Money Management

As of 2022, 58% of American households owned stocks. This is a higher percentage than ever before. See why it’s good news that more Americans own stocks. 

According to a new Federal Reserve survey reported by The Wall Street Journal, the percentage of Americans who own stocks is at an all-time high. As of 2022, approximately 58% of American households owned stocks — up from 53% in 2019, and up from only about 33% in 1989. This is a big transformation that can tell us a lot about how Americans manage money and invest for the future, and even how people see themselves.

Why does it matter how many Americans own stock? Because it can help us understand overall stock market trends and envision a (hopefully) brighter future for Americans’ personal finances. More Americans owning stock could be a sign that Americans are getting more savvy about investments, are more likely to be on track for retirement, and that more people are sharing in the wealth generated by the world’s most successful companies.

Let’s see why more Americans owning stock could be good news for the economy — and for your retirement savings.

Why it’s good news that more Americans own stocks

For most of the history of the stock market, owning stocks was considered a pastime that was mainly for the wealthy. Back in the 1920s and 1930s, the average American family didn’t have enough money to buy stocks. Even into the 1950s and 1960s, with a growing middle class, most of the average household’s wealth was more likely to be invested in houses or land, not financial assets. A generation or two ago, many middle class people might not have thought of themselves as investors or shareholders.

Two big trends have shifted this mindset. One is the rise of defined contribution pension programs, like 401(k)s, that let employees invest and manage their own money for retirement. And more recently during the pandemic, there was a boom in retail investing with online trading platforms like Robinhood. America is a nation of shareholders now. Millions of Americans have gotten interested in — and invested in — the stock market.

When more Americans own stock, that’s good for the economy in a few ways:

It’s easier for companies to get capital to invest in growth.There’s more money going to stocks of companies that can use it for productive goals, like creating jobs and making innovative products.More Americans owning stock (and boosting their retirement savings) could help relieve the retirement crisis and take pressure off of Social Security.More Americans are likely to share in the wealth created by the stock market.

On that last point: owning stock is not just for rich people anymore. It’s true that most stocks are owned by the wealthiest investors. But lower-income Americans have also seen big gains in their stock ownership since 1989, according to the Federal Reserve survey. As of 2022:

About 40% of Americans in the 20th-39.9th income percentile owned stocks, up from about 15% in 1989About 18% of Americans in the bottom 20% of income owned stocks, up from about 3% in 1989

Why is buying stocks a good idea for your retirement?

If you’re investing for retirement, it’s important to buy some stocks. Investing in stocks means that you own a share of the future profits of the world’s most successful companies. This can be one of the most effective ways to help you build wealth. Although the stock market can be volatile, with big ups and downs depending on the year, month, or day, over the long run, stock prices tend to go up. During the past 50 years, the stock market (as measured by performance of the S&P 500 index) delivered an average annualized return of 9.4%. That’s a better return on investment (ROI) than the best high-yield savings accounts — and it’s lasted for 50 years.

One of the best ways to buy stocks is to put a consistent amount of money into a 401(k), traditional IRA or Roth IRA, or other brokerage account with automatic contributions from every paycheck. This way, you can use dollar-cost averaging to keep buying stocks (or an appropriate mix of stocks, bonds, and ETFs) month after month, year after year.

Owning stocks can be a great way to grow your money, because along with the long-term appreciation (growth) of their share prices, stocks tend to pay dividends to investors. Set up your investment account to automatically reinvest your dividends, and you can quietly turn your stock portfolio into a wealth-building machine.

Bottom line: More Americans own stocks now than at any time in U.S. history. This is good news, because it means that more people might be getting savvy about investments, and sharing in the profits created by the stock market and the world’s most successful companies. Investing in stocks for the long term is often one of the best ways to save for retirement and grow your wealth.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More 

Traveling to more affordable places is a great way to stretch your travel budget. Check out an easy trick to find cheap destinations. 

Flights are one of the biggest travel expenses. But how much they cost is highly dependent on where you live and where you’re going. If you’re flexible about where you vacation, it’s much easier to get cheap flights, and there’s an easy travel hack you can use to find them.

Instead of plugging in destinations, try an “everywhere” search. This will show you destinations you can visit from your home airport and how much they cost. According to Skyscanner’s Travel Trends 2024 Report, 1 in 2 travelers who come to Skyscanner use this option. You can find incredible deals this way — for example, one traveler booked a round-trip flight to Santiago, Chile for just $221!

If you have specific travel plans, such as a winter vacation to Puerto Vallarta, then an “everywhere” search won’t work for that. But if you’re the adventurous type and are hoping to save on your flight, it’s an option worth checking out.

How to do an “everywhere” flight search

Many airfare search sites let you explore destinations, including Google Flights, Skyscanner, and Kayak. Personally, I like the Google Flights interface the most. If you have a site you like to use, check there first to see if this option is available.

After you’ve picked a site, here’s how to do an “everywhere” flight search:

Enter your departure airport.For the destination airport, choose the “everywhere” or “anywhere” option (the terminology depends on the site you’re using).Add your other travel details: Round trip or one-way, number of passengers, cabin, and travel dates.Run the search and see what’s available.

You’ll see a list of destinations where you can travel from your departure airport. With each destination, you’ll also see the lowest flight price available to get you there.

Research the destination before you book

Being open about where you travel is a great way to have new experiences and see more of the world. And as mentioned earlier, it can also be good for your finances, since you can look specifically for low-cost destinations.

However, if you’re unfamiliar with a destination, I’d highly recommend doing a little research on it before you book. Get an idea of what it’s like, and see what other travelers have said about it. It’s exciting to book a trip on a whim, but if you end up not enjoying the destination, you may wish you had done your homework first.

Case in point, when my wife and I were traveling around Europe last summer, we knew we wanted to visit Italy. After hearing good things about the South, we booked an Airbnb for two weeks in Naples. It felt adventurous — we were going wherever the wind took us. Well, we absolutely hated it. Naples isn’t exactly the cleanest city, to put it lightly, one of the many reasons we couldn’t wait to leave.

I don’t regret going there. Not every travel experience is going to be perfect. But if I had to do it all over, we would’ve skipped Naples and spent more time in Milan and Tuscany.

Even if you find a cheap flight, every trip costs time and money. Find out more about a destination outside of how much flights cost so you can make sure it’s your type of city.

More ways to save on travel

Exploring destinations is one way to travel for less, but there are lots of other strategies you can use. Here are a few more ways to save on travel:

Use travel credit cards to pay your bills and everyday expenses. These credit cards earn rewards you can use to cover travel purchases, such as flights and hotels. If you travel often, this type of card is practically a must-have.Be flexible about your travel dates. Flexibility with your travel plans always helps, as you can book based on what deals are available. Even if you have a specific destination in mind, you can still save by being open about when you travel.Book travel and activities early. If you start shopping around three to six months in advance, you’ll likely find lower prices than if you waited until the last minute.Look for affordable travel activities. Not everything you do when you travel needs to be expensive. Walking tours, museums, and parks are all affordable and fun things to do on vacation.

It’s definitely possible to travel on a budget. Based on Skyscanner’s recent research, “everywhere” searches are a popular option, and they’re perfect for keeping your flight costs down.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

 Read More 

Hotel rating systems use stars to evaluate properties. Get an understanding of how hotel stars work so you know what to book for your next trip. 

When you’re planning a trip, finding the right hotel can be challenging. Midsize and large cities usually have an assortment of options, so comparing them all would take too much time. Hotel ratings can help you narrow down your options to properties that work with your travel plans and budget.

Hotel rating systems normally range from one to five stars. A higher star rating indicates a more upscale hotel and a more expensive nightly rate. Once you know how hotel stars work, it makes the booking process faster and easier.

A note about hotel ratings systems

Before we get into hotel stars, it’s important to note that there are many organizations that provide hotel ratings. They all have their own ratings standards.

This means there’s no universally accepted definition of a one-star hotel, a two-star hotel, and so on. It depends on the rating system. Some hotels have different star ratings depending on which travel guide you look at (these hotels would undoubtedly prefer that you go by whichever guide gave them the highest rating). Even with the inconsistency between ratings systems, it’s possible to come up with a general idea of what each star means.

How hotel stars work

Here what you can typically expect at a hotel based on how many stars it has:

One-star: One-star hotels are a basic, bare-bones option. There likely won’t be any extra amenities, such as a restaurant or pool. These are the cheapest hotels for travelers who only need a place to sleep, and quality can be lackluster.Two-star: Two-star hotels are a step up. The rooms are typically more comfortable than what one-star hotels offer, and there may be some on-site amenities. They still tend to be budget-friendly.Three-star: Three-star hotels provide a balance between amenities and affordability. They often have features to make your stay more enjoyable, such as a gym, restaurant, or room service.Four-star: Four-star hotels are much more upscale. They have high-quality designs, rooms, and amenities, with most having at least one on-site restaurant. Prices tend to be significantly higher for these hotels.Five-star: Five-star hotels are the most luxurious option. They’re beautiful to look at, they’re full of amenities, and the customer service is excellent. They’re also expensive, with rooms at some high-end properties costing thousands of dollars per night.

Word to the wise: Don’t assume a hotel has a certain amenity based on its star rating. Some ratings systems classify hotels based on the amenities they offer, but again, these ratings aren’t always consistent. For example, I’ve read that five-star hotels have spas, but I’ve also stayed in five-star hotels without them. If you want to be sure a hotel has a specific amenity, double-check with the hotel itself.

How to choose a hotel

When you’re on vacation, the hotel can make or break your travel experience — and your budget. Now, I travel often, and I’ve stayed in hotels of every star rating. Yes, that includes one-star hotels when I was younger and had far less disposable income (and no travel points from my credit cards). Here’s my advice for finding a hotel.

Start by narrowing down which types of hotels fit your travel plans. This is where star ratings can be a big help. Here’s my recommendation for how many stars to look for depending on what type of accommodations you want:

If you’re looking for luxury or a very high-quality travel experience, stick to four- and five-star hotels.If you want a reasonable place to stay without breaking the bank, check out three-star hotels. Two- and four-star hotels could also be a match.If a low price is most important, try two-star hotels. You might also find three-star hotels that fit your budget. One-star hotels are the cheapest option, but they’re often very low-quality properties.

Search for hotels with your brand or travel portal of choice. If you have a hotel chain where you want to stay, because you have elite status or points you can use there, start on its website. For example, I have a couple of hotel credit cards with Hilton, so I always look for Hilton properties first.

Otherwise, search for options through your favorite hotel booking site. Or, if you have any travel credit cards, see if the card issuer has a travel portal you can use. Many booking sites and travel portals give you the option of searching for hotels by star rating.

Compare your options and pick one you like. At this point, you have a list of hotels. Now, you can see what each hotel has to offer, and book the one you like the most. Here are a few of the features you may want to consider when comparing hotels:

Rooms: See what’s included in the room, and check the pictures to see if it looks comfortable for you.Location: Is the hotel close to major attractions and the activities you want to do? Is it located near public transportation, or will it be a chore to get around?Amenities: Make sure the hotel has all the amenities you want, such as a restaurant, pool, gym, parking, etc.

It’s also smart to read some reviews, and especially recent reviews. By reading other guests’ experiences, you can learn what the hotel is like and if there are any major issues, such as noise or uncomfortable mattresses.

Hotel stars are far from the only thing that matters when booking a place to stay. But they are useful for quickly getting an idea of the level of quality a hotel offers.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly 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.

 Read More 

The idea of a tax audit is scary. Read on to see why you need not fret over one. 

The IRS audits under 1% of the tax returns it receives every year. Due to limited capacity, the agency can’t conduct audits to the extent it may want to.

That may be changing this year, though. The IRS has been granted $80 billion in funding as part of the Inflation Reduction Act. Part of that money is going to be earmarked for enforcement, otherwise known as audits.

As such, you may be worried about having your taxes audited in 2024. But in reality, you probably don’t need to be concerned unless you’re a higher earner. And even then, there’s a really easy way to avoid having your return audited.

The IRS isn’t going after everybody

Even with its additional funding, the IRS will not have the capacity to thoroughly examine every single tax return it receives this year. As such, the agency has to focus on audits that are likely to yield the most money. And that means the only people who are likely to see an uptick in audit activity this year are higher-income individuals.

In fact, the IRS said a few months ago that it’s seeking to “restore fairness in tax compliance by shifting more attention onto high-income earners, partnerships, large corporations, and promoters abusing the nation’s tax laws.” What this tells us is that if you earn an average wage, your audit risk in 2024 is probably comparable to what it was in 2023 — really low.

Steps you can take to avoid a tax audit

More often than not, a tax audit only means having to answer some additional questions the IRS poses by mail or submit additional documentation to the agency. The majority of tax audits are not conducted in person because the IRS doesn’t have the resources to do that.

But still, your preference may be to avoid a tax audit this year, and that’s understandable. The good news, though, is that there are steps you can take to lower your audit risk.

Mark Steber, Chief Tax Information Officer at Jackson Hewitt Tax Services, says, “Mismatched information from a taxpayer’s tax return versus what the IRS was given from the taxpayer’s employer, bank, or other tax documents” could trigger an audit. So it’s important to make sure you’re reporting all income accurately.

If you earned interest in a savings account last year, access your 1099 form from your bank and list the exact amount on your taxes. If you guess at that amount and put $1,000 on your tax return when you really earned $1,047, the IRS is likely to flag your return because it will have a 1099 form from your bank showing a different amount.

Incidentally, the same thing is likely to happen if you report $1,000 in interest income when you only earned $994. The IRS will sometimes flag mistakes even if your error works in its favor.

Steber also says that tax returns with missing income are more likely to trigger an audit. So if you earned a small amount of freelance income from a handful of clients in 2024, report those earnings.

Honesty is really the best policy

All told, being honest on your tax return is the best way to avoid getting into trouble with the IRS. So if you make a point not to fudge your deductions or avoid reporting income, you may find that you’re not chosen for an audit even if you are a higher earner.

What’s more, perhaps your situation is more likely to trigger an audit, such as if you had a large number of self-employment deductions last year relative to the income you earned. If those deductions are ones a tax professional confirms you’re entitled to, don’t avoid taking them because you’re scared of an audit.

If the IRS asks for proof of those deductions, you’ll have it. And while you might have to spend a little time sending over documentation, at the end of the day, there shouldn’t be any financial penalty involved if the deductions you’ve claimed are accurate and legitimate.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. This card features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Mortgage rates remain elevated. Read on to see when they’re likely to come down. 

Today’s housing market is a tough one for buyers for several reasons. First, mortgage loans remain expensive to sign. Secondly, home prices remain elevated. And finally, there’s a glaring lack of housing inventory, and that’s largely due to where mortgage rates are sitting today.

As of this writing, the average 30-year mortgage rate is 6.6%, according to Freddie Mac. Seeing as how mortgage rates got close to 8% in late 2023, 6.66% reads like an improvement.

However, most homeowners today have a mortgage rate that’s well below 6.66%. And until rates fall, homeowners are likely to want to stay put.

Most borrowers are paying less than 5% on their mortgages

Recent data from Bank of America reveals that about 80% of existing mortgage borrowers have an interest rate of under 5%. This is likely due to most homeowners having either signed their mortgages prior to the pandemic, when rates were generally lower than they are today, or due to homeowners having refinanced their loans when mortgage lenders dropped their rates substantially in 2020 and 2021.

Because so many homeowners have a competitive mortgage rate, they’re unlikely to want to sell anytime soon. Doing so would mean swapping a low mortgage rate for a much higher one.

But that’s just apt to prolong the inventory shortage that’s been plaguing the real estate market since the pandemic began. And it’s apt to continue making it very difficult for would-be buyers to find a home.

When will mortgage rates get back to below 5%?

If inflation continues to cool in 2024, it’s likely that the Federal Reserve will cut interest rates. That could, in turn, lead to a drop in mortgage rates.

However, we’re unlikely to see mortgage rates fall below 5% this year due to where they are today. Also, the Fed’s rate cuts are unlikely to be drastic, so that could lead to a slower decline in mortgage rates.

Now, without a crystal ball, it’s hard to know when mortgage rates will get back to the sub-5% mark. But it’s fair to say that they’ll get there in time. However, until then, there are steps you can take to snag the most competitive mortgage rate you can given market conditions.

First, if possible, consider a 15-year mortgage instead of a 30-year loan. Shorter-term loans commonly come with lower interest rates. That said, your monthly payments will be higher with a 15-year loan than a 30-year loan, so you’ll need to make sure you can afford it.

Another key step to take if you want the best mortgage rate possible is to work on boosting your credit score. You can do so by paying all bills in a timely manner, paying off credit card balances, keeping long-standing credit accounts open, and reviewing your credit report regularly for errors.

In time, mortgage rates will hopefully become more attractive. Until then, you’re not doomed as a home buyer — especially if you take steps to put yourself in a position to score a good deal on a mortgage.

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.The Motley Fool has a disclosure policy.

 Read More