Money Management

If you contribute the maximum amount to your IRA this year, you can set yourself up for a more secure retirement. Learn how to do just that. 

Investing using an individual retirement account (IRA) can help you be a wealthier retiree. IRAs are great because you can open an account with any brokerage firm and usually have a choice of way more investments than if you put your money into a 401(k). You can also claim a tax deduction in the year you make your contribution if you choose a traditional IRA, or can make tax-free withdrawals if you choose a Roth IRA (although you won’t get that upfront deduction with that option).

In 2024, the amount you are allowed to contribute to these tax-advantaged accounts has gone up. While you could contribute a maximum of $6,500 in 2023, you’re allowed to put up to $7,000 into your IRA account in 2024. If you are age 50 or over, you are also eligible to make an additional $1,000 catch-up contribution.

If you want to make the most of these accounts, here are a few simple steps to take that will enable you to max out your IRA.

1. Make sure you’ve earned any 401(k) match first

Although IRAs offer benefits over a 401(k), including more flexibility in investment options, you still want to make sure you are putting enough into a 401(k) to earn your full employer match before switching your retirement account contributions to your IRA.

An employer match is free money, although you have to contribute to your account to get it. If your employer matches 100% of contributions on up to 4% of your salary and you make $45,000 a year, you could get as much as $1,800 in free money as long as you invested that amount in your workplace plan. Don’t pass that up — put your money into your 401(k) first to get that match.

2. Choose the right kind of IRA

If you’ve got your 401(k) matching contributions earned and want to invest in an IRA but don’t yet have one open, you’ll have to decide which account type is right for you. The $7,000 contribution limit applies to both Roth and traditional IRAs. You can invest that much total across both accounts, although you can split the amount any way you want.

Roth IRAs provide a tax break later, allowing for tax-free withdrawals as a retiree, so can be a better option if you think your tax rate will be higher in the future. Traditional IRAs provide a tax break in the year you contribute but you do pay taxes as a retiree on withdrawals. So these are a good choice if you think you will be in a lower tax bracket as a retiree.

You can open both types of accounts with most brokerage firms, so which one you choose is just a matter of personal preference.

3. Decide how much to contribute each month

Next, you’ll need to decide how much to contribute each month. It’s easiest if you just break the big goal of a $7,000 (or $8,000) contribution down into monthly goals. So, you could invest either $583.33 per month or $666.67 per month if you’re eligible for catch-up contributions.

This may not work for everyone. For example, you may want to jumpstart your IRA investments by depositing your tax refund into them and then investing a smaller amount each month. The important thing is to set a specific goal for when the money will go in.

4. Automate your contribution

Once you’ve decided how much to contribute and when, the next step is to automate the process. Arrange to have the funds taken directly from your checking account. So, if you plan to contribute $583 per month, you could have that entire amount auto-transferred from your bank to your brokerage firm on payday, or split it and have $291.50 transferred over each payday.

By automating your contributions, you’ll make sure you never miss one and will hit your goal of maxing out your IRA.

5. Don’t forget to pick your investments

Finally, once your money is in your IRA, you’ll usually have to buy investments with it (except in limited cases, like if you are using a robo-advisor). So don’t forget to sign into your account and choose what to do with your money. For many people, the simplest option is to just set up automatic purchases of an S&P 500 ETF. The S&P 500 tracks the performance of the market and consistently earns around 10% average annual returns over time.

By taking these five steps, you can max out your IRA contributions and be well on your way to a more secure retirement.

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Love nature? You may want to consider an annual pass to the national parks system. Keep reading to learn more about what it costs and what it gives you. 

If you’re someone who loves to travel, one thing you should know is that you don’t need to go overseas to enjoy breathtaking views and scenery. The country’s national parks system features hundreds of parks with amazing views and colors (depending on the time of year) that could really take your breath away.

The best part? Visiting a national park has the potential to be a low-cost endeavor — if you plan ahead. One thing you may want to do is purchase an annual national parks pass. For $80, you’ll gain access to any national park or recreation area that normally charges a fee.

But is that $80 worth it? Well, it depends.

A great value for those looking to visit multiple parks

There are 109 national parks that charge an entrance fee. In most cases, you’ll pay that fee on a per-vehicle basis. The cost generally ranges from $20 to $35. What this means is that if you’re looking to visit multiple national parks in the same year, an annual pass might pay for itself in just three visits, depending on your specific destinations.

And remember, you only need one annual pass per household if you’ll be traveling together in the same car. So all told, you’re not looking at a particularly large credit card tab.

Make sure you can put your pass to good use

Any time you buy something you don’t use, you’re throwing your money away. The same holds true if you spend $80 on a national parks pass but only use it once, or don’t use it at all.

Now, you might think you’ll get great use out of your pass. But one thing you should know is that visiting some of the more popular national parks can be challenging. Certain parks, due to their popularity, require you to reserve a timed entry.

Colorado’s Rocky Mountain National Park is one of them. So if you’re hoping to visit in 2024, you’ll need to plan your trip ahead of time or otherwise risk not being able to visit the park when you want to. If you’re someone who prefers to hop in the car at the last minute on a road trip, you might hit a snag with parks that require advanced reservations.

Also, you may find it challenging to visit certain national parks at a time when the weather is optimal. That’s because the crowds can be a huge turn-off. And even if you’re not required to make a reservation ahead of time, you may arrive at certain parks during the peak season only to find that there’s no parking available.

A number of national parks are located in remote parts of the country where lodging is either expensive, limited, or both. So once again, you may be in a position where you need to either commit to a trip far in advance or risk not being able to visit your parks of choice due to a lack of accommodations.

Also, while an annual national parks pass is relatively inexpensive, lodging near certain parks can be the opposite. Compounding matters is that you may not find as many large hotel chains in certain remote areas adjacent to national parks. If your plan is to bank your hotel points for a free stay, that may not work for a national park trip.

All told, a national parks pass could be a solid purchase in 2024. But it’s important to research what it means to visit different parks and plan your trips in advance. Your best bet is to do that research before investing in a pass so you don’t end up throwing your $80 away.

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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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Buying a house is a major life milestone. Watch for these four signs that suggest you’re ready for it, so you don’t end up making a mistake you’ll regret. 

Buying a house is one of the best things I ever did, both personally and financially. I love having a place to call my own and decorate the way I want. And I’ve been pretty lucky and my homes have gone up in value after I’ve bought them in the past.

I’m not the only one who has benefitted from homeownership. Property owners tend to have higher net worths than renters, although some of that is because people who are wealthier in the first place tend to be in a better position to buy a house.

None of this means buying a house is always a good idea, though. The reality is that if you aren’t financially ready, the dream of homeownership can turn into a nightmare because a mortgage can become unaffordable. This can lead to an inability to accomplish other important financial goals or worse, like losing your home to foreclosure.

If you’re thinking of buying in 2024, be sure to check for these signs you’re ready so you can make sure homeownership is actually the right choice for you.

1. Your credit is in good shape

It is possible to buy a house with a low credit score, especially if you get a government-backed loan. For example, you can get an FHA loan with a score as low as 500. But just because you can get a loan even with imperfect credit doesn’t mean doing so is the right choice.

The table below shows what rates you could expect to pay — and what monthly payments your loan would come with — if you were buying a $400,000 home using a 30-year mortgage at the national average mortgage rate as of mid-January 2024.

As you can see, buying a home with imperfect credit costs a whole lot more. So, before you move forward, you’ll want to try to aim for a reasonably good credit score. You can do that by taking steps like paying down loan balances or asking creditors who you’ve generally been a good customer with to voluntarily remove old negative information from your record.

If you have a pretty good credit score, though (ideally at least 700), then this is a good sign you’re ready to buy.

2. You have a down payment of at least 10%

Some mortgage lenders don’t require money down or let you put down a small sum, like 3% of what your home is worth. Taking advantage of these options usually isn’t wise, however.

Mortgages with lower down payments cost more because you’re a riskier borrower, so you will generally pay a higher rate. Plus, you’re borrowing (and paying interest) on a larger sum. And an even bigger problem is that you may not be able to afford to sell or refinance if you need to and you made a low down payment.

See, there are huge costs of selling a house, with real estate commissions alone usually running you around 6%. If you don’t make a solid down payment, you risk ending up owing more than you could get for your home. You could be trapped unless you can bring money to the table or can get your lender to agree to a credit-damaging short sale.

To reduce the chances of ending up underwater on the home loan, try to put down at least 10%. If you can put down 20%, that’s even better since you can avoid private mortgage insurance (PMI) that lenders require to protect them in small down payment loans.

If you have a 10% down payment, though, that’s a green light suggesting you may be ready to buy. Of course, this means if you’re buying a $400,000 house, you’d need about $40,000. You can work on saving more if you don’t have enough by reworking your budget to prioritize your down payment or taking on some extra work. If you do have at least 10% down, that’s a good sign you should move forward.

3. You can afford mortgage payments on homes in your area

You’ll also need to make sure that mortgage payments are affordable for you when buying a home you like in your area. Ideally, you’ll want to keep housing costs below around 25% to 30% of income, including your mortgage payment, property taxes, insurance, homeowners association fees, and other monthly costs.

Unfortunately, recent studies show you’d need to make around $114,627 each year to buy a median priced home in most areas of the country. That could make becoming a property owner very difficult. The good news is, if you can put more down or find a home priced below the median, you may be able to move forward even with less income.

To see if you’ve got the green light, check home prices in your area and use a mortgage calculator to see what you’d pay for those you might be interested in. If you’re coming in under 30% of your income, that’s a sign you can move forward.

4. You aren’t planning to move for many years

Finally, you’ll want to be sure you’re planning to stay in the house for at least two years and ideally more like five. Otherwise, you could find yourself unable to pay all the transaction costs of a sale out of your property purchase and still break even. You’ll need property values to go up enough to cover the costs of buying and selling so you don’t lose money — and it takes time for that to happen.

If you spot these four signs you’re ready to buy, then you may want to call a real estate agent and get the process started soon so you can find the perfect home to call your own in 2024.

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A journey of 1,000 miles begins with a single step. Learn a few tiny moves you can use to get better with money this year. 

A lot of us could surely use more confidence around money. To use the youngest adults as an example, the Ernst & Young Gen Z Segmentation Study from last year found that 52% of Gen Zers surveyed were very or extremely worried about not having enough money — and 39% of them were very or extremely worried about making the wrong choices when they manage their finances.

Luckily, there are small, easy ways to get better with money management — and feel better as a result. Give these a try in 2024.

1. Stay on top of your balances

When it comes to your money, knowledge is power. How much money do you have? And how much do you owe? If you’ve been sticking your head in the sand on this topic until now, 2024 could be the year you stop and face the music instead.

Resolve to check your bank account and credit card balances at least once a week this year. Knowing how much money is in your checking account will help you avoid overdrafts (and see if your bills are coming out of the account like they should be). Keeping an eye on your savings account balance helps you assess the state of your emergency fund or how close you are to your savings goals. And watching your credit card balances can ensure you’re not spending more than you can afford to pay off without incurring interest.

2. Automate saving and investing

Some people like to put their finances on autopilot as much as possible, and I’ll tell you right upfront that I am not one of those people. I have a long (long) history of living paycheck to paycheck, and that has absolutely given me the drive to be more hands-on with paying my bills and moving my money around.

That said, I recognize how much autopay helps people and lessens their stress around money — if you know the rent will be auto-paid, you don’t have to worry about forgetting it or being late. While you can certainly set all your bills to come out of your bank account automatically, if you’re more like me and would prefer to be a bit more hands-on with paying the bills, you still have the option to automate some of your personal finances.

In particular, if you struggle to carve out money to save and invest, it’s worth automating the process. Set up transfers from your checking account to your savings and investment accounts, scheduled for when you get paid. This also falls into “paying yourself first,” which means treating savings like an essential bill that can’t be put off. I do it manually, but I used this technique to save money to buy a house this year — it really, really works.

3. Take a peek at your credit score every month

It might be overkill to check your credit report every month (unless you’re going through a big financial change or suspect you’re the victim of fraud or identity theft). But it’s a darn good idea to view your credit score monthly. FICO® Scores are updated every month, and if you’ve been making some positive financial changes, like paying your bills on time and paying down debt, it can be encouraging to see your credit score climb. But if you see your score slip, you can also investigate to see what went wrong — and how you can fix it.

You want to look at your FICO® Score specifically, because it’s the one used by 90% of lenders. And you can get access to it for free via your bank or a credit card issuer — if not, this is a credit card perk that is absolutely worth pursuing.

Getting better with money is a journey, not a destination. Consider making these small changes to improve your personal finances this year.

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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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Is a home an investment or an expense? It’s complicated. Read on to learn more. 

Homeownership certainly isn’t for everyone. Not only does it mean taking on a huge amount of financial responsibility, but it also means having to commit to a lot of work over time. That’s why it’s really important to buy a home for the right reasons.

In a recent Bank of America survey, 91% of respondents say they view their home more as a valuable investment than as a financial liability. But if you’re looking at homeownership from an investment perspective, you may be looking at it the wrong way.

You can’t count on making money from a home

Some people insist that the reason to own a home rather than rent one is to avoid throwing money away and instead, set yourself up to make money. But that’s really not something you should count on.

Perhaps you’ll buy a home for $300,000 and sell it for $500,000 down the line. Or, you might buy a $300,000 home whose value drops down the line, and you may end up having to sell that home for $280,000. That’s not a financial gain.

Also, it’s important to realize that even if your home appreciates in value, you’re not necessarily making a profit by selling it for a much higher price than what you paid for it. On top of your mortgage and the interest you’re paying on it, you’re also covering the cost of expenses like property taxes, insurance, maintenance, and repairs over time.

Let’s say you buy a $300,000 home and sell it for $500,000 after 20 years. At first, it looks as if you’re making a cool $200,000 profit.

But what if, between property taxes, insurance, upkeep, and repairs, owning your home cost you $15,000 a year during that 20-year period? That means you spent $600,000 on your home all in between its initial $300,000 purchase price and the $300,000 you spent while living there. So selling for $500,000 doesn’t really put you ahead financially.

Buy a home for the right reasons

Some people are excited to own a home because they want the stability of having a place of their own and the opportunity to make their own rules instead of having to listen to a landlord. If that’s your mindset, then by all means, embark on a home search and start contacting mortgage lenders to see if you qualify to finance a home.

But if your goal is to make money, don’t buy a home. Instead, keep renting. That way, you’ll have predictable, fixed monthly costs for the duration of each lease you sign. And you’ll then have an opportunity to invest your money in assets like stocks that might allow you to grow a large portfolio.

Of course, just as you’re not guaranteed to sell a home at a price that’s higher than what you paid for it, so too are you not guaranteed to make money with a stock portfolio. But let’s say you invest $300,000 in stocks over time and your portfolio eventually becomes worth $500,000. In that case, you’re looking at an actual $200,000 profit, because you don’t have to pay property taxes on stocks or spend money to keep them around.

All told, your best bet in the context of buying a home is to think of it as a worthwhile expense. If it happens to make you some money over time, great. But that’s not something you want to bank on.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Maurie Backman has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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