Money Management

Review current home loan rates before buying a house. You may be shocked to discover how much money you could save with a lower mortgage interest rate. [[{“value”:”

Many homeowners finance their home purchase with a mortgage loan. When getting a mortgage, paying attention to the interest rate is essential. A higher interest rate will result in you paying more interest throughout the life of the loan. But a lower rate could offer savings.

Unfortunately, home loan rates have been higher in the last year. That means most newer homeowners with mortgages are paying more in interest charges. For hopeful buyers who can delay purchasing a home, waiting until mortgage interest rates are lower could be a win for their wallets. Find out how much you could save with lower mortgage interest rates.

Interest rates impact your monthly mortgage payment

Interest rates matter. You could save thousands of dollars by securing a home loan with a lower interest rate. I’ll illustrate two home loan examples to show you how the total home lending costs can quickly increase if you have a loan with a higher interest rate.

Many home buyers take out a 30-year fixed-rate mortgage, so we’ll compare this kind of home loan. Using data provided by Freddie Mac, the average interest rate for a 30-year fixed-rate mortgage for the week ending Feb. 29, 2024, was 6.94%. Historical data shows the average rate for the same loan type for the week ending March 3, 2022, was 3.76%.

According to a recent Architectural Digest study, the average home buyer’s budget for 2024 is $313,141. Considering this stat, I’ll compare 30-year fixed-rate mortgage loan prices using a home sale price of $300,000 and a 20% down payment.

I used The Ascent’s mortgage calculator to compare the monthly interest costs for both loans based on their rates and the total interest paid throughout the lifetime of each loan.

You could save over $170,000 with a lower interest rate

While paying an additional $474 monthly on interest for a home loan with a 6.94% interest rate may not sound like a huge difference, the extra expense adds up fast.

The total interest costs throughout the 30-year loan period are considerably higher than the total interest paid on a home loan with a 3.76% interest rate. In the example above, you’d pay an additional $170,687 in interest over 30 years.

This cost breakdown shows how important it is to research interest rates before buying a home. Homeowners have little control over average home loan rates, but timing your purchase so you buy when average rates are lower could benefit your bank account.

Refinancing could offer savings

Not everyone can hold out for mortgage rates to drop. If you purchased a home recently or plan to soon and want to take advantage of lower mortgage rates in the future, one option to explore is a mortgage loan refinance. Doing this could allow you to score a better rate when interest rates drop.

A refinance could make your monthly mortgage payment cheaper if interest rates become more affordable. But before you refinance your mortgage, research all the fees to avoid a costly surprise. Closing fees can eat into your savings. Do the math to make sure a refinance is wise.

Lower mortgage interest rates are ideal

Homeowners can benefit from having a mortgage with a lower interest rate. Avoiding $100,000 or more of interest charges could allow you to prioritize other personal finance goals, like investing for your retirement years. It’s best to stay alert to mortgage interest rates.

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Earn a six-figure income? Read on for ways to lower your tax burden. [[{“value”:”

No matter how much money you earn, you have to think about taxes. But if you earn $100,000 or more, your tax burden may be higher than someone who earns a lot less than you do.

That doesn’t mean you’re doomed to a massive IRS bill year after year, though. Here are a few steps you can take to eke out some tax savings.

1. Max out your IRA or 401(k)

The more money you put into a traditional IRA or 401(k) plan, up to the annual limit set by the IRS, the more income of yours you can shield from taxes. But to be clear, you only get a tax break on those contributions if you fund a traditional IRA or 401(k) — not a Roth account.

This year, IRAs max out at $7,000 for savers under the age of 50, and $8,000 for those 50 and over. With a 401(k) plan, the limits are much higher — $23,000 for savers under 50, and $30,500 for those 50 and over.

If you earn well over $100,000, it’s conceivable that you may be in a position to max out a 401(k). And you should know that if you’re entitled to an employer match in your account, it won’t count toward your contribution limit.

2. Take losses strategically in your brokerage account

If you’re investing in a brokerage account, your goal is no doubt to make money. But if you have an underperforming stock, selling it at a loss could benefit you from a tax perspective.

Capital losses in a brokerage account can be used to offset capital gains, which happen when you sell assets at a profit. And if you don’t have gains to offset, you can use up to $3,000 in investment losses to offset some ordinary income. So if you earn $120,000 a year, taking a $3,000 loss might reduce your taxable income to $117,000, leaving you to pay the IRS a bit less.

3. Donate to charity

You can claim charitable donations on your tax return if you’re someone who itemizes. Being a higher earner doesn’t automatically mean that itemizing will make sense for you. But if you own a home, your write-off for mortgage interest and state and local taxes (which include property taxes) might exceed your write-off under the standard deduction. So in that case, it pays to track your charitable donations and claim them on your tax return as well.

You should also know that you can claim a deduction for donated goods as well as money, as long as those goods are given to a registered charity. Let’s say you have an old dining room set you’re upgrading. You could try to sell it locally for $300. But if you don’t want to go through the hassle of doing that, you may instead want to find a charity that will take those items and claim a $300 deduction for that set’s fair market value — the amount it’s worth at the time of your donation, as opposed to its original value.

4. Go after the tax credits you’re entitled to

You might assume that if you earn more than $100,000, you won’t be eligible for any of the tax credits the IRS makes available to filers. But that’s not entirely true.

As one example, the Child Tax Credit is a credit you can claim in full if you earn under $200,000 as a single tax-filer or under $400,000 as a married couple filing jointly. And even if your income exceeds these limits, you don’t necessarily lose the credit completely — you may just get less of it.

Some credits, like the Earned Income Tax Credit, will be off the table if you earn $100,000 or more. But don’t assume there are no credits available to you.

Just because you earn a good wage doesn’t mean the IRS will get to take a massive chunk of your money. If you’re strategic in your tax planning, you may find that you’re able to reduce your IRS burden substantially and keep more of your hard-earned money for yourself.

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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.
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Credit card interest rates are at an all-time high. Read on to find out how to lower yours. [[{“value”:”

America’s dependence on credit cards has reached an all-time high. Recently, U.S. households’ credit card debt reached $1.13 trillion, a 21% increase over the past four years.

Americans are having difficulty keeping up with inflation and interest rates over the past few years, which have made groceries, housing costs, car payments, and nearly everything else more expensive than before. While inflation has slowed down recently, much of the damage has already been done to people’s budgets.

The high cost of living has forced many Americans to reach for their credit cards to solve their immediate financial needs. If you’re one of them, there are a few steps you can take to begin getting out of credit card debt. The first change you need to make is lowering your interest rate.

Lower your interest rate

The average American household has $6,501 in credit card debt right now. That amount can be difficult enough to pay off, but high interest rates have made the problem worse. The Federal Reserve increased the federal funds rate over the past two years, which has caused credit cards’ variable interest rates to rise.

The result is that many people now pay an average credit card APR of more than 20%.

To better understand how interest rates affect credit card balances, let’s calculate a credit card payoff. The typical consumer pays $430 toward their credit card debt every month. If you have a starting balance of $6,501 and pay 20% interest, it will take you 18 months to pay it off — and you’ll have spent a total of $7,553.

That means you will spend $1,052 in interest alone.

While the Fed may be in charge of setting interest rates for everyone, you can take control over your rate relatively quickly with two simple moves.

How to lower your interest rate

Historically high credit card debt and interest rates are the bad news. The good news is that by asking for a lower interest rate or opening a balance transfer credit card, you can likely lower your interest rate, spend less money in total payments, and pay off your debt faster.

RELATED: How Does a Balance Transfer Work?

Here’s how to lower the interest rate on your debt.

1. Ask for an interest rate reduction

Some studies have shown that you have a 50% to 81% chance of getting a lower interest rate simply by calling your credit card company and asking for it. Doing so could significantly lower how much you spend on interest.

For example, let’s assume your credit card company agrees to lower your interest rate from 20% to 17%, and you continue making the average of $430 in monthly payments on $6,501 in debt. You’ll pay off the debt in 17 months and spend $867 in interest, saving you $185 and allowing you to pay the debt off one month earlier than with a 20% interest rate.

The key to this strategy is to be persistent. If the credit card company says it won’t lower your interest rate, continue making on-time payments, call back in a few months, and ask again.

2. Find a balance transfer credit card

Balance transfer credit cards have introductory interest rates that are very low, often 0%, which can help you make payments without incurring interest.

Here are a few things you should know about balance transfer cards:

The intro 0% APR usually expires in 15 to 21 months: Pay off your entire balance before the intro period ends to avoid paying any interest. After the intro period ends, the interest rate will be whatever is specified in the original terms.There’s a balance transfer fee: Most cards charge a fee of 3% to 5% of the amount you transfer to the new card.There may be a cap to how much you can transfer: Some credit card companies will limit your balance transfer amount to 75% of your credit limit, or they may specify a specific dollar amount. For example, some Chase cards have a balance transfer limit of $15,000.

Using the same example as before, let’s assume you’re approved for a balance transfer card with a 0% intro APR for 18 months, and the card has a 3% balance transfer fee.

The 3% balance transfer fee will cost you about $195 to transfer the $6,501 in debt to the card. If you pay $430 per month on the now $6,696 ($6,501 plus $195) balance, it will take you 16 months to pay off the card, and you’ll spend $0 in interest. In this scenario, the $195 balance transfer fee is well worth the cost!

While not everyone will benefit from a balance transfer card, it can be a great way to manage your interest rate while making payments. The most important part is to stay consistent with payments and not add to the balance while paying it down.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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Yes, Costco sells precious metals. See if buying silver coins at Costco is a good investment. [[{“value”:”

Costco is a great place to buy $1.50 hot dogs, $5 rotisserie chickens, and…rare silver coins? The warehouse retailer recently offered a special price on packages of twenty-five (25) 1 troy ounce 2024 Canada Maple Leaf Silver Coins, 99.99% pure silver. Priced at $679.99 per 25-count package, the Costco silver coins sold out fast.

This is not the first time Costco has sold precious metals. The company also recently offered special members-only pricing on $2,000 gold bars.

Should you buy silver coins at Costco? Let’s see if Costco’s silver coins are really a good deal for coin collectors or precious metals investors.

Costco silver coins: Are they a good deal?

Let’s compare the price of Costco’s silver coins to silver spot prices. As of March 13, 2024, silver spot prices were about $24.16 per ounce. The Costco silver coins are one ounce each, in a package of 25 coins for $679.99, or about $27.20 per 1-ounce coin. This means the Costco coins cost $3.04 more per ounce, compared to silver spot prices.

What about the price of other Canada Maple Leaf Silver Coins? Another online retailer offers the same type of Canadian Silver Maple Leaf Coins (one Troy ounce each, 99.99% silver) for $32.95 per coin. Costco’s silver coins are about $5.75 cheaper per coin — about a 17.5% discount compared to this other coin retailer’s price.

Downsides of Costco’s silver coins

Unfortunately for silver investors and coin enthusiasts, Costco’s silver coins did not get rave reviews from all customers. The coins only have a 3.3 star rating on the Costco website — not because of flaws in the coins, but bad packaging and shipping. Several Costco silver coin customers complained that the packaging was faulty, with broken seals, and that their coins had spilled out of the protective tubes. Some said their coins were scratched and damaged, and others questioned whether they could still be assured of the authenticity of the coins, which were promised as having “brilliant uncirculated finish.”

If you are a coin collector or silver investor and it’s important for your coins to have the highest standards of quality and true “mint condition,” buying silver coins from Costco or other online retailers could pose some risk. Costco advertised the silver coin deal as non-refundable and not eligible for price adjustments, so it’s not clear whether any of the unhappy customers were compensated for their bad experience with the coin packaging.

How to decide if investing in silver is a good strategy

People invest in gold, silver, and other precious metals for a wide range of reasons. Some people love to collect beautiful gold bars, silver coins, and other valuable objects — Costco’s gold bars were truly gorgeous; I had to stop and zoom in on the photos a few times. It’s understandable why gold has been in demand as a collectible item for millennia — in royal palaces and more humble homes.

During times of economic uncertainty, some investors also turn to precious metals because they believe these commodities can be an enduring store of value. Even if high inflation takes away the value of a dollar, precious metals investors believe that gold and silver will tend to retain their value as a store of wealth. For example, there’s an old saying among gold investors that “at any time in history, an ounce of gold has been able to buy a nice men’s suit.”

Is silver a good investment compared to buying stocks? Let’s look at the price of silver vs. the S&P 500 for the past five years.

Precious metals are like any other investment category: sometimes they go up, sometimes they go down, and sometimes they go sideways. Gold and silver are pretty to look at, and could be worth including in a diversified portfolio, but there’s no inherent reason why silver or gold should be considered a “better” investment for the long term than just buying stocks and bonds. Gold and silver don’t pay dividends like stocks, they don’t generate income like bonds, and they’re not FDIC insured like CDs and savings accounts.

And investing in precious metals like silver can also bring a few special risks and downsides: you have to store your silver coins somewhere. What if your silver coins get lost, damaged or stolen? Or worse: what if the company that’s selling silver to you is also stealing from you?

Unfortunately, some precious metals investors have been victims of precious metals fraud in recent years, where unscrupulous merchants and dealers have cheated them out of their money with bogus sales pitches and big promises. Precious metals are not the only type of investment where this could happen. But if some sales person is promising you “guaranteed returns” on an investment, trying to get you to sign up for complicated financing or trading terms you don’t understand, or hitting you with high-pressure sales tactics, just hang up the phone and walk away.

The collectible coin market is unregulated, highly speculative, and involves risk — and like all investments, past performance is no guarantee of future results.

Bottom line

Costco made headlines for offering a unique deal on silver coins — but the story also shows why investing in silver coins can be risky for your personal finances. If you love collecting coins and you believe in precious metals as an investment category, then Costco silver coins could be a good deal. But beware of the risks and downsides of this or any investment.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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Have kids and a job? Read on for some tips that might save you money big time. [[{“value”:”

Being a working parent is no easy feat. Not only do you have to manage the demands of your job, but you also have to grapple with what could be some pretty hefty child care expenses.

The silver lining, though, is that there are several steps you can take to eke out tax savings. Here are a few to look at.

1. Contribute to a dependent care FSA

Many people are familiar with flexible spending accounts, or FSAs, in the context of healthcare. A dependent care FSA lets you set aside pre-tax dollars for child care costs, which include daycare tuition, after-school care, and summer camp.

This year, as has been the case in recent years, you can put up to $5,000 into a dependent care FSA if you’re a single parent or are married and filing a joint tax return. If your tax status is married filing separately, that limit is $2,500.

Basically, if you’re married and spend $5,000 or more on child care, you can allocate $5,000 to a dependent care FSA and then avoid paying taxes on $5,000 of income. If you’re in the 24% tax bracket, that saves you $1,240.

2. Claim the Child and Dependent Care Credit on your taxes

A tax credit is a dollar-for-dollar reduction of your tax liability. And the Child and Dependent Care Credit is a credit you can claim if you paid for care for a child under age 13 in your household.

Calculating the credit is a little tricky. You can claim a percentage of your child care costs of up to $3,000 for one child, or up to $6,000 for two or more children for the 2023 tax year. The percentage of these totals hinges on your income and ranges from 20% to 35%.

But as an example, let’s say you have a 6-year-old and a 9-year-old whose camp tuition costs a total of $7,000 in 2023. And let’s say your household income is $80,000. In that case, you can claim 20% of $6,000, or $1,200.

3. Don’t forget about the Child Tax Credit

The Child and Dependent Care Credit only allows you to claim the cost of care for children under age 13. But if you have older kids, you’re not out of luck. The Child Tax Credit allows you to claim up to $2,000 per child in your household under the age of 17.

To be clear, this isn’t a credit that’s reserved for working parents. You can claim this credit on your tax return regardless of whether you pay for child care or not. However, higher earners may not get to claim the credit in full, as it phases out for singles with an income of over $200,000 and married couples with an income of over $400,000.

Juggling a job and children is not a simple thing. The good news, though, is that there may be certain tax breaks available to you to ease the burden of having to pay for care — and to cover the cost of raising your children.

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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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Younger workers have adopted a key retirement savings plan. Read on to see why you should, too. [[{“value”:”

When you’re on the younger side, saving for retirement may be the sort of thing you don’t really think about. And that’s understandable.

Many 20-somethings these days, for example, are focused on building emergency funds and paying off educational debt. So it’s easy to see why retirement savings might fall by the wayside.

Recent data from Fidelity, however, shows that Roth IRA participation for Gen Zers rose 50% during the fourth quarter of 2023 compared to the fourth quarter of 2022. And if you’re able to save for retirement, it pays to consider a Roth IRA.

Set yourself up for benefits down the line

One reason some retirement savers like traditional 401(k)s and IRAs is that they give you an upfront tax break on your contributions. If you contribute up to the allowable IRS limit — $7,000 for an IRA this year ($8,000 if you’re 50 or older) or $23,000 for a 401(k) plan ($30,500 if you’re 50 or older) — every dollar you put into your account represents a dollar of income the IRS can’t tax you on. (Note that these limits are the same whether it’s a traditional savings plan or a Roth.)

With a Roth IRA, you don’t get that same benefit, because contributions are made with after-tax dollars. A $1,000 Roth IRA contribution won’t exempt any income from taxes, for example. But with a Roth IRA, you get to enjoy tax-free investment gains and tax-free withdrawals in retirement.

With a traditional retirement plan, investment gains are tax-deferred, so you don’t owe the IRS money year after year per se. However, you pay taxes on those gains when you take withdrawals, which are subject to taxes. And that can be stressful in retirement, when you’re living off of your savings.

Another benefit of Roth IRAs is that they don’t impose required minimum distributions, or RMDs, whereas traditional retirement plans do. RMDs force you to remove a portion of your retirement account balance each year or face a costly penalty. They’re a problem if you’re someone who has the goal of passing down a lot of that money to heirs.

And even if not, the reality is that you’re working hard to save for retirement. Shouldn’t you be the one to decide when you take withdrawals? With a Roth IRA, that’s not something to worry about.

Should you choose a Roth IRA for your retirement savings?

If you don’t make such a high salary and are therefore in a pretty low tax bracket, then a Roth IRA makes a lot of sense. The reason? Let’s say you’re single and earn $42,000 a year. That puts you in the 12% tax bracket. This means you’re not giving up a very big tax break by funding a Roth IRA over a traditional one.

With a $1,000 traditional IRA contribution, your immediate tax savings are $120. But what if you end up in a much higher tax bracket in retirement between retirement plan withdrawals, Social Security, and other income sources you might have at your disposal? In that case, you’d want to enjoy tax-free treatment of your money at a time when the benefits are highest.

Plus, we don’t know what tax brackets will look like down the line. But let’s say you end up in the 22% tax bracket as a retiree. In that case, a $1,000 Roth IRA withdrawal saves you $220 in taxes. So it’s worth giving up a $120 tax break now for $220 in tax savings later.

Another thing you should know is that higher earners generally can’t fund a Roth IRA directly. But you need a pretty high income for that to be the case. Roth IRA contributions start to phase out with an income of $138,000 for singles or $218,000 for married tax filers. And if your income is too high for a Roth IRA, you can actually contribute to a traditional one and then convert it to a Roth if you want to (known as a backdoor Roth IRA). There are tax implications to consider, though, so it’s best to consult a professional before doing a conversion.

All told, Roth IRAs offer a lot of benefits and are easy to open with a brokerage firm. It pays to consider saving at least some of your retirement funds in one of these accounts.

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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.Maurie Backman 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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