complete monthly benefit you were collecting while you were alive. That benefit may be enough to cover day-to-day expenses. But what about larger ones?

Let’s say you don’t have much retirement savings and your survivors benefits from Social Security aren’t enough for your spouse to cover your funeral costs. If you were to leave your spouse with a life insurance payout, that sum might cover your funeral costs and other large expenses that have the potential to arise, like home or car repairs. Plus, the money from a life insurance benefit might just plain give your surviving spouse more breathing room.

Let’s say you pass away but your spouse outlives you for years, all the while having to cover the cost of maintaining your home and paying off the mortgage. If you leave your spouse with a lump sum of money, that could become less of a financial burden.

Also consider the fact that life insurance benefits are generally tax free. Your surviving spouse may not have access to any other tax-free income.

Social Security benefits have the potential to be tax free, but they’re often taxed if the recipient is also privy to additional income — even a small amount. And traditional IRA or 401(k) withdrawals are subject to taxes as well. So this way, your spouse might be left with some income the IRS can’t touch.

Also, while much of this discussion has centered around a surviving spouse, it may be that you have other people in your life you support or want to financially, like grown kids or grandchildren. Let’s say it’s important to you to be able to help fund your grandchildren’s college education. If you leave behind a life insurance payout, that might allow you to fulfill that goal even if you aren’t around.

Can seniors even get life insurance?

The quick answer is yes, they can. However, the cost is likely to be higher than it is for younger applicants.

Let’s say a 30-year-old and a 70-year-old apply for life insurance with a 10-year term. The likelihood of the insurer having to pay out a death benefit is higher with the 70-year-old, so because of that, the premiums for that policy will likely be higher. It’s a good idea to shop around for life insurance as an older applicant to compare rates and, ideally, eke out some savings.

Progressive also says that seniors may be limited in the type of coverage they can obtain. For example, a 30-year term life policy may not be available for an older applicant.

But all told, it is possible to get life insurance when you’re older. So think about the benefits it could provide to your loved ones before writing off the idea.

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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

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Curious about the EV tax credit? Read on to find out which new vehicles qualify in 2024. [[{“value”:”

The federal government is offering tax credits worth up to $7,500 to encourage Americans to buy electric vehicles (EVs). The credits can be immediately applied to the purchase of a new EV, giving consumers a significant discount on some vehicles.

But not all EVs are eligible for the credit, and some are only eligible for half of it. If you’re in the market for a new EV this year, here’s what vehicles qualify for the credit, how much you’ll get, and one hidden cost of EVs you should be aware of.

These new EVs qualify for the tax credit

It’s worth mentioning that some hybrid cars qualify for the tax credit, and some used EVs qualify as well, but I’m only listing new 2024 EV models here. Here are the new models that qualify and how much of the tax credit you’ll receive:

2024 Tesla Model 3 Performance ($7,500)2024 Tesla Model Y ($7,500)2024 Tesla Model X ($7,500)2024 Ford F-150 Lightning ($7,500)2024 Cadillac Lyriq ($7,500)2024 Chevrolet Blazer ($7,500)2024 Acura ZDX ($7,500)2024 Honda Prologue ($7,500)2024 Volkswagen ID.4 ($7,500)2024 Rivian R1S ($3,750)2024 Rivian R1T ($3,750)2024 Nissan Leaf ($3,750)

You might be wondering why these new EVs made the cut while others didn’t, and why a handful of them aren’t eligible for the full tax credit. Essentially, to receive the full $7,500, a vehicle needs to be assembled or manufactured in North America and have a list price of $55,000 or less if it’s a car or $80,000 or less if it’s an SUV or light truck.

Additionally, at least 40% of the vehicle’s battery materials must be sourced in the U.S. or with its trade partners. If a vehicle doesn’t meet the battery sourcing requirements but does meet the manufacturing/assembly requirements and price, it may only be eligible for half the credit amount.

One hidden cost of EVs you should know about

The EV tax credit can go a long way toward making some EVs more affordable, but there are costs associated with electric vehicles that consumers should understand. Namely, electric vehicles are more expensive to insure.

EVs may cost more to insure than gas-powered vehicles because they’re more expensive to repair and replace. Progressive Insurance says there are fewer technicians trained to fix EVs than there are for gas-powered vehicles, which translates to higher repair bills.

EV battery costs are also a factor. The replacement cost for an EV battery can be between $4,000 and $20,000, according to Progressive. Insurance companies factor this cost into EV insurance policies and sometimes may even write an EV off as a total loss if it’s an accident and the battery is damaged.

How to get better EV insurance rates

The good news is that as EVs become more common, some of these costs will likely go down. But for now, it means that EV owners may want to spend some extra time comparison shopping for the cheapest insurance rates. Compare prices from at least three companies to ensure you get the best rate for you.

It’s also a good idea to try to improve your credit score before you sign up for EV car insurance. Most car insurance companies rely on credit scores to help determine premiums, so having a higher score could save you money. Paying your bills on time and reducing the total amount you owe will have the biggest impact. Those two categories account for 65% of your total score.

And finally, speak with your insurance company about the discounts you might qualify for. Bundling your home insurance (or renters insurance) with your auto insurance can save you up to 5%. Taking a defensive driving course can also lower your auto insurance premiums by 5% to 20%.

Tapping the available federal tax credit could make buying an EV far less expensive this year, but just be ready for an insurance increase if you decide to buy one. Taking a few steps now toward finding lower insurance rates could help you avoid insurance sticker shock later.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Progressive. The Motley Fool has a disclosure policy.

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Looking to grow your savings this month? Read on to see how. [[{“value”:”

In 2023, the average American saved $6,138.06, according to data from New York Life. That’s about $512 a month.

But let’s face it. If you only earn a moderate wage, or you’re juggling a lot of bills and perhaps some debt payments, too, then saving upward of $500 on a monthly basis may not be reasonable.

But what if you could manage to start saving $200 a month? That might do the trick in boosting your emergency fund and giving you more breathing room to tackle unanticipated bills. With that in mind, here are a few steps you can take to put $200 into your savings account this month.

1. Make some sales while you’re doing your spring cleaning

April is a popular time to tackle the task of spring cleaning. So if you’re going to push yourself to clear out your closets, basement, and garage, seize the opportunity to make some money in the process.

As you’re doing your cleaning, take inventory and set aside items of value that you may be able to sell. And then, start selling.

Post electronics on sites like eBay, or announce a yard sale on your town’s social media page so you can sell gently used toys, clothing, and housewares. You might easily end up with $200 to bank.

2. Have a no-takeout month

If you’re someone who relies pretty heavily on takeout due to either your busy schedule or lack of desire to cook, then you’re probably well aware that you’re spending way more to put food on the table than you would by purchasing groceries. If you’re looking to save $200 this month, pull the plug on takeout for a few weeks.

Instead, research easy recipes online, plan out your meals in advance, and cook in batches so you have leftovers to eat during the week. And to make it more fun, find a partner.

If you live with someone, get them involved. Otherwise, team up with a friend to go on a cooking spree this month and share recipes (and leftovers, if you’re so inclined). You may even decide to cut back on takeout in general once you get into the swing of cooking and meal-planning — especially after seeing how much good it does for your budget.

3. Bank your tax refund

As of this writing, the average tax refund issued by the IRS this year is $3,081. If you have a similar payday coming your way, then you might easily manage to save $200 in April — and then some.

However, a lot of people have their tax refunds earmarked for specific expenses — costs like home improvements, electronics, and so forth. So take a close look at your cash reserves. You should, ideally, have enough money in emergency savings to cover at least three full months of essential expenses. If you don’t, then you may want to reconsider spending your refund and bank it instead.

The sooner you get into the habit of saving more, the more secure you might feel in your personal finances. So use these tips to close out the month of April with a higher savings account balance than you started with.

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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.

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Home sales dropped last year — but perhaps not for the reason you’d think. Read on to learn more. [[{“value”:”

It would be more than fair to classify 2023 as a difficult year to buy a home. Not only were home prices elevated, but mortgages were expensive to sign from the start of the year through the end of it.

Meanwhile, the National Association of Realtors reports that home sales fell to a 28-year low in 2023. And on a year-over-year basis, they declined 19%, with only 4.09 million homes sold.

But the reason for sluggish sales isn’t a lack of buyer demand. Rather, it’s a lack of inventory.

There just weren’t homes to sell

You’d think that buyers would’ve run from the housing market in 2023 due to high mortgage rates. But actually, in 2023, the median home sale price was $389,800, up about 1% from 2022 and the highest on record. This tells us that demand is strong enough to result in an uptick in home prices.

As such, the fact that home sales declined notably in 2023 largely boils down to a lack of housing inventory. Simply put, if there aren’t homes available to buy, sales figures are apt to be limited.

Will things change in 2024?

Home sales could pick up in 2024 — but only if real estate inventory increases. And whether that happens will largely come down to how mortgage rates trend.

Part of the reason it’s so expensive to sign a mortgage these days is that the Federal Reserve raised interest rates in 2022 and 2023 to cool inflation, and that’s resulted in higher borrowing costs across the board. The Fed has signaled that it may start cutting interest rates later on in 2024. Once that happens, mortgage rates could start to drop. And from there, we could see more homes hit the market.

See, a big reason there aren’t many homes for sale now, and there weren’t in 2023, is that many new buyers locked in low mortgage rates in 2020 and 2021, when rates plunged to record lows. And during that same period, a lot of existing homeowners refinanced their mortgages to take advantage of the low rates that became available.

Meanwhile, mortgage rates were elevated for all of 2023, and so far, they’ve been high in 2024. But if rates start to come down, it could prompt some existing homeowners to list their properties.

To put it another way, someone with a 3% mortgage rate isn’t going to want to swap that for a loan at 6.87%, which is the average rate for a 30-year mortgage as of this writing. But swapping a 3% loan for a 5% loan may be more palatable.

Of course, this isn’t to say that mortgage rates are going to drop as low as 5% this year. That may not happen. The point, however, is that as mortgage rates start to come down, housing inventory should improve. That should lead to not only higher sales, but lower prices. But the extent to which the market becomes more favorable for buyers on a whole in 2024 is still yet to be determined.

If you’re hoping to buy in 2024, keep track of interest rates in general, as those could trickle down and have an impact on mortgage rates. Also do your best to boost your down payment funds and improve your credit score. The higher that number is, the more likely you are to qualify for whatever the best mortgage rates are at the time of your application.

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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.

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