Money Management

HOAs may have more power than you think. Find out what the consequences could be if you fail to live up to the restrictions of your association. [[{“value”:”

If you buy a house in a neighborhood with a homeowners association (HOA), you most likely have rules and regulations to follow. These rules can range from the logical, like maintaining your yard by cutting your grass regularly, to the wild, like regulating what size and color your doorbell needs to be.

RELATED: What Is a Homeowners Association?

The big question for homeowners, though, is what exactly your association can do if you don’t follow the rules. And the answer is one you may not like. While the specifics of exactly what an HOA can do may vary depending on where you live, here are some general steps an association most likely will be able to take if you fail to live up to your obligations.

Your HOA could impose fines

In most cases, if you do not follow the rules of your homeowners association, the HOA could impose fines. However, the law usually doesn’t automatically give associations the right to charge fees for non-compliance. The governing documents of the neighborhood have to establish this authority — otherwise, HOAs couldn’t do this.

State laws do impose certain limitations, restrictions, or requirements on the fines that can be imposed. For example, in many states, the association would be required to provide some kind of notice and instructions on how to correct violations before it could fine you. But if you didn’t follow the rules and fix the problem, you’d be subject to whatever fees your community charter allows and the HOA imposes.

Your HOA could correct the problem and charge you for it

In certain situations, the governing documents of your community might give the HOA the right to correct your violations and then charge you for doing so.

For example, let’s say your neighborhood rules require that you keep your lawn mowed and remove dead trees. If you don’t mow and leave a dead tree standing, your association might be allowed to have someone go in and trim the lawn and cut down the tree — and could then impose a bill for doing so.

Again, state laws won’t provide this authority automatically, but if the rules applicable to your neighborhood give the HOA this right, state laws won’t typically prevent it from taking action.

Your HOA could put a lien on your house and even foreclose

Finally, HOAs actually could have the right to take your home — even if you are current on your mortgage payments. This can happen if you don’t pay your assessments or don’t pay the fines that your association imposes. Associations can do this by getting a lien on your house, which is an ownership claim, and then foreclosing on the lien and forcing the sale of your home.

There will likely be some laws in your state protecting you throughout this process to ensure that your association doesn’t unfairly take your home. But if you do owe fines or fees and don’t pay up, this is a very real possibility.

The consequences of not following the rules can obviously be very serious. You don’t want to face them. So, if you aren’t OK with the restrictions and policies in any particular neighborhood, you should avoid taking on a mortgage to buy a house there. If you already have a home in a place with an association, you should read the rules carefully and do your best to comply with them in order to avoid any of these undesirable consequences.

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Retirement accounts aren’t just useful for saving on this year’s taxes. Check out the little-known perks that these accounts offer. [[{“value”:”

It’s widely recommended to invest with retirement accounts because of their tax benefits. With traditional 401(k)s and individual retirement accounts (IRAs), your contributions are tax-deductible in the year you make them. With Roth 401(ks) and Roth IRAs, you don’t need to pay taxes on your withdrawals in retirement.

That’s certainly a good reason to use these accounts. You could save hundreds of thousands in taxes with them. But that’s not the only reason. There are also a few little-known perks that make your retirement accounts even better.

1. The early withdrawal penalty motivates you to keep your money there

Retirement accounts all have rules on when you can withdraw your money. These vary, but the most common is an early withdrawal penalty if you need to take out money before age 59 1/2. The penalty amount is 10%.

Penalties are normally a drawback, not a perk. In this case, there’s a benefit to the early withdrawal penalty: You have an incentive to keep your money invested in your retirement account.

With a standard brokerage account, you can make withdrawals at any time. It gives you more flexibility, but that’s not helpful when you’re investing for retirement. Every time you make a withdrawal, that’s less money you’ll have invested, which cuts into your returns.

Let’s say you have $30,000 invested early in your career. You decide to take out $10,000 for a down payment on a new car. If you had kept that money invested and it earned 8% per year, then after 30 years, it would’ve been worth $100,627. Taking money out of your investments has serious long-term repercussions, and retirement accounts help you avoid this.

2. You can make your retirement savings automatic

The best way to save for retirement is to be consistent about it. And the best way to be consistent is to make it automatic.

If you tell yourself you’ll save what you can, there’s a good chance you’ll get to the end of the month without much to save. If you set up automatic retirement savings of $500 per month, you’ll quickly get used to that. It will just become part of how you manage your money.

RELATED: Best Budgeting Apps

Retirement accounts are perfect for saving automatically. With a 401(k), you decide how much to contribute, and it’s taken right out of your paycheck. With IRAs, you can set up automatic investments with your stock broker.

3. They could get you a deduction on last year’s tax bill

It’d be reasonable to assume that if you didn’t contribute to an IRA last year, you missed that opportunity to save on your taxes. Luckily, you have more time than you’d think.

The IRA contribution deadline isn’t the end of the calendar year; it’s the tax-filing deadline. You can contribute to an IRA until April 15, 2024, and deduct those contributions from your 2023 taxes. The 2023 contribution limit is $6,500 if you’re under age 50 and $7,500 if you’re 50 or older.

You could also contribute to a Roth IRA. Since this type of IRA doesn’t let you deduct your contributions, you won’t save on your 2023 income taxes. But you’ll be contributing more money that you can take out tax-free when you retire.

Everyone needs a retirement fund, and retirement accounts are the best way to build yours. You won’t want to take out money early because of penalties, you can make contributions automatically, and you can even sneak in IRA contributions for last year until tax day.

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

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There’s no perfect way for everyone to allocate their money. Keep reading for a rundown of what I do. [[{“value”:”

As both a financial writer and a Certified Financial Planner™, I’m very familiar with all of the various types of bank accounts and other interest-bearing instruments Americans can use to store their cash. However, one of the most common questions I’m asked is what I do with my own money.

Well, without getting into the dollar amounts I keep in various accounts, here’s a rundown of the different types of cash accounts I use and some things to keep in mind when you’re deciding how to allocate your money.

How much do I keep in my checking account?

According to the Federal Reserve Board Survey of Consumer Finances, the average U.S. household has $10,618 in their checking account. However, the median is about $2,000, which means that half have less and half have more.

Without getting into the actual dollar amounts I keep in my bank accounts, I’ll say that I keep about one month’s worth of expenses in my checking account at any given time.

It’s a good idea to keep enough money in a checking account so you don’t have to worry if there’s enough to cover your bills at any time, but not so much that you have lots of excess cash sitting there at 0% interest, or close to it.

Savings accounts are my primary cash account type

I prioritize investing when I have extra money, and while that’s a different topic for a different article, it’s worth pointing out that the bulk of my money is in brokerage accounts and retirement accounts, invested in stocks, mutual funds, ETFs, and other instruments.

With that in mind, when it comes to my cash, the majority is in high-yield savings accounts. We’re in a relatively high interest rate environment right now, so for me, my high-yield savings account gives me an excellent return while also maintaining flexibility. This might change a bit when it looks like rates are about to decline, as I’ll discuss in the next section, but I prioritize flexibility over maximum yield for cash. Of course, that’s just my preference and it isn’t a one-size-fits-all approach.

Bonds and CDs

As mentioned, the bulk of my cash that hasn’t been put in investment accounts is in high-yield savings accounts. But there are two other things to mention.

First, around the time of the inflation spike we saw in 2022, I decided to make Series I Savings Bonds, or I bonds, a part of my cash management strategy. The general idea is that I bonds have an interest rate that varies over time based on inflation data, so your money doesn’t lose purchasing power over time.

Second, I currently don’t have any money in CDs, but with rates widely expected to start falling later in 2024, I’m planning to change that. While CD yields aren’t directly tied to the benchmark interest rates controlled by the Federal Reserve, they tend to move in the same direction. At some point in the next few months, my plan is to take some of the money in my high-yield savings account and use it to open a CD ladder of varying maturity terms.

There are other options available, including Treasury securities (bills, bonds, and notes), money market accounts, and more. I don’t currently use any of them (although I’m sure some of the funds in my retirement account own Treasuries), but that doesn’t mean my strategy won’t shift as my financial situation and life circumstances evolve.

Your ideal allocation might be different

As I’ve mentioned already, this is just what I do with my bank accounts. I’m an active investor and want to be able to put money in my brokerage account whenever I see an opportunity, so that’s why high-yield savings accounts are my top choice right now, even though I could probably get a slightly better yield from a 1-year CD.

I might be more eager to put cash in CDs if I anticipated a major cash need within the next few years. For example, my oldest child is still about nine years away from college, but if she were two or three years away, I might shift some money into CDs to lock in a rate until I needed the money.

The bottom line is that in the current interest rate environment, there are plenty of excellent options when it comes to places to keep your cash. And the best combination for you depends on your circumstances.

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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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Stocks are the top investment for millennials and Gen Z. Find out what else each group likes to invest in and what’s worth having in your own portfolio. [[{“value”:”

There are many ways you can invest your money, from traditional options like stocks and mutual funds to more recent options like cryptocurrency. In all likelihood, your age will play a large role in which investments you choose. Younger and older generations each have their own preferences in investment products.

The Motley Fool recently researched investing habits of Gen Z and millennials to see which investments they like the most. Here’s what it found and how to choose the right investments for your portfolio.

The five most popular investment products for millennials

Here are the most popular investments for millennials and the percentage who own each one:

Stocks: 55%Retirement accounts: 47%Cryptocurrency: 43%Mutual funds: 33%Bonds: 28%

Millennials are open to a variety of investments. They had the highest ownership rates of 7 out of 9 investment products. That’s probably in part because they started investing around the same time that zero-commission trading became the norm, providing the opportunity to invest in anything at an affordable cost.

The stock market has historically grown at a rate of about 10% per year. Investing in stocks, whether individually or in investment funds, is a smart decision. Millennials, to their credit, are the most likely to invest in stocks. They’re also the most likely to invest in crypto, a high-risk asset and not a good place for all but a small portion of your money.

While some millennials may be investing more than they should in crypto, the biggest issue is that only 47% are using retirement accounts. These are a must, because they help you save on taxes. Even if you don’t have the option of a 401(k), you could still open an individual retirement account (IRA).

The five most popular investment products for Gen Z

Here are the most popular investments for Gen Z and the percentage who own each one:

Stocks: 37%Retirement accounts: 36%Mutual funds: 26%Cryptocurrency: 22%Options: 18%

Many members of Gen Z haven’t started investing yet. That’s to be expected, since none of them have even reached age 30, but it’s also a costly mistake. Even if you can’t invest a lot as a young adult, it helps to invest something. The younger you are when you start investing, the more time your money has to grow.

Gen Z is also the least likely to have retirement accounts. Once again, this is understandable. A large portion probably doesn’t have access to a workplace retirement plan yet. But anybody who is working can open an IRA and start making tax-deductible contributions. Another option is a Roth IRA, which will allow for tax-free withdrawals in retirement (but contributions aren’t tax deductible).

Which investment products should you have in your portfolio?

Every investor should have at least one retirement account. If your employer offers a 401(k), make sure to take advantage. An IRA is another good option, whether you already have a 401(k) or not. Retirement accounts have early withdrawal penalties if you take out money before you’re 59 1/2, but they’re still worth using because of the tax savings they offer.

You might also want to open a regular brokerage account, so you have investments you can access without an early withdrawal penalty. But for most investors, it makes sense to fund retirement accounts first for their tax benefits.

As far as what to buy, stocks are one of the best options because of their growth potential. Keep in mind that you don’t need to invest in stocks individually. Mutual funds and exchange-traded funds (ETFs) are also popular options. They invest in a large number of stocks for you, so you don’t need to build an entire portfolio yourself.

You might want to invest in bonds, since these are a stable, fixed-income investment. Some investors also like to put money into real estate investment trusts (REITs) or crypto. While there’s nothing wrong with having a diverse mix of assets, stocks are normally the backbone of a strong investment portfolio.

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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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