Money Management

Follow a few simple principles to benefit from credit cards and not end up in debt. Find out more here. [[{“value”:”

Credit card debt is extremely expensive, with the average interest rate on credit cards coming in at 21.47%.

If you’re spending a fortune in interest because you’re carrying a balance on your cards, you’ll end up enriching large financial institutions — all while making it harder to accomplish your own money goals.

You most likely don’t want to help a big bank CEO buy another private jet at the expense of your retirement, so you should follow these simple tips to stay out of credit card debt for good.

1. Set up a budget to live within your means

If you are spending more money than you bring in, that’s a surefire recipe to end up in credit card debt since you need some way to cover the extra costs you’re incurring.

You’ll have to make sure your spending is under control to be free of credit card debt, which means allocating your dollars to your purchases and savings while staying below the income you earn.

You can make a detailed budget assigning every dollar a job, or a 50/30/20 budget keeping fixed costs to 50%, saving 20%, and spending the rest. Whatever approach you choose, the key is to make sure you can consistently live on your budget to ensure that anything you’re putting on your credit card can be paid off in full out of your checking account when your statement comes.

2. Set up automatic payments for your cards

Next, set up automatic payments for your full balance from your bank. This way, you won’t be tempted to ever just carry a balance for a little bit. You can have the money come out of your account automatically to pay your creditors in full, so you don’t have to force yourself to always make the smart choice.

You definitely want to be sure you don’t overdraft your bank account by paying more out of your account to your credit card than you have in it. But if you’re living on your budget and have kept your spending to the levels you determined were safe, this shouldn’t be an issue.

3. Maintain an emergency fund

Finally, the last step to staying out of credit card debt for good is to make sure you have an emergency fund. This should be a fund with about three to six months of living expenses in a high-yield savings account.

This is important because many people turn to their credit cards when surprise costs come up — and then they find themselves in credit card debt. If you have money saved for emergencies, you won’t have to worry about this. You can rely on those funds to pay for your surprise expenses and keep the spending on your credit card to the limits you set in your budget. This way, you won’t charge more than you can pay back.

By following these three simple steps, you can stay out of credit card debt for good and end up in a much better financial position, since your hard-earned cash won’t be going to cover interest.

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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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It’s not an easy time to buy a home. But sticking to certain ground rules might make the process easier. Keep reading for three big “don’ts.” [[{“value”:”

When my friend insisted in January that 2024 was going to be the year in which she’d become a homeowner, my first thought was “good luck.” And yes, I meant that both genuinely and sarcastically.

It’s not a secret that so far, 2024 is shaping up to be a pretty lousy time to be looking for a home. As of January, there was only a three-month supply of available properties on the market, according to the National Association of Realtors. That’s well below the six-month supply that’s commonly needed to fully meet buyer demand.

It’s also not a secret that mortgages remain expensive to sign. Between that and elevated home prices, anyone who buys a home in 2024 could end up with very expensive housing payments.

But since I of course want the best for my friend, when she asked for advice as a 2024 home buyer, I told her to make sure not to do these three things.

1. Wait for mortgage rates to come down

You’ll often hear that trying to time the stock market doesn’t work. The mortgage market isn’t too different.

It’s true that economists are anticipating interest rate cuts from the Federal Reserve later this year. Once that happens, mortgage lenders might lower their rates.

But we don’t know to what extent mortgage rates might fall. And a modest downtick may not do much for buyers financially.

It’s also hard to know exactly when we’ll see lower mortgage rates. So, I told my friend not to track mortgage rates obsessively. Rather, I told her to go out and try to find a home she can afford — and by that, I mean a home that will have her spending 30% of her take-home pay or less on housing expenses. The way I see it, if she can afford a home based on the mortgage rate she’s able to lock in this year, in time, she can always try to refinance and pay less.

2. Assume she can’t negotiate

Because there aren’t many available homes on the market today, you might assume that when a seller puts a home up for sale, you have to pay the asking price at a minimum. Not so.

You never know when a seller might negotiate in exchange for flexibility. My friend, for example, isn’t trying to buy and sell a home at the same time. Rather, she lives with folks right now as a means of saving money, and they’re not kicking her out anytime soon.

Because of this, she can close on a home immediately if a seller wants, or delay her closing by five months. That flexibility is something she can use to her advantage by talking a seller down on price. And if you’re not on a tight timeline, you can do the same.

3. Buy at the top of her price range

As mentioned above, the general convention is that you’re not taking on too much house as long as your monthly costs — including things like your mortgage, property taxes, and homeowners insurance — are limited to 30% of your take-home paycheck. But I advised my friend to try to go lower and keep her costs to more like 25% of her pay.

The reason? Homes have a sneaky way of needing expensive maintenance and repairs. Because my friend is buying hers solo, she’ll only have her income to rely on when things go wrong. So I think she’d be wise to be more conservative in the amount she spends. And I’d tell anyone else buying a home solo to do the same.

Today’s housing market is tricky — there’s no question about it. But the above advice doesn’t just apply to my friend. It applies to almost anyone looking to buy. So take these words to heart as you try to navigate the market and close out 2024 with a mortgage and home in your name.

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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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Lots of people play the lottery, but very few win. Learn about a proven method that can make you a millionaire without needing to buy lotto tickets. [[{“value”:”

The odds of winning may be near zero, but that doesn’t make the lottery any less popular. Americans spent $95.6 billion on lottery tickets in 2021, the most recent year with sales data available. That’s according to lottery statistics gathered by The Motley Fool Ascent.

Most players don’t win anything. So even if you like buying lotto tickets, it’s better to look at that as a fun diversion and not a retirement plan. And while some people think becoming a millionaire without winning a jackpot is out of reach, there’s a reliable way to do it.

The most effective way to become a millionaire

The best way to become a millionaire is by investing — putting your money in places where it can grow. It’s a strategy used by everyone from employees saving through 401(k) plans to the richest people in the world.

Over long periods of time, this multiplies the returns you get on your money. You don’t just end up with what you’ve saved. You’ll have that, plus the interest you’ve earned on it, and the compound interest you’ve earned on that.

For example, let’s say your household makes about $75,000 per year, which is near the median income. You’re able to set aside 10% of that: $7,500 per year, which comes out to $625 per month. If you kept that up for 40 years, then just by saving alone, you’d end up with $300,000.

Or, you could invest that money. Investing in stocks is one option. The stock market has historically returned about 10% per year. To be conservative, we’ll assume you get an 8% annual return over that same 40 years. You’d end up with $2.1 million. That’s seven times as much money and enough to make you a multimillionaire, and all because you invested wisely.

How to get started with investing

One of the most common questions that comes up about investing is how exactly to do it. When you haven’t invested before, it can feel confusing and intimidating.

It’s easier than you might think to make investing well part of your budget. Here’s how to get started:

Set up an investment account. If your employer gives you the option of opening a 401(k), you can start investing there. You can also invest by opening an account through a stock broker online. To find one, check out The Ascent’s list of the best online stock brokers.Choose your investments. The simplest option is picking one or more investment funds, such as exchange-traded funds (ETFs). These invest your money across a large number of stocks for you, so you don’t need to pick stocks yourself. See what fund options your 401(k) plan or stock broker has available and choose the ones you like.Automate your investing. Your employer will set this up for you if you’re investing through a 401(k) — just let them know how much you want to contribute. If you’re investing through a stock broker, you can likely schedule automatic investments for the same day every month.

The most challenging part will probably be choosing your investments. Personally, I put most of my money in a total stock market fund. That means my money is being invested across the entire U.S. stock market, so my portfolio will follow the market’s performance. If you’re interested in that, most stock brokers have this type of fund available.

Try getting started by investing 10% of your income, if you can manage that. It’s also fine to start with less if you need to, or more if you have plenty of disposable income. Remember that the key is to stick with it for the long term. Investing isn’t a way to get rich overnight. It’s a personal finance habit that pays off more the longer you do it.

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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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CD rates are extremely high right now, but these accounts also limit access to your funds. Here’s where I keep my savings instead. [[{“value”:”

Certificates of deposit (CDs) have rarely looked so tempting, with many of the top banks offering interest rates around 5% with terms of just 12 months. But you won’t find me parking any of my cash here, at least not for the foreseeable future. These accounts are a little too restrictive for me.

That doesn’t mean CDs are a poor choice for everyone, though. To make the right call for yourself, you have to understand exactly what you’re getting when you sign up for a CD.

How does a CD work?

CDs pay an interest rate that can be comparable to or even higher than a bank’s savings account interest rates, but that comes at a price. To claim this rate, you must agree to leave your money alone for a length of time known as the CD term. This depends on the CD you choose. Short-term CD terms might only be a few weeks or months, while long-term CDs can have terms of five years or more.

It’s possible to take your money out before a CD term ends, but you’ll usually pay an early withdrawal penalty equal to several months of interest payments. This could even cost you some of your principal if you take your cash out shortly after opening the CD. You also can’t make partial withdrawals. You must take all your cash out of the CD at once.

These limitations make CDs a poor choice for housing your emergency fund or any cash you hope to spend within the next few years. If you’re worried about early withdrawal penalties, a high-yield savings account is a better choice for you.

I choose to keep my savings in one of these because I can still earn a high rate of interest on my funds, and I can make withdrawals whenever I need to. Currently, many of the best savings accounts also have interest rates close to 5%, so I can earn a similar amount to what the best CDs offer.

But one drawback of savings accounts is that they don’t have locked-in interest rates. When rates begin falling, as they’re expected to later this year, savings account interest rates will fall while CD rates remain locked in at the rate the bank offered when you opened it.

Who is a CD good for?

A CD could be a better fit for you than a savings account if you’re worried about losing money due to falling interest rates. By securing a high CD rate now, you can be assured that you’ll earn an above-average rate for the next few months or even several years.

If you’re worried about losing access to your cash, you could always try building a CD ladder. This is where you divide your money equally between CDs of different term lengths — for example, a 1-year CD, a 2-year CD, a 3-year CD, etc. When one CD term ends, you can either spend that money or invest it in another long-term CD. This gives you access to some of your money every year and enables you to take advantage of the higher rates long-term CDs generally offer.

CDs could also be a good fit for those who want to get better at saving but worry they might be tempted to spend their funds if they’re left in a savings account. The CD’s early withdrawal penalty might be just the motivation you need to leave that cash alone for a while.

It doesn’t hurt to compare some top CD offers with some of the best savings account interest rates to see which appeals to you more. Be sure to dive into each account’s fees as well so you know what the bank can charge you for and how much you’ll pay. And if you have any questions, reach out to the bank for clarification before you open the account.

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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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