Money Management

Do you ever wonder what debt is and how it’s used? Debt is a form of time travel for your personal finances. See how to buy time and build a better life. [[{“value”:”

People tend to have a complicated relationship with debt, and debt is often misunderstood. Some people think “all debt is bad,” and try to avoid getting into debt at all. Others feel guilty about being in debt, like debt is a moral failure; like they’re a bad person because they borrowed some money.

Other people hate being in debt so much that they bend over backwards to pay off all their debt as fast as possible, even lower-interest debt like car loans and mortgages. They sacrifice a lot of time and joy because they’re obsessed with “getting out of debt.”

One thing I’ve learned over the years from working in personal finance and banking is: there is never one right answer for every situation. People handle money in complex ways for powerful emotional reasons. If having zero debt helps you sleep at night and feel better about your money, then that’s great.

But I believe too many people are making themselves miserable because of a misguided understanding of what “debt” really is.

What is debt and how is it used?

Debt is a tool that lets you buy time. Debt is not just about the value of money, it’s about the value of time. Debt is a form of financial time travel that lets you make your life better today in exchange for money tomorrow.

And of course, it can be bad for your finances to take on high-interest debt that you can’t afford to repay. Try to avoid credit card debt. Sometimes when people can’t pay their bills, declaring bankruptcy is the best way to get out of financial trouble.

But on many occasions, debt is actually a good deal. Here are a few ways that “buying time” with debt can actually improve your personal finances — present and future.

Debt lets you buy what you want (or need) right now

Let’s say that you want to buy a car. Instead of having to come up with $30,000-$40,000 of cash to buy a car today, you can borrow money to “buy time” to pay off that car with an auto loan. You can “buy time” to pay for your house over the course of a 30-year mortgage, instead of having to live in a lower-cost, lower-quality home.

Debt lets you improve your life today in exchange for future payments. Yes, you’ll owe interest. But many times, it’s OK to borrow as long as you can make your payments and as long as the borrowing leaves you better off in the long run.

Debt lets “future you” pay your bills

If you take on debt, you are borrowing money from your future self. But here’s the thing: that’s often totally fine! Many times, “future you” is going to be happy with the deal. As people get older and advance in their careers, they tend to earn more money. They may get pay raises and promotions at work. Your car payment might be a lot more affordable in three years. Your mortgage payment might feel much more manageable in five years.

Debt is a bet on the future. By borrowing money, you are making a statement of faith that your future self will make more money and be better able to cover your monthly bills. And that can make it OK to borrow today for the car, home, or other life expenses that you need. You’re (probably) going to get paid more money in the future. Your future could be brighter than you realize!

Debt gives you options for your cash

I currently have a car loan that I could comfortably afford to pay off with cash. But I’m not going to pay off that debt. That car loan only has an interest rate of about 3.75% APR. My cash can earn more money than that in a high-yield savings account.

I would rather have a $20,000 car loan and $20,000 of savings in the bank, than have a paid-off car loan and $0 in the bank. Even if my bank savings account wasn’t paying higher interest than the car loan APR, I would still make this choice. Why? Because I value having flexibility and options for how to use my cash.

What if my family got hit with a big emergency expense, what if I decided to take a fun vacation, or what if I needed to put some cash into tax-advantaged retirement savings like an IRA instead? I can’t make any of those moves if I have $0 in the bank but a fully paid-off car. When your car is paid off, you can’t pull cash out of it like an ATM. You can’t “spend” your car. Having cash in the bank is hugely valuable, even if you’re losing a few dollars a month on loan interest.

Debt can get cheaper

Along with debt getting “cheaper” in the future as your income (likely) goes up, debt can be refinanced in case interest rates go down. The mortgage payment you have today won’t necessarily be this expensive for the rest of your life. And ideally your mortgage or auto loan debt is at a fixed interest rate — you don’t need to worry about your monthly payments going up.

Bottom line

Debt is a financial tool, not a moral failing. Yes, some people get into trouble with too much credit card debt. But if you can manage your monthly payments, debt can give you options, flexibility, and a more comfortable life.

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Is buying a car in cash a good idea? Maybe — but maybe not. Read on to see why. [[{“value”:”

Buying a new car can be a lot more expensive than buying a used car. However, there are some perks involved.

For one thing, new cars come with a warranty, and one that you may be able to extend at a modest cost. That means you might spend years without having to worry about covering the cost of a major repair. With a used car, you may not get anywhere close to the same warranty. And what you save in the form of a lower purchase price, you might spend on expenses like a busted transmission.

Many people who look to buy a new car end up financing their vehicle purchases with an auto loan. But what if you have a robust savings account balance? You may be considering buying a new car in cash. But is that a smart move?

Well, it could be. But it could also backfire on you.

There’s a benefit to paying in cash

When you buy a car in cash, you don’t have to deal with the hassle of shopping around for the best auto loan. More importantly, you save money on the interest you’re not paying on that loan.

As of November 2023, the average auto loan rate was about 8.5%, according to Federal Reserve data. So let’s say you take out a five-year, $40,000 auto loan at 8.5%. In that case, you’re looking at spending over $9,200 on interest when paying your auto loan off. So not having to lose that money is huge.

But there’s also a big drawback

While you can save big on interest by not having to finance a vehicle purchase, the drawback is that you might leave yourself short on cash for other expenses. And that could lead to a situation where you may be forced to incur even more expensive debt.

Let’s say you empty your savings account to buy a car, only then a $5,000 emergency expense arises. If you’re forced to charge that expense on a credit card, instead of paying around 8.5% interest like you might with an auto loan, you could end up paying 18.5% interest instead.

As such, if you’re going to buy a new car in cash, make sure to leave yourself with a decent emergency fund. At a minimum, keep enough cash on hand to cover three full months of essential expenses.

So let’s say you spend $4,000 a month on essential bills. If you have $80,000 in the bank and want to buy a $40,000 car in cash, by all means, go for it. But if you have $45,000 in the bank and want to spend $40,000 of it on a car, that’s a more dangerous move. You could, in that case, end up left in a bind in the event of a layoff, for example, because you’ll be left with only about a month’s worth of bills you can cover.

All told, buying a car in cash has its benefits — but only if you can leave yourself well-equipped to handle emergency expenses after doing so. Otherwise, you may be better off financing your vehicle, even if it means paying interest on a loan.

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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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Many states have SNAP processing backlogs, but Washington D.C., North Dakota, and New York are far behind. Find out what you can do if your application is delayed. [[{“value”:”

SNAP food benefits help millions of families keep food on the table. Indeed, the Center for Budget Policy and Priorities (CBPP) says SNAP is the nation’s most effective tool in combating hunger. But it can only be effective if people get the money they’re entitled to. And unfortunately, some states have huge backlogs of applications to get through.

Delays when you’re waiting to hear back about a SNAP application can be beyond frustrating and stressful. That’s why USDA Secretary Tom Vilsack recently wrote to 47 states and territories, urging them to improve their SNAP systems. Five states stood out for having the longest delays:

Washington D.C.North DakotaNew YorkFloridaNew Mexico

SNAP applications are most delayed in these states

When you apply or renew your SNAP food benefits, the idea is that you get an answer within 30 days. If you are in urgent need, you may qualify for expedited processing with a seven-day turnaround. The USDA wants states to process 95% of applications within these timeframes. Worryingly, only a limited number of states are meeting this target.

According to Secretary Vilsack’s letters, the following states are most behind:

It’s one thing to talk about statistics, but these numbers have a real impact on people’s lives and bank account balances. The CBPP estimates the average benefit for a four person household is $713, while the maximum is $973. That means some families are missing out on hundreds of dollars a week because of administrative delays.

What to do if your SNAP application is delayed

If you’re waiting to hear back about a SNAP application or renewal, you’re not alone. Sadly, many people are in similar situations. Don’t give up. What’s important is to find ways to feed your household while you wait for an answer.

If you can find any short-term financial boosts, don’t wait. For example, perhaps you have unused cash back app bonuses or unused items you might be able to sell online. It’s not an ideal scenario, but it’s better than going hungry.

Here are some other steps you can take:

Look for local food programs: There are food pantries and soup kitchens all over America that can give you dry and frozen goods, bread, fresh produce, and even a hot meal. You may need to show some form of ID, but — unlike SNAP — there’s no paperwork or income requirements. Check out what days different local pantries are open and be prepared to arrive early.Look for free legal assistance: The National Center for Law and Economic Justice has sued in Alaska, Missouri, Georgia, and Connecticut over SNAP delays or other systemic issues. Reach out to the organization to learn about your rights and what might be done in your state.Make some noise: Keep calling, emailing, and writing to your local SNAP office. Be polite, but don’t be afraid to speak up. You could also write to your local politicians. One SNAP recipient told Marketplace she got an answer after contacting her local senators.See if you qualify for other benefits: If you’re able to get help with any other parts of your life, it could free up cash for food. Go to www.benefits.gov to find out if there are other forms of financial assistance you might be able to claim. United Way (call 211) is another valuable source of information.Prioritize essential bills: If you’ve kept your household budget afloat through the rising prices and economic difficulties of recent years, you’re likely already an expert at juggling bills. All the same, focus on essentials such as housing, food, and utilities. You might also consider calling some of your creditors to see if you can temporarily delay other payments to give your personal finances some breathing room.

Some people have also turned to friends and family for financial help. If you go this route, bear in mind that your SNAP payments won’t be backdated to cover the processing delay. If you borrow money or delay other bills to tide yourself over, you won’t get a lump sum of additional money you can use to pay back what you owe.

Bottom line

Slow SNAP paperwork processing means Americans who are eligible for food assistance are not getting the support they need. If you live in a state that’s behind with its application processing, look for local support in the form of charities and food pantries. Not only might they stop you and your household from going hungry, but they may also help you get your SNAP payments more quickly.

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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.Emma Newbery 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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Your 20s are a pivotal time. Make the most of them with these key moves. [[{“value”:”

Your 20s are an interesting decade of life. You’re learning to function like an independent adult and may face some tough financial decisions, yet you’re not quite ready to throw in the towel and commit to being in bed by 9:30 p.m. every night.

Either way, the moves you make in your 20s have the potential to set you up for success later in life. So with that in mind, here are three pivotal moves to make before you reach age 30.

1. Build an emergency fund

Did you know that 63% of Americans sorely lack the funds to cover an emergency expense? SecureSave reports that most Americans couldn’t cover an unplanned bill costing $500.

Your primary financial priority before age 30 should be to build up an emergency fund — one with enough money to cover a good three months of essential bills at a minimum. That way, if, say, your car stops running and needs a $2,000 repair, you won’t automatically have to charge that expense on a credit card and pay interest on it for months on end.

Of course, coming up with the funds for your emergency savings might take time. So a good bet is to set a reasonable monthly goal so you don’t get discouraged.

Let’s say your essential living costs come to $3,000 a month. The idea of having to save $9,000 might be enough to get you to quit before you even get started. Instead, break that total down into smaller increments so you can celebrate each win along the way.

2. Figure out if you’re in the right career

Some people take a random job when they graduate college to pay the bills and get a feel for what it’s like to be part of the workforce. Others take a job in a field they think they want, only to realize it’s not all it’s cracked up to be.

Your 20s are an important time to assess your career and make sure you’re happy with it logistically, emotionally, and financially. There’s nothing wrong with making a career change much later in life. But let’s face it — if you’re 28, single, and don’t have kids, you may have an easier time starting over in a new profession (and potentially taking a pay cut) than if you’re a 38-year-old parent with a mortgage to pay every month.

One thing you definitely want to ask yourself is whether your career is conducive to a good work-life balance. Also, ask yourself if it pays enough to support the lifestyle you want. There’s nothing wrong with deciding to go a different direction because it’s more lucrative and will lend better to your financial goals.

3. Start to save for retirement

You shouldn’t be expected to save, say, $100,000 for retirement by the time you turn 30. But you should save something for retirement in your 20s, because the more time you give your money to grow, the more you can benefit. In fact, it’s important to simply get into the habit of saving for retirement in your 20s, even if that means allocating $30 or $40 a month to an IRA or 401(k) and planning to ramp up over time.

For some context, over the past 50 years, the stock market has averaged an annual 10% return. If you have a $10,000 IRA balance by age 30, even if you don’t contribute another dime, and if your portfolio gives you 10% a year, you’ll have a little more than $281,000 by age 65.

To be fair, you’ll probably want a larger nest egg than that for retirement. But Northwestern Mutual reports that the average saver in their 60s has $112,500 in retirement funds today. That $281,000 puts you way ahead, and that assumes you’ll stop funding your IRA at age 30, which you probably won’t do.

The financial decisions you make in your 20s could have a huge impact. So before you turn 30, do your best to build your emergency fund, make sure you’re happy with your career, and get into a retirement savings routine.

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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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As a homeowner, repairs and maintenance are your responsibility. Read on for one writer’s biggest repair bills of all time. [[{“value”:”

I love being a homeowner. My mortgage payments are affordable, I’m building equity, and I’ve been able to customize my house the way I want. But I also realize it’s expensive to own a house — especially because I own both a primary residence and a vacation home.

In the fifteen years that I’ve owned various properties (I’m on my third vacation home and first primary house), I’ve incurred a lot of repair expenses. Here are some of the biggest ones to come out of my bank account, so you can get an idea of the costs you might have to one day pay as a homeowner.

1. A new roof

The single most expensive item I ever purchased as a homeowner was a new roof. While the average cost of a new roof is $10,000, mine cost me much more than that due to my home’s location and complexity of its design.

Roof shingles are supposed to last for 20 to 50 years in many cases, depending on what shingles you get. Some are even called names like “30-year shingles.” In reality, though, your roof may develop problems well before that — especially if you live in a hot climate and experience a lot of wear and tear.

If you buy an older home or stay in your house for long enough, you’re going to get stuck putting a roof on at some point, since you can’t just let your house leak. It’s very important to save up for this big-ticket expense so you don’t end up struggling to afford it when the time comes.

2. A new air conditioner

Air conditioners can be an optional luxury in some parts of the country. In others, like where I live, they’re a necessity during the hot summers. They’re also expensive, with an average cost of $5,913.

When I installed my air conditioner after my old one quit working on a hot summer day, I spent $6,000 for parts and labor. It was worth every penny, but I sure was glad I had a home repair fund to cover the costs.

3. A new water heater

Water heaters are just tanks that hold water, so I figured I’d be out a few hundred bucks when mine broke. The problem is, there are a lot of regulations on energy efficiency that have driven up the cost. Since I needed an 80-gallon water heater to accommodate multiple showers and two washer/dryers in my home, I was looking at a cost of more than $2,500.

While smaller models are cheaper (a 40-gallon tank will run you around $450 to $500), you don’t want to go too small and constantly run out of hot water. You also can’t easily just buy a bunch of smaller tanks and link them together without paying a lot of extra costs, if it’s even doable in your configuration (believe me, I asked!).

These are just a few of many expenses you could end up having to pay if you own your home. To make sure you’re prepared, you should have a dedicated savings account for home repairs and deposit around 1% to 2% of your home’s value into it every year. Treat this expense like a must-pay bill for your home, like your monthly payment to your mortgage lender. This will save you from having to tap your emergency fund or go into debt when the need for repairs inevitably arises.

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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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