Money Management

It’s a tough time to buy a home. Don’t make things worse on yourself by falling victim to these mistakes. 

So far, 2024 is shaping up to be a tricky time to buy a home. Not only are property values elevated, but there still isn’t a lot of inventory to choose from.

If you’re looking to buy your first home in 2024, you might get overwhelmed by today’s tough market. And that might cause you to fall victim to certain pitfalls you’re better off avoiding, like these.

1. Not checking your credit score before applying for a mortgage

As of this writing, the average interest rate on a 30-year mortgage loan is 6.66%, according to Freddie Mac. But that doesn’t mean you can’t snag a better rate. Whether that’s possible or not, though, will depend on your credit score.

In a nutshell, your credit score tells mortgage lenders how much risk they’re taking on by loaning you a large sum of money for a home purchase. The higher your score, the more comfort lenders get, which is why it’s so important to see what your score looks like ahead of your mortgage application and take steps to boost it if it could use work.

You can raise your credit score by paying bills on time, paying off credit card balances, and correcting errors that may be lurking on your credit report.

2. Not shopping around with different lenders

The interest rate one mortgage lender offers you may be quite different from the rate another lender offers. It’s a good idea to shop around with different lenders, rather than accept the first mortgage offer you get.

And during that shopping, don’t just look at interest rates. Consider the terms of each loan agreement. One lender may impose much higher closing costs than another, leaving you to pay higher fees to put your mortgage in place.

3. Assuming you can’t negotiate your home’s purchase price

Because there’s not a lot of housing inventory to choose from these days, you might assume that you have to pay whatever listing price a given seller puts out there. But that’s not automatically true.

If you’re buying a home that clearly needs work, you and your real estate agent can devise a strategy to negotiate the price downward. Similarly, you may be able to get a seller to come down on price by being very flexible with your closing date — for example, being willing to put it off if your seller wants more time to move.

You may have a seller with school-aged kids whose home you make an offer on in March. That seller may prefer to stay put until June, when the school year ends. Agree to that rather than an earlier closing, and it could be your ticket to a bit of money off of your purchase price.

4. Underestimating repair costs

At a time when there’s a pretty notable lack of real estate inventory, you may have to compromise on the home you buy. And that could mean purchasing a place that needs some work.

But if you’re going to do that, try to get an estimate of what it’ll cost to fix that home up before moving forward. You may be able to afford the mortgage payments and associated costs of a given home based on its listing price. But if you also need to spend $20,000 your first year in that home to get it into livable condition, that might bust your budget in a serious way.

Buying a home in today’s market can be a daunting experience — whether you’re a first-timer or not. But if you’re new to homeownership, make sure to avoid these mistakes as you go about your home search.

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If you’re age 50 and over, you can use 401(k) and IRA catch-up contributions to, well, “catch up” on your retirement savings! See how to save more in 2024. 

If you’re middle aged, hopefully your career is going better than ever. People tend to earn more money as they get older, and for many people, their 40s and 50s are some of their peak earning years. If you’re 50 or over, it’s especially important to take advantage of the opportunity to save for retirement.

A recent survey from the MIT AgeLab found that “Midlifers” have a strong desire to retire. In fact, 74% of people in their 50s said that being able to retire is extremely important to them, but only 57% actually expect to be able to retire. People in middle age are often struggling to balance a lot of competing financial demands. At age 50, you might be trying to save for college for your kids, caring for older adult loved ones, or dealing with the costs of raising children. It’s all too easy to neglect your own retirement savings while caring for everyone else in your life.

If you’re turning 50 in 2024, you need to know about one simple money move that could supercharge your retirement savings. Not everyone will have enough extra cash flow in their budget to make this move. But if you can do it, you’ll be more likely to retire in comfort.

Let’s see what this one retirement savings move is all about.

Supercharge your retirement savings with catch-up contributions

If you have a 401(k) or other qualified retirement plan at work, and you’re age 50 or older, the IRS wants to encourage you to invest for retirement. It’s called a “catch-up contribution.”

With a catch-up contribution, people ages 50 and over are allowed to put an extra $7,500 into their 401(k) for 2024. The regular limit on 401(k) contributions is $23,000. So with the extra catch-up contribution money, that means that if you’re age 50 or over, you can put a total of $30,500 of your salary, pre-tax, into your 401(k) for 2024.

Catch-up contributions are also available for traditional IRAs and Roth IRAs. For 2024, people age 49 and younger can put $7,000 into IRAs (Roth and traditional combined). People age 50 or over can make an extra $1,000 catch-up contribution, bringing their IRA total to $8,000 for 2024.

Keep in mind that if you or your spouse also have a 401(k) or other retirement plan at work, some income limits apply when using traditional IRAs and Roth IRAs. If you’re a higher earner, you might not be able to use a Roth IRA or get a tax deduction on all the money you put into your traditional IRA in 2024.

Who should use catch-up contributions to save for retirement?

If you’re a higher-income “Midlifer” in your 40s and 50s, socking away more money for retirement is a good strategy. You should consider maxing out your 401(k) and other retirement accounts during your peak earning years. Every dollar you put into your 401(k) in 2024 doesn’t count toward your taxable income in 2024. Maxing out your 401(k) can help reduce your adjusted gross income (AGI) that helps you qualify for a tax-deductible traditional IRA or Roth IRA.

Here are a few examples of how high-earners at age 50-plus can maximize retirement savings (and tax savings).

Bill and Karla, both age 50, married filing jointly

Bill is age 50 with a salary of $125,000, married to Karla, also age 50, with a salary of $40,000. In 2024, Bill can put a total of $30,500 of salary into a 401(k). This reduces Bill’s W-2 wages for tax purposes to $94,500. And Karla puts $8,000 into her 401(k), leaving W-2 wages of $32,000.

After those 401(k) contributions, Bill and Karla have a combined adjusted gross income (AGI) of $126,500. They want to put extra money into a traditional IRA — and they can. But with that level of income, Bill and Karla won’t get a tax deduction for all of their IRA contributions. Their combined income of $126,500 puts Bill and Karla in the tax deduction “phaseout range” for a traditional IRA ($123,000–$143,000 of income for married couples filing jointly).

Bill and Karla can still put up to $8,000 each into a traditional IRA for 2024, but not all of that money will be tax-deductible. Or they can put up to $8,000 (for each spouse) into Roth IRAs — the income limits are higher.

Jamal, age 50, single

Jamal is single, age 50, with a salary of $107,000. If he saves aggressively, Jamal can put the full $23,000 plus $7,500 catch-up contribution into his 401(k) for 2024. This brings his AGI down to $76,500. Having an AGI below $77,000 means Jamal is eligible to make fully tax deductible contributions to a traditional IRA — he could put an extra $8,000 into an IRA for 2024, and reduce his taxes even more.

Higher-earning single filers should also consider a Roth IRA, because there’s a higher income limit to contribute to a Roth. If you’re single and have a retirement plan at work, and your adjustable gross income income is less than $146,000, you can make a full $8,000 contribution to a Roth IRA for 2024.

Bottom line: If you’re a higher-income “Midlifer” who wants to save aggressively for retirement, making catch-up contributions after age 50 is a great way to do it. Catch-up contributions to your 401(k) and traditional or Roth IRAs can help you boost your retirement investments and maximize your peak earning years.

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82% of millennial home buyers report having one significant regret regarding the decision to buy. If that sounds like you, find out what you can do. 

It is estimated that a human makes up to 35,000 decisions each day. We must decide on everything, from whether we’re skipping breakfast to which podcast we’ll listen to on the way to work. And the sneaky thing is, some truly monumental decisions are hidden within all those tiny decisions.

As we decide whether we want to make an offer on a home, we’re also deciding if it’s cool enough outside to wear a coat and if we should feed the dogs before leaving the house. It’s easy to make a decision we later regret. You have options if you’re among the new homeowners who regret getting a mortgage and buying your current home.

Make a list

Having moved into a new home in the summer of 2022, I feel your pain regarding disappointment. My husband made the purchase while I was in another state selling our old home, so the first time I saw our new house was the evening I moved in. He purchased a home that was mechanically sound but quite unattractive.

Given that this wasn’t my first rodeo, I knew the drill. I sat down and wrote out a “dream list.” It included everything I wanted to do to change this house. I knew we couldn’t do it all at once, but I felt better knowing I had a long-term plan.

If you look around your new home and wonder what in the world you’ve gotten yourself into, draw up a list of the things you’d like to change. Tackle one at a time as your checking account allows.

Treat your home as a business decision

You probably applied with a mortgage lender and bought a home, in part, because you thought it would be a good investment. And you got that right, but only if you dial back the emotion and treat the property as a business decision — and that means not selling too soon.

Real estate experts say you should aim to stay in your house for at least five years before selling. On average, that’s about how long it takes to make up for the closing costs and mortgage interest paid.

If you’re a first-time buyer, it would be easy to believe that the value of your property will continue to increase as home prices have over the last few years. However, you can’t count on that. The table below gives you an idea of the rate at which home prices increased before the pandemic and since the beginning of COVID-19 lockdowns.

Since no one knows when home values are going to slow, you may want to err on the side of caution. If you decide to sell down the road, wait long enough to make a profit on your investment.

Fake it

Experiencing regret does not have to mean you’re miserable. Build memories in your perfectly imperfect home by hosting family functions, inviting friends over for a game night, and spending time doing the things you enjoy. If you love being outdoors, plant a small garden. If you’ve always wanted to learn to play guitar, now’s the time. In short, find activities that make you smile.

In a somewhat surprising study, Sanford research scientists found that even faking a smile makes us feel happier. The effect may not be enough to overcome depression or other medical issues, but it does lift our spirits.

Even if you’re determined to sell the house as soon as possible, use this time to fill it with memories you can look back on fondly.

Know you’re not alone

Having critical thinking skills sometimes leads to questioning your own decisions. If you’re pretty sure you made a mistake, keep in mind how normal your reaction is. A RealEstateWitch.com survey found that of millennials who own a home, 82% report having at least one significant regret related to their home purchase.

The early-20th-century writer Katherine Mansfield called regret “an appalling waste of energy” because you can’t build on it. However, that doesn’t mean you’ll never experience it. If a home purchase is your current regret, I suggest you take it on as a challenge. Make a list of what bothers you about the home, and then one by one, tackle those issues.

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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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Costco is a great place to find deals on lots of items, but it might not be ideal for treadmills. Here’s why. 

If you like to run but aren’t so keen on heading out into the elements, adding a treadmill to your home gym could be an excellent investment. And yes, I used the word “investment” on purpose here, because quality treadmills are not cheap.

(In my experience, a cheap treadmill is worse than no treadmill.)

Folks who are financially conscious and Costco fans might think, “Hey, I bet Costco has some good deals on treadmills!” Unfortunately, you’re only kind of right.

The prices are good — the selection is not

Those competitive prices for which we all love Costco definitely are there for the treadmills. The Costco prices were quite a bit lower than competitors on the models I researched. However.

The selection is very sparse. As of writing, Costco has three treadmill listings on Costco.com, from just two manufacturers. (Chances are good your local warehouse has fewer than that.)

To be fair, limiting your options is pretty true to Costco’s style. It’s part of how it keeps overhead costs down.

But we’re not talking about only offering two brands of almonds; almonds are pretty much almonds. Treadmills are four-figure purchases that can have hundreds of variations in features and function. You’re probably going to need to compromise some of what you want if you’re limiting yourself to a choice of three models here.

Credit card options are also limited

So, this one might be an issue more for people like me who take their rewards maximization way too seriously. But it’s a big pet peeve, so here’s my soapbox.

Unlike most other major companies, you can’t use just any old credit card at Costco. No, if you want to use a credit card in a Costco store, it has to be a Visa card. Online is a little better; there, you can also use Mastercard credit cards.

But my beloved Amex rewards cards? Nope. You can’t even use Discover credit cards.

As someone who tries to turn every big purchase into a welcome bonus opportunity, I dislike credit card restrictions. If I’m going to buy a $4,000 treadmill at Costco, it would be nice if I could use whichever credit card gives me the best return.

Delivery and installation problems seem common

Even if one of Costco’s three options is good enough to meet your needs, you still need it to get from the warehouse to your house. Then, it needs to go from being in pieces to being in one piece.

The two ProForm treadmills on Costco.com both include delivery, assembly, and package removal. Which, at first glance, sounds great.

But according to the reviews, not so much. From missing parts to incorrect assembly, many reviewers had issues with something before even using their treadmills.

Some of the issue seems to be on the manufacturer, some of it on whatever company Costco contracts with to fulfill delivery and assembly. Either way, you’re now going to have to get your money back.

Plus side: Costco’s return policy is great

Other than price, the return policy is the main reason you’d want to buy a treadmill, or other major fitness equipment, from Costco.

Essentially, you can return anything to Costco for any reason at any time. Alright, it’s not quite that broad. There are exceptions, such as for major electronics and kitchen appliances, tobacco and liquor, custom items, and so on. But treadmills don’t fall into any of those categories.

So, Costco’s regular, generous return policy applies to treadmills. And since I’ve heard stories of people returning items to Costco years after purchasing them, that policy really is a valid reason to shop there.

Whether it’s valuable enough to make up for the limited selection, annoying restrictions, and potentially frustrating delivery/assembly… well, only you can really decide that.

If you’re still undecided about buying your own treadmill, but still want to get fit, maybe joining an affordable local gym would be a better way to get started. That $1,000 you don’t spend on a home treadmill could pay for many, many years of gym membership fees.

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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.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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It costs a minimum of $60 per year for a Costco membership. Read on for a list of questions to answer before joining this year. 

Costco is a warehouse club beloved by many. Not only are its prices affordable, but it also has products that people really enjoy buying, including its famous $1.50 hot dog and soda combo and its line of Kirkland Signature branded products.

If you aren’t already a Costco member, you may be thinking about becoming one in 2024 so you can take advantage of all that this warehouse club offers. But before you move forward, there are a few key questions to answer first.

1. Is there a warehouse club near you?

Costco has 871 locations across the U.S., but that doesn’t necessarily mean everyone has a warehouse club close to them. Be sure to use the Warehouse Locator to find out where your closest Costco is before joining.

Research shows that the average consumer only travels about eight minutes from home to their grocery store. So it may be too much of a pain to go to Costco often enough to justify a membership if your nearest store is 45 minutes away.

2. Will you shop at Costco enough to justify the membership fee?

The cheapest Costco membership will run you $60 annually, so you’d need to shop at the warehouse club enough to save at least that much per year to break even on your membership.

This breaks down to about $5 per month for the cost of membership. If you shop at Costco every month or get gas there on a monthly basis and save $5 per trip on fuel or other products, then joining would be worth it.

It’s pretty easy to save $5 a month at Costco. Filling up your gas tank there about twice a month would do it, while switching to buying just your bread, eggs, and milk at Costco alone could save you more than $5 a month compared with other grocery stores like Stop & Shop.

3. Will you use up bulk purchases before they go bad?

Costco’s big savings come from buying in bulk. Unfortunately, if you can’t use up the items before they go bad, you won’t really end up saving money; you’ll be tossing some of the items you purchased in the trash.

You’re more likely to be able to use up bulk Costco purchases if you have a large family. If you don’t, then unless you can share items with friends or are primarily interested in buying non-perishable items with a long shelf life, then a Costco membership may not make sense.

4. Do you prefer to shop with manufacturer coupons?

If you like to keep your credit card bills down by using manufacturer coupons, joining Costco isn’t the right move. The warehouse club does not accept them.

There’s no sense in joining the warehouse club if you buy most of your household items with coupons that help bring prices down to be at or below what Costco is charging. For example, combining manufacturer coupons and drug store deals can often make it possible to get items like free toothpaste at drug stores. Costco isn’t going to beat $0.

5. Are you OK with in-store shopping or do you prefer online only?

Finally, think about whether you’re going to shop in person most of the time. Costco’s online prices are higher, so you won’t be able to benefit from the best deals if you like to order your stuff over the Internet.

Plus, Costco allows non-members to shop online for a 5% surcharge. Unless the surcharge you pay ends up adding up to more than the $60 membership (which would happen only after you spent at least $1,200 a year at Costco.com), you may be better off just paying it rather than becoming a member if you won’t be setting foot in your local warehouse store.

By considering these factors, you can decide if joining Costco makes sense for your personal finances. If you’ll be visiting the club often, it’s close to you, you don’t regularly clip coupons, and you’ll save at least $5 a month, then join. Otherwise, pass up your Costco membership and look for other ways to save on household items (like using those coupons!).

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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My home closing almost didn’t happen because of an unforeseen issue on my end. Here’s what happened, so you can avoid the same mistake. 

Last month, I closed on the purchase of a home. I had been waiting for months to officially buy the house and own the property, so I was excited to finally become the legal owner. Unfortunately, on the morning of the closing, I discovered an issue on my end that almost made it impossible to move forward on that date.

Here’s what happened.

This unexpected issue almost derailed my closing

On the day of my closing, I received the information from the title company about the amount of money that I had to send over. My mortgage lender had delivered most of the funds, but I was also making a good-sized down payment and covering closing costs and transfer taxes.

And here’s where the problem came in. When you close on a mortgage, you can’t just write a check or Venmo the cash over. You need to do a wire transfer so your bank transfers your funds directly into the account of whomever is overseeing the closing (usually a title company or a lawyer). But when I signed into my bank account and went to transfer the money, I wasn’t allowed to do that. The bank apparently had a $25,000 daily limit for wiring money using an online request.

I was unaware of this limit as no other bank I’ve ever used has imposed these requirements. And unfortunately, I’m not the only one who has run into a snag because of this, as there are complaints on Reddit about discovering this problem and almost having their home sale derailed because of it.

Here’s why this is such a big problem — and how you can avoid it

Unfortunately, fixing this issue isn’t necessarily simple. I was lucky that I happened to be close to a local branch and I was able to get a same-day appointment with a banker who manually processed the transfer for me (which took a long time and was quite stressful). But not everyone has a bank branch near them or can get an appointment right away.

It’s important to remember that all of the numbers for closing are calculated very precisely based on factors like the number of days of interest due on the loan and the number of days of homeowners association fees and taxes that are being paid by the prior owner versus the current owner. So if you can’t close on the pre-established day, it can be a big deal to re-do all that. Plus, you don’t take ownership of the house until you close, so if you had movers planned and intended to get into your new home right away, you might not be able to.

To avoid this issue, you’ll want to get in touch with the bank where you have your funds well before closing day. Find out how much you’re allowed to wire out and how the process works. This way, when the time comes for you to move your money over, you’ll be able to do it without all the stress I endured — or without your closing ending up off schedule.

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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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