Find out how as a consumer you can use this to your advantage. Shopping King Louie / Shutterstock.com
Frugal families have long been fans of the end-of-season sale. They know that when stores change out old inventory for new, they slash prices on the outgoing merchandise to sell as much as possible. But time-sensitive sales are not only limited to seasonal items. Price-conscious consumers looking for cars, appliances or computers need to know what times of year those items go on sale.
If you want a lower mortgage rate than you started with, refinancing is the answer. Keep reading for a few situations where you shouldn’t bother, though. [[{“value”:”
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Refinancing a mortgage can be a great way to save money. After all, a mortgage payment is many people’s largest monthly expense. If you can reduce the amount you’re paying a mortgage lender every month, that will leave more money in your bank account for other financial goals.
But while refinancing can be a good financial move, it’s not the right choice in every situation. In fact, here are a few circumstances where refinancing your mortgage would make no sense at all.
In almost every situation, the point of refinancing is to make your new loan cheaper than your old one. If you cannot qualify for a new loan at a lower rate, then refinancing would have the opposite effect. You don’t want to get a new loan just to pay your new lender more than your old one, so pass up on refinancing if that’s the case for you.
This will likely mean it makes no sense for anyone who got a mortgage a few years ago to refinance any time soon. Mortgage rates hit record lows during the height of COVID-19 and have been at recent-record highs in the last year or so.
It likely makes no sense to refinance if you’re going to be selling your home soon. That’s because there are usually upfront costs of getting a refinance loan. You could pay anywhere from 2% to 5% of the loan amount in refinance closing costs. It will take time for your new lower payments to make up for that.
Say, for example, you originally borrowed $300,000 at 7.25% in 2022 and you’re considering refinancing into a new 30-year loan at 6.70% — but your new loan comes with $9,000 in closing costs (3% of the amount you’re borrowing).
While you’d save $150 a month in payments, the upfront closing costs you’d pay would mean it would take you over five years to break even. You’d end up paying $1,303 more for your loan during those first five years, even after accounting for the fact you will pay down your principal a little faster with the loan at the lower rate.
If you’re moving any time within the coming few years, you need to take closing costs into account when deciding how much getting a new refinance loan would actually save you. For a quick rule of thumb, divide the amount you’ll pay in closing costs by the amount you’ll save monthly to see how long it would be before you’d break even on those closing expenses. Or you can use online refinancing calculators that give you specific details of how long it would take to break even, if you want to be sure.
RELATED: Is Refinancing Worth It? Here’s How to Find Out
Finally, refinancing likely doesn’t make sense if your current loan is almost paid off. That’s partly because you may not have the new loan long enough to make up for the closing costs. Taking out a new loan when you’re close to being done would also reset the clock on your payments.
Say, for example, you had five years left on your loan but refinanced to a new 30-year mortgage. You’d lower your payments a lot since you’d be taking 30 years to pay off the remaining debt instead of five, so each payment could be much smaller. But the extra years of interest tacked on would ultimately make payoff much costlier.
The bottom line is, refinancing can make sense if you can lower your rate enough to cover closing costs in a reasonable time and if you’re staying put for a while. Otherwise, you’d be better off sticking with the loan you’ve got.
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If you got a big tax refund, that means you gave the IRS an interest-free loan of your money. Find out why this comes at a cost. [[{“value”:”
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Getting a big tax refund can feel really exciting. After all, you’re getting a nice check in the mail or a big chunk of money deposited into your bank account just for filling out some paperwork in the form of a tax return.
But while it might seem nice to get your refund payment, the reality is that it’s actually bad news to get a lot of money back from the IRS. Here’s why that’s the case — and some tips for what you can do about it if you discover that getting a refund isn’t right for you any more.
When you get a refund, it can feel like free money since the cash shows up in a big lump sum. But it isn’t free money; it’s your money. And it’s your money that you haven’t had access to — sometimes for over a year if you pay taxes in January and don’t get a refund until after tax day in April of the following year.
When you get a big tax refund, you have essentially loaned the IRS a lot of your money. And you haven’t been paid a dime of interest or otherwise benefited from the fact you gave the government use of hundreds or even thousands of dollars that you could have been making good use of.
There’s an opportunity cost to lending the IRS so much of your cash in this way. Since you don’t have the funds, you can’t do anything else with them. If you had kept your cash, you could have invested it, paid down debt, or aimed to accomplish other financial goals throughout the year rather than just letting the IRS have it for months on end.
Let’s say, for example, that you had overpaid the IRS $3,207 (the average tax refund received by taxpayers so far for the 2023 tax year). That’s an overpayment of about $267.25 a month. If you were able to invest and receive a 5% return on your $267.25 in January of last year and then invest $267.25 every month until April of this year, you would have earned $173 in interest.
That’s quite a bit of extra money — especially if you’re giving that up every year because you consistently overpay the IRS.
You’ll also have your money tied up so you can’t use it for other goals. Say, for example, you have no emergency fund. You could have saved the $267.25 you were overpaying the IRS in a bank account, and the money would have been there for you throughout the year if you had a surprise expense. But instead, the IRS would have it and you might have to put your unexpected costs on your credit card. The IRS isn’t going to send your money back early just because your car breaks down or your kid gets invited on a class trip.
You don’t want to give up whatever you could have been doing with the money. There’s no benefit at all to overpaying the IRS and letting it hold your money captive.
The good news is you can adjust your withholding with your employer so you pay less money in taxes from each paycheck. This can help you avoid overpaying and getting that big refund you may not want, once you think more deeply about why you’re getting it.
The IRS has a tax withholding estimator, so use it to make sure you pay only the amount needed to comply with the requirement to pay your taxes as you go — and nothing more.
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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.
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Rewards credit cards are becoming more popular. But cash back rewards cards are the most common type. Find out why Americans prefer cash back credit cards. [[{“value”:”
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Many consumers use credit cards for everyday spending. If you’re using credit cards, it’s wise to use ones that earn rewards, and there are plenty of rewards credit card options to choose from. A recent study by The Motley Fool Ascent found that most credit card users prefer credit cards that offer cash back rewards. Should you prioritize credit cards that earn cash rewards?
The Motley Fool Ascent polled 2,000 U.S. adults to learn more about Americans’ credit card habits and preferences. The Generational Credit Card Habits study examined how different generations use credit cards, what types of rewards they prefer, and what features they look for when choosing a new credit card.
Featured offer: save money while you pay off debt with one of these top-rated balance transfer credit cards
The study found there are generational differences. Respondents were asked to explain why they chose their most recent credit card. A whopping 48% of Generation Z respondents were focused on establishing credit, which makes sense since they’re younger and likely have little to no credit history.
Just 15% of baby boomers cited optimizing rewards as their reason for getting their most recent credit card, while only 7% of Gen Z had the same answer. However, 15% of study respondents across all generations got a credit card to boost their cash back and reward points.
Americans use a variety of credit cards, but one kind of rewards credit card topped the list. The study found that 56% of Americans have at least one cash back credit card in their wallets.
Why might U.S. consumers prefer cash back credit cards to other rewards cards? The variety of cash back cards available may be one reason. Consumers can choose flat-rate rewards cards that offer a set percentage of cash back for all purchases made with their card. Some people prefer this card type because it requires little effort to earn rewards.
But there are other credit cards with cash back rewards. Some credit card issuers have cards with bonus categories. Cardholders can earn rewards at a higher rate when making certain types of purchases. This kind of card can be a win for consumers who spend significant money on everyday essentials in eligible spending categories.
Finally, many Americans like cash back cards because they make redeeming their rewards easy. Many cash back credit cards let cardholders redeem their earned rewards for cash back or statement credit. Sometimes, simplicity is best.
If you’re looking to apply for a new rewards credit card, you may need help deciding which type is right for you. Should you choose a card that offers cash back rewards?
Cash back cards might be an option to explore if you want to earn cash back rewards that you can deposit into your checking account or redeem as a statement credit to your credit card account. Earning cash may feel more rewarding.
But before getting a credit card, review the features and benefits so you know what to expect. Remember to review the annual fee and any other card fees, too. You should also verify how the card earns rewards and the ways you can redeem your rewards.
If you prefer to redeem your rewards for travel, a travel rewards credit card may be a better fit. Check out our list of the best rewards credit cards to learn more about your options.
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.
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Lottery payouts vary from state to state. Discover the 10 states with the highest prize payouts and learn why there are better ways to spend your money. [[{“value”:”
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If you play the lottery, you might think that your chances of winning money are about the same no matter where you are. It sounds reasonable, but it’s not the case.
Your odds of winning money, and how much, depend on the state where you play. In some states, the average prizes paid per dollar spent are two- and even three-times higher than in others. Below, you’ll find the best states to play the lottery, based on lottery statistics gathered by The Motley Fool Ascent. Then, I’ll cover a more reliable way to get rich.
Here are the best states to play the lottery and each state’s prizes paid per $1 of lottery spending:
Ohio: $0.76Missouri: $0.74Arizona: $0.74Maine: $0.74Arkansas: $0.74Idaho: $0.74Pennsylvania: $0.73Florida: $0.72Vermont: $0.72Kentucky: $0.71
This lottery data is from 2021, the most recently available dataset.
So, for every $1 of lottery spending, Ohio pays out $0.76 in prizes. It’s not an evenly distributed $0.76 — more like $76 million for one player, and $0 for 1 million other players.
Still, players are more likely to come out ahead in those states. Some states pay far less, with South Dakota being the stingiest. It pays only $0.21 per $1 of lottery spending.
The appeal of playing the lottery is understandable. Win the jackpot, and you’re rich beyond your wildest dreams. It’s an instant solution to all financial problems, and it doesn’t take any work on your part.
But the odds of it happening are incredibly small. For the Powerball jackpot, your chances are 1 in 292 million. Most players don’t even win small prizes.
If you enjoy playing the lottery, then by all means, buy a ticket or two. It’s your money. But don’t spend too much on it, and only look at it as a fun diversion. If you’re hoping to get rich, there’s a much more effective way to do that.
Winning the lottery isn’t the only way to be successful. Anyone can improve financially and eventually become a millionaire or even a multimillionaire. But it doesn’t happen overnight.
For most people, financial success is the result of following good money habits, day in and day out. Here are the most important money habits to start building wealth:
Be careful with your spending. It’s never good to spend more than you earn. If possible, try to keep your regular bills to about 60% or less of your income. For example, if you make $5,000 per month, aim to spend no more than $3,000 on your expenses.Save and invest a portion of your income. You’ll need savings for emergencies and short-term goals, and investments to grow your money. A good guideline is to save 10% of your income every month and invest another 10%.Invest your money in the stock market. This is the key ingredient to building wealth. The U.S. stock market has historically delivered an average return of about 10% per year. An easy way to invest in stocks is with low-cost index funds. You can invest in funds that track the S&P 500 (500 of the largest publicly traded companies) or the whole stock market.Maximize your earning potential. You don’t need to earn an above-average income, but it helps. Look for steps you can take to earn more, whether that’s negotiating a raise at work, job hunting, or starting a side business.
These habits pay off more and more the longer you follow them. Let’s say you invest $400 a month and get an 8% annual return, a reasonable amount based on the stock market average. After five years, you’ll have $30,412. After 40 years, you’ll have $1.34 million. And that number will be even larger if you’re able to increase your income and the amount you invest.
It’s certainly not as exciting as the idea of winning the lottery. That idea rarely becomes reality, though. Play the lotto if you want, but make sure you also have a realistic path to a safe financial future.
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.
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The excessively wealthy live different lives from the rest of us. Take a look at how you can adopt the best parts. [[{“value”:”
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Alright, sure, the only real way to “live like the 1%” is to, you know, be the 1%. They honestly have more money than most of us can even comprehend, living lives we couldn’t even imagine. (If you’ve ever worried about paying rent, you’ve living in a different world than the people who own entire towns.)
But there are certain things we associate with the super wealthy, traits of their lifestyles, that we could — and even sometimes should — actually incorporate into our own lives (albeit on smaller scales). Here are a few affordable ways you could live a richer life.
One thing we immediately associate with the extremely wealthy is the high quality of their, well, everything. It’s all hand-crafted, tailored, custom-made, and from the finest materials, often imported or hyper-local.
Personally, I have more of a some-assembly-required budget. But that doesn’t mean I have to skip out on things that add a touch of luxury to my life. I simply splurge where it’ll give me the best quality of life boost. (Our trash can is downright fancy. As are my kettle, my electric mug, and the imported tea I put in them.)
Focus on the items that you use every day, upgrading them over time. You can get literal lifetimes of use out of well-made goods, so it’s actually a smart personal finance move to upgrade certain products.
One thing I know I associated with the excessively wealthy is their ability to do basically whatever they want. I mean, you hear all the time about billionaires buying up businesses on a whim that they then just run into the ground.
These folks can take chances because they have plenty of money to fall back on when things go south. I’m not going to say you can live that lifestyle (and really, you probably shouldn’t even if you could). However, we can definitely set ourselves up to allow room for a little risk in our lives.
Everyone should have, at minimum, a basic emergency fund that’ll get you by for about three months. Put it in a high-yield savings account and let it grow. Once that’s in place, though, start working on your “Stuff Happens” fund.
This is the money that gets you by for a few months when you suddenly realize you can’t stand your job. Or the money that pays for the truck when you decide to move across the country. This is the money that lets you do what you want (within reason) and take risks for a better quality of life.
The jet-setting elite can breakfast in Paris and watch the sunset in Peru — all without dealing with TSA. Who wouldn’t want to travel like that?!
Well, you could. Alright, no, not quite. But you can certainly up your travel game with some awesome vacations around the world, without breaking the bank. How? Travel rewards. Specifically, travel rewards credit cards.
It’s not quite a private plane, but I’ve had a few long-distance flights in business class that were truly spectacular. They also didn’t cost much, since I used airline miles to pay for them. The same way I used hotel rewards to book a heart-of-downtown room (free minibar included!).
It’s easy to see the lifestyles of the excessively wealthy and want it for yourself. Sadly, it’s probably just not going to happen for, you know, 99% of us.
You don’t need billions in the bank to live a rich life. You can enjoy many of the same lifestyle elements of the 1%, like embracing luxury and taking risks — even if there are double digits in your percentile.
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.
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