Money Management

There are several common money habits the 1% follow. Find out what they are so you can use them in your own life. [[{“value”:”

“Learn from the best” is smart advice for just about any endeavor. If you want to get better at playing golf, it makes sense to watch the pros in action. And if you want to improve your finances, it helps to know how the richest 1% manage their money.

Even though this group is extremely wealthy, their most important money habits are things that anyone can do. Here’s a look at those money habits of the 1%, based on reports, surveys, and information from financial planners.

They don’t overspend on vehicles

The stereotype of the rich driving around in the latest Ferraris and Maseratis doesn’t always match the reality. Faron Daugs, a Certified Financial Planner®, told CNBC that his self-made millionaire clients typically buy cars outright. They also keep their cars for a long time.

Now, cars are expensive, so buying in cash isn’t always feasible. What’s important is that you calculate how much car you can afford. A good rule of thumb is to not spend more than 10% to 15% of your take-home pay on a car payment.

Overspending on cars is one of the biggest money mistakes. It leaves you with less money to save and invest. And once you take on an expensive car payment, it’s hard to get out of it.

They invest in the stock market

The 1% know that saving money isn’t enough. With inflation, your savings will gradually lose value. To build wealth, you need to put your money into assets that increase in value.

That’s why the wealthiest Americans invest in stocks. When the Federal Reserve surveyed Americans about their assets, it found that stocks make up a larger portion of assets for those with higher net worths. Wealthy Americans also tend to put their money in investment funds, such as mutual funds.

The stock market’s average return is about 10% per year. It can fluctuate from year to year, but it has historically been a smart choice for long-term investors. An easy way to invest in the stock market is with an index fund. Funds that track the U.S. stock market or the S&P 500 are both popular options.

They keep plenty of money in their emergency funds

You’re going to have unexpected expenses from time to time. It could be a car accident, medical issue, job loss — or all of the above. It’s best if you don’t need to go into debt for emergencies, because that costs you money in interest.

The usual recommendation is to have an emergency fund with enough money to pay for three to six months of living expenses. Daugs found that his clients save even more, typically enough for six to nine months.

If you don’t have an emergency fund already, make that one of your goals, and save money toward it every month. It takes time to build one, but it also gives you peace of mind to know that you’re ready for anything.

They take advantage of tax savings opportunities

Another stereotype about the 1% is that they don’t pay their fair share of taxes. That’s undoubtedly true with some. But many more simply take advantage of legal tax avoidance strategies. There are plenty of methods that the other 99% can use, too.

For example, almost anyone can contribute to tax-advantaged retirement plans. With these plans, you’re normally not allowed to make withdrawals until age 59 1/2, at least without an early withdrawal penalty. In return, you save on taxes. Here are a few options:

Contribute to a 401(k) plan at work. If your employer offers a 401(k), you can have contributions taken out of your paycheck. This lowers your taxable income by the amount you contribute. For 2024, the contribution limit is $23,000. If you’re 50 or older, you can make an additional $7,500 in catch-up contributions.Contribute to an individual retirement account (IRA) through a stock broker. This is an account you open on your own, and your contributions lower your taxable income. For 2024, the contribution limit is $7,000. Those 50 and older can make an additional $1,000 in catch-up contributions.Contribute to a Roth 401(k) or Roth IRA. With Roth plans, contributions don’t lower your taxable income. However, when you make withdrawals in retirement, you don’t need to pay income taxes on them. Withdrawals from traditional 401(k)s and IRAs are taxed as ordinary income.

They avoid bad debt

The wealthy aren’t averse to debt. Some will take on debt to buy a home or expand a business. But they typically don’t get into bad debt.

What’s the difference between good debt and bad debt? Good debt has a reasonable interest rate (normally no higher than 6% to 8%, and ideally even lower) and has long-term benefits. For example, a mortgage is generally considered good debt. Mortgages normally have low interest rates, and they allow you to buy a home, which could potentially increase in value.

Bad debt is the opposite: It has high interest rates and no long-term benefits. Credit card debt is the most common example. It costs over 20% per year, on average. And this type of debt is unlikely to have any long-term value for you.

All those money habits of the 1% can have a positive impact on your finances. If you follow them diligently, you’ll be in better control of your money and prepared for the future.

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Avoid common New York tax mistakes for smoother filing. Check our guide for tips and tricks for New York State tax filers. [[{“value”:”

Filing your taxes can feel like navigating a maze blindfolded. Given the complexity of tax laws, it’s easy to stumble into pitfalls. One wrong turn (or typo!) and you might find yourself at a dead end, waiting for a refund that’s taking forever or, worse, getting a nudge from the taxman for an audit. Below, we’ll explore five common mistakes to avoid when filing your New York State taxes to keep your tax journey smooth.

1. Getting your Social Security number wrong

It sounds simple, right? But you’d be surprised how many folks trip over their Social Security numbers (SSNs). Mixing up these digits on your tax return can cause a heap of confusion, delaying your refund or messing with your tax records. Imagine waiting extra weeks for a refund just because of a typo. Double-checking your SSN (and your spouse’s and dependents’, if applicable) against your Social Security card is a small step that can save you a big headache.

2. Names and SSNs not matching up

This mistake is like the sneaky cousin of the first one. Changing your name after marriage or adoption and not updating it with the Social Security Administration can lead to mismatches on your tax return. The tax department flags these mismatches, slowing down your refund process. Before you file, make sure the name on your tax return is the same one the Social Security folks know you by. It’s like matching your socks; it feels better when things line up!

3. Reporting incorrect income amounts

Here’s where things get a bit more serious. Reporting wrong income amounts, whether too high or too low, is a big no-no. The New York State Department of Taxation and Finance is on the lookout for discrepancies between your reported income and the info from your W-2s or 1099s. Slip-ups here can delay your refund and land you in audit territory, potentially costing you penalties or extra taxes. To put it in numbers, even a small discrepancy could lead to a penalty of 20% of the unpaid tax. Accuracy is your best friend when reporting income.

4. Overlooking deductions or credits

Failing to claim all your eligible deductions and credits is like leaving money on the table. New York State offers a bunch of these for everything, from college tuition to making energy-efficient home improvements. Not claiming these can unnecessarily inflate your tax bill. It’s worth taking the time to comb through the available deductions and credits — after all, who doesn’t like saving money?

For example, missing out on the Child and Dependent Care Credit could mean saying goodbye to up to $3,000 (for one qualifying individual) or $6,000 (for two or more) that could have lowered your tax bill. Luckily, the best tax software can help you find the credits and deductions you qualify for.

5. Filing late or with incorrect postage

Waiting until the last minute to file or messing up the postage on your mail-in return can backfire. The New York State Department of Taxation and Finance reminds us that late filings come with penalties — typically 5% of the unpaid taxes for each month the return is late, up to 25%. Plus, incorrect postage could mean your return doesn’t even reach its destination on time. E-filing is a safe bet to dodge these issues, ensuring your taxes are in on time without the fuss of stamps and envelopes.

These tax-filing pitfalls are like the potholes on the road to your tax refund. Keep your eyes peeled for them — check and double-check those Social Security numbers, ensure your name is up to date, report your income to the penny, claim all the tax breaks you can, and beat the clock by filing early.

With a bit of care and attention, you’ll navigate through tax season like a pro, keeping stress levels low and possibly saving yourself a nice chunk of change in the process. And hey, if it all seems overwhelming, there’s no shame in reaching out to a tax professional for guidance.

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Refinancing a mortgage can be costly. Read on to see how refinancers may be in for relief. [[{“value”:”

Because mortgage rates are high right now, it’s not the best time to refinance a home loan. But in time, those rates are apt to come down. And from there, refinancing a mortgage could make sense for a large number of buyers, from those seeking to lower their monthly payments to those looking to take cash out of their homes for renovations and repairs.

The problem with refinancing, though, is that it can be expensive. That’s because mortgage lenders charge closing costs to finalize a refinance. But now, President Biden is seeking to eliminate one fee that tends to make closing costs for refinancing expensive. And that could lead to a world of savings for those seeking out new mortgages.

Bye bye, title insurance fees

You may hear about title insurance in the context of buying a home or refinancing the loan on a property you own. When you buy a home, the title on that property must pass from the buyer to the seller. And the title is supposed to show that the seller in question owns the home legally. Title insurance, meanwhile, protects buyers from issues related to a home’s title after they’ve taken ownership of a home.

When you buy a home, a title search and title insurance are expenses you have to cover as part of your closing costs. The same holds true when you refinance a mortgage. But now, President Biden is seeking to get rid of title insurance fees for certain refinances.

In his recent State of the Union address, Biden said, “My administration is also eliminating title insurance {fees} on federally backed mortgages. When you refinance your home, you can save $1,000 or more as a consequence.”

Other ways to save on a mortgage refinance

Biden’s plans could clearly do a world of good for mortgage refinancers. But there are other steps you can take to lower your costs in the course of refinancing.

First, shop around. Getting quotes from multiple refinance lenders could help you identify the best deal you’re eligible for. And don’t just look at refinance rates when you do your shopping — also consider the closing costs you’re being presented with.

Additionally, don’t hesitate to negotiate certain aspects of your closing costs. You may, for example, be able to get your lender to come down on your application or appraisal fee.

Finally, do your best to boost your credit score before you apply to refinance your mortgage. The higher your score, the more attractive an interest rate you’re likely to get.

If you’re hoping to refinance your mortgage in the near term, do know that waiting until later on in 2024, or until 2025, could leave you with a more favorable interest rate on your new home loan. That’s because the Federal Reserve has signaled that interest rate cuts are in store for later this year and next. And while the Fed doesn’t set mortgage refinance rates directly, when it lowers its benchmark interest rate, the cost of borrowing tends to drop across the board.

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For the 2023 tax season, the average tax refund is $3,182, according to the IRS. Learn how to invest that money to grow it into a serious nest egg. [[{“value”:”

The average tax refund for 2023 is $3,182, according to the latest IRS data. If you’re getting a refund, you may be tempted to use that money on a splurge. But if you’re willing to keep your hands off that money for a while, you could watch it grow into a substantial nest egg.

It’s surprisingly easy to turn your tax refund into a small fortune, even if you don’t have any investment experience. We’ll walk you through exactly what to do to watch your money grow.

Finding the best use for your refund

Before we talk about how to invest your tax refund, let’s address an important question: Should you invest your tax refund?

If you have credit card debt that’s accruing interest, it’s smart to apply your refund to your balance. Due to high credit card interest rates, you’ll probably pay more on your balance than you’d expect to earn from the stock market in a typical year, so it’s best to tackle that debt first.

Also, if you don’t have an emergency fund that could carry you for three to six months, consider putting your refund into a high-yield savings account. An emergency fund protects you in case you lose income or face a major unexpected expense. Because you don’t want to sell investments at a loss if your bad luck coincides with a stock market downturn, it’s best to focus on your emergency fund before you invest.

How to turn your tax refund into a fortune

If you don’t have high-interest debt and your emergency fund is in good shape, opening a Roth IRA is a great way to use that tax refund. You don’t get an upfront tax break on your contributions, but your money grows tax-free — which is a worthwhile tradeoff for many people, given the potential for an investment to compound over time.

The S&P 500 index, which represents about 80% of the value of the U.S. stock market, has historically delivered average annual returns of about 10%. Some years, the index smashes way past the average, while in other years (think 2022), the index finishes down. But over long periods of time, it produces pretty reliable returns. Here’s how a $3,000 tax refund invested in one of the top S&P 500 index funds could grow over time, assuming 10% annual returns.

Of course, this assumes you don’t contribute an additional penny. But you’ll see the value of your account skyrocket if you get in the habit of making regular Roth IRA contributions. Even if you can only kick in $50 or $100 a month, that’s a great start. You can aim to save more any time you get a raise or a surprise windfall until you hit the annual Roth IRA contribution limits.

Should you be getting a tax refund?

There’s a lot of debate in personal finance about whether getting a tax refund is a good thing. It’s true that when you get a big tax refund, you’ve given an interest-free loan to the U.S. government. But on the other hand, some people who struggle with budgeting find that a tax refund functions as a sort of forced savings account, making it easier to stash away money.

One option is to adjust your tax withholdings so that you’ll more or less break even when you file a tax return. You can then set up automatic transfers to your Roth IRA or high-yield savings account so the extra money you’re getting in your paycheck goes directly into the account. Use a budgeting app if you need help deciding how much to save out of each paycheck.

The best approach is whichever motivates you to save more. Giving the federal government an interest-free loan isn’t ideal. But if getting a big infusion of cash once a year is more helpful for your financial goals than getting a little extra from each paycheck, go ahead and do what works for 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.
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.Robin Hartill 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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Waited till the last minute to shop for Easter? Amazon’s got you covered. Keep reading for great basket picks. [[{“value”:”

Easter commonly falls in April, so the fact that it’s happening in March this year may be throwing you for a loop. If you haven’t yet begun to buy Easter basket fillers, don’t panic. If you’re an Amazon Prime member, you can order some fun finds today, and they might arrive just two days later.

Here are some specific items to consider if you’re in a rush and want to put together some colorful baskets with a mix of treats and toys.

1. Easter Milk Chocolate Bunnies

It’s a pretty natural thing to want to put chocolate into an Easter basket. Why not go all in with small chocolate bunnies?

Amazon is selling a half-pound bag for $9.99, which isn’t inexpensive in the grand scheme of chocolate. But unfortunately, the market is such that you’re going to pay a lot extra for chocolate if you want it in bunny form.

If you have a need for a larger quantity of chocolate bunnies, one thing you could do instead is buy this two-pack of bunny molds for $7.99 and then buy some run-of-the-mill chocolate at your local supermarket to fill them with. But if you’re not the crafty type, you may want your chocolate bunnies pre-made if that works for your budget.

2. Easter Marshmallow Chicks Peeps Variety Pack

Easter and Peeps tend to go hand in hand. If you can’t find Peeps at your local supermarket, you can buy a four-count of these colorful treats on Amazon for $13.99.

However, this is one of those situations where you may be better off heading to your local grocery store first, as the cost may be lower. However, if your local supermarket is all out and you don’t have the capacity to run from store to store all over town, Amazon could serve as your fall-back option. And given that you may only be buying Peeps once a year, if money isn’t tight, spending a touch extra to put a smile on your kids’ faces may not be the end of the world.

3. Hatchimals Alive, Pink & Yellow Easter Eggs Carton with 6 Mini Figures

Looking for a non-food gift to put into an Easter basket? Consider this six-pack of Hatchimals. These adorable little creatures “hatch” from a peelable egg and are a favorite of young kids. And right now, you can snag this Hatchimals set for 33% off the usual price, bringing your cost to $13.49.

The one caveat here is that Hatchimals are tiny. That’s a good thing if you don’t have a lot of storage space at home. It’s a bad thing if your kids tend to leave toys on the floor and you don’t enjoy stepping on items and injuring your feet. So you may want to set some ground rules, like “The Hatchimals must stay on the playroom shelves.”

4. Play-Doh Modeling Compound 24-Pack

Play-Doh is one of those toys that has the potential to keep kids busy for hours. Right now, Amazon is selling a 24-pack of Play-Doh in assorted colors for $13.60, which is 14% off the usual price. These cans could be the perfect addition to your Easter baskets, and there’s plenty to go around.

Pro tip: You may want to remind your kids to actually close the lids of their Play-Doh cans tightly once they’re done using them. Otherwise, their Play-Doh might harden. And hardened Play-Doh is useless Play-Doh.

5. B. toys- B. softies- 12″ Pink Plush Bunny

Why spend a small fortune on a plush bunny when this affordable bunny could be yours for just $11.95? It’s soft, cuddly, and perfect for the upcoming holiday. Plus, this bunny is actually machine washable, so not if, but when your kids get Easter chocolate all over it, you can clean it with relative ease.

All of these products could be perfect for your Easter basket. But if you’re short on funds, one thing you may want to do before placing your Amazon order is run over to your local dollar store and see what it has in stock. Given the proximity to the holiday, you may not find the same selection you would’ve a few weeks ago. But you may be able to save money on your Easter haul, even with Amazon’s prices being pretty competitive.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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CDs can be a great place to put your money, but there are drawbacks. Read on to find out how to wisely use CDs as part of your investment strategy. [[{“value”:”

Certificates of deposits (CDs) can be a great way to let your money grow over time without much risk. With many CDs offering annual percentage yields (APY) over 5%, many people are opting to put some of their money into a CD right now.

If you’re still deciding whether to open a CD, here are some pros and cons of these accounts and how to evaluate a CD if you choose to open one.

Pros of opening a CD

CDs offer you a low-risk opportunity to earn interest on your money. And while they won’t make you rich, there are some great reasons to put money into a CD right now.

1. It’s a guaranteed return

You know upfront what the APY is for the term of the CD, giving you the chance to calculate exactly how much you’ll earn over that period. For example, if you invest $5,000 in a 3-year CD that pays 5% interest, you’ll earn about $788 in interest over that period.

When you put your money into the CD and leave it there for the entire maturity period, you’ll earn the guaranteed interest and get your initial deposit back. You can only earn less if you withdraw your money early (more on that below).

2. You pick the terms

Another great thing about CDs is that you can decide how long you want your money to be in them, what interest rate you want, and how much you’ll invest.

For example, you may only want to part with your money for a year or less, making a 6-month or 1-year CD a good option. Or perhaps you have $2,000 to invest, and you need a CD with a minimum deposit amount that fits your budget. Whatever your preference, there’s likely a CD that fits your needs.

3. They’re FDIC insured

There aren’t many places you can put your money, earn a return, and have your initial deposit be FDIC insured. But because CDs are a type of savings account, the government insures deposits up to $250,000 per FDIC-insured bank, per ownership category.

This makes having your money in a CD safer than putting it in a mutual fund, bonds, or stocks, which aren’t FDIC insured. While bank failures aren’t common, five occurred in 2023, so FDIC-insured CDs can give you peace of mind that your money is protected.

Cons of opening a CD

The cons of CDs are minor, but it’s still important to know them when evaluating whether to open an account. Here are three things you should be aware of.

1. Your money is tied up

One drawback of CDs is that once you put your money into one, you’re committed to keeping it there. Unlike a savings account, where you can access your money easily and without penalty, a CD has more restrictions.

If you take some of your money out early, you’ll probably be charged a penalty. For most CDs with terms of more than 24 months, you’ll be charged a penalty fee of 90 days of simple interest for the money you take out early. For CDs with longer terms, the penalty is typically 180 days of simple interest.

2. You might make more money in the stock market

CDs are a great place to grow your money and keep it safe, but having that safety means you may forfeit some earning potential.

For example, the average historical annual rate of return of the S&P 500 is about 10%, far higher than any current CD rate. If you choose a 5-year CD over investing in the stock market, you could lose out on potentially significant gains.

Of course, there’s no return guarantee when investing in stocks, and you can certainly lose money.

3. CD returns don’t always outpace inflation

CD rates are relatively high right now, but it’s possible that putting your money in a CD with a low APY won’t keep pace with inflation.

For example, the average 3-month CD rate in mid-2022 was less than 1%, far below the U.S. inflation rate of 8.3% at the time. If you put your money into a CD account and let it sit there when inflation is high, it could potentially lose a lot of value.

How to decide if you should open a CD

The Federal Reserve has said it may lower interest rates later this year, and if it does, that will eventually cause CD rates to drop. Many CDs offer 5% rates or higher right now, so opening one and locking in a high rate may be a good idea.

Here are a few things to consider before opening a CD:

Find an annual percentage yield (APY) that works for you and outpaces inflation.Choose a CD maturity length that fits your financial situation.Most CDs have a minimum deposit amount, so pick one that fits your budget.Read the fine print on early withdrawal fees so you know what to expect if you need to withdraw money.

CDs are great for investing your money relatively cheaply and with low risk. Just be sure you’ve considered all the details above before opening one so you can make the best decision.

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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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