Money Management

Buying a home today may be tough for some people. But that doesn’t make it impossible. Read on to learn more. 

Many people who have been trying to buy a home are pretty discouraged at this point. And that’s totally understandable. Not only are home prices elevated to start off 2024, but mortgage loans remain expensive to put into place. The record-low rates mortgage lenders were offering in 2020 and 2021 are, at this point, long gone and unlikely to return in the near term. So all told, buying a home in 2024 is shaping up to be an expensive prospect.

It’s therefore not so surprising to learn that 70% of Americans think it’s unrealistic to buy a home this year, according to data from IPX1031. And 63% say they can’t afford to buy a home this year.

You may, at this point, be in a similar place. But rather than write off homeownership this year, think about the steps you can take to make it work given the state of the real estate market today.

Compromising could be your ticket to homeownership

When you’re talking about a purchase as monumental as a home, you can really only psych yourself up to compromise so much. After all, if you envision yourself enjoying the privacy of a detached house with a peaceful backyard, you’re not going to want to settle for a townhouse with shared walls and a tiny patio.

But that doesn’t mean there aren’t aspects of a home purchase you can compromise on. And doing so could mean making your dream of homeownership a reality this year, despite the state of the market.

For one thing, you may want to compromise on the state of your home instead of its size. You can’t easily turn a 1,300-square-foot home into 2,300 square feet of living space. But you can finish an existing basement or update a kitchen that’s seen better days.

Another thing you may be able to compromise on is the location of your home. Your heart might be set on a specific neighborhood with lots of amenities, like walkable stores and restaurants. But if you’re willing to move a bit further out, you may find that you can get a lot more space for your money. And the extra 10-minute walk into town is something you might come to appreciate from a daily exercise perspective.

Make sure you’re looking at an affordable home

All told, homeownership may be realistic for you in 2024 if you’re willing to make some concessions. But one thing you can’t compromise on is affordability.

If you can’t swing a home purchase today due to the cost of homes and mortgage rates, then you really should not move forward. Buying a home you can’t comfortably afford could put you at risk of falling behind on bills, wrecking your credit, and potentially having to give up the property you pushed yourself to buy.

So how do you know if a home is affordable? As a general rule, if you’re able to keep your housing costs to 30% of your take-home pay or less, you’re in good shape. So if you can find a home where your recurring expenses like mortgage payments, property taxes, and homeowners insurance costs come to 30% of your take-home income or less, you should know that you’re most likely spending a reasonable amount.

READ MORE: Mortgage Calculator

However, take your personal non-housing expenses into account, too, when crunching your numbers. Maybe you have two kids in a daycare center that costs you $700 a week. Or maybe you just signed two car loans that are costing you $650 a month a pop.

In that case, you may want to limit your housing costs to 20% or 25% of your take-home pay to play it safe. But all told, if you change your housing requirements to a reasonable degree, you may find that you’re able to afford a home in 2024 after all.

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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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Getting better with money doesn’t need to take a long time. Check out these easy ways to improve your finances in just five minutes. 

Some people have the misconception that getting better with money is a complicated process. They think that any meaningful improvement is going to take hours or longer. That’s a harmful belief, because it often leads to not making any positive changes.

It’s faster and easier than you might think to improve at personal finance. In fact, you can make several impactful changes in five minutes or less.

1. Bump up your retirement contributions

Ideally, you’re already saving money for retirement. If not, see if your employer offers a 401(k) plan you can start contributing to directly out of your paycheck. Another option, that anyone can open, is an individual retirement account (IRA).

If you save for retirement every month, see if you can increase how much you save. A good way to do this is to increase your contributions by 1% of your income every year.

Let’s say you make $5,000 per month, and you currently save 10% ($500) for retirement. For 2024, try raising that to 11% ($550). If that works, go for 12% ($600) in 2025, and so on. Make sure you also recalculate the dollar amount you should be saving each time you get a raise.

2. Automate your savings

Saving money is one of those important, simple financial habits that can be a lot more difficult than you’d think. You go over the numbers and figure you’ll be able to save a certain amount at the end of the month. But when the end of the month rolls around, you realize you have nothing left to save.

Most of us have been in this situation. When you make saving the last item on the list, it’s easy to spend all your money.

The solution: Move saving to the top of the list and make it automatic. Set up an automatic transfer from your checking account to your savings account after you get your paycheck. When you automate your savings, you don’t have to worry about forgetting to do it or spending all your money first.

3. Cancel unneeded subscription services

Subscription services are everywhere, and they can be worth it, if you use them often enough. But if you have too many, or if you’re paying for subscriptions you don’t use, that’s when they become a financial problem.

This is all too common. In a 2022 survey by C+R Research, 42% of respondents said they stopped using a subscription but forgot they were still paying for the service.

Check all the subscriptions you’re currently paying for. If there are any you don’t use, cancel them right away. Also, make sure you’re getting your money’s worth from the subscriptions you use. If there’s anything you’re on the fence about, consider canceling for now and seeing if you miss it or not.

4. Review your recent spending to see where your money’s going

People often underestimate how much they spend. If you feel as if you never have as much money as you’d expect, there’s a good chance you’re spending more than you realize.

The only way to know for sure is to review your spending. Look over your most recent credit card statement to see exactly where you’re spending money and how much. If you’re spending more than you expected anywhere, make it a point to cut back in that expense category. Another way to better monitor your spending is by using a budgeting app.

5. Open a rewards credit card

Rewards credit cards are an easy way to get value back on the money you spend. Some of these cards earn a flat rate of 1.5% to 2% back on purchases. Others earn a base rate of 1%, but also have bonus categories where they earn anywhere from 3% to 6% back.

To demonstrate how much value you can get from a rewards card, let’s say you have $2,500 in monthly credit card spending. You open a card that earns 2% back on purchases. That will earn you $50 in cash back per month, which adds up to $600 per year.

If you have a good credit score (670 or higher), a rewards card is well worth it. Here are some of the best options for earning cash back and travel points:

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Simple financial changes can have a huge impact over time. With these five-minute tips, you could boost your savings and trim your spending going forward.

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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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The Fed may cut interest rates this year. Will CDs be impacted? Read on to find out. 

Inflation has been a persistent problem for U.S. consumers over the past few years. Thankfully, though, it’s starting to cool.

The Federal Reserve is happy about that. Its goal has been to bring annual inflation down to around the 2% level, which is the level it typically targets in the long term.

In December, annual inflation, as measured by the Consumer Price Index, was recorded at 3.4%. Now, there’s still a clear gap between where inflation is at and where the Fed wants it to be. But the situation is improving.

As such, the Fed opted to pause its rate hikes during its last three meetings of 2023. Not only that, but late last year, the central bank forecast three rate cuts for 2024.

Rate cuts could be good news for consumers from a borrowing perspective. But from a banking perspective, less so.

The upside of rate cuts

The Fed’s string of interest rate hikes that took effect in 2022 and 2023 did the job of cooling inflation by driving the cost of borrowing up. After all, for inflation to calm down, consumer spending needs to decline — and that’s likely to happen when it costs more to borrow money.

If the Fed cuts interest rates in 2024, it could make loans less expensive to sign. It could also make credit card balances less expensive to carry. So all told, rate cuts could make it so that borrowers have much to celebrate.

The downside of rate cuts

If the Fed ends up cutting rates in 2024, it means banks will likely start paying less interest on products like savings accounts and certificates of deposit (CDs). Not only that, but longer-term CD rates might really become notably less attractive. That’s because banks may be leery of committing to higher rates over a lengthy period of time knowing that more rate cuts on the Fed’s part could be in store.

It’s for this reason that you may want to lock in a CD now, before any rate cuts happen. And if you’re interested in a longer-term CD, definitely move sooner rather than later.

CD rates could move quickly

It could take as little as one rate cut for 3- 4-, and 5-year CDs to experience a big drop in rates. So if you know for a fact that you’re able to commit to a CD of that sort of term, lock in your rate now, while it’s higher.

What’s more, if you opened a CD that will be coming due at some point this year, pay attention to its renewal date and see what CD rates look like at the time. Some banks will automatically roll a CD into a new one with the same term if you don’t take action. But if CD rates are less attractive, that may not be what you want.

Let’s say you have a 1-year CD coming due in mid-2024, and your initial CD rate was 5%. It may be that 1-year CDs are only paying 4% at the time you have the option to make a change. If that’s not a rate you’re happy with, you’ll have an opportunity to cash out your CD at its maturity date rather than renew it — but you’ll need to let your bank know before that date arrives. You can usually do so by logging into your account and making an election.

All told, rate cuts could offer a lot of relief for borrowers in 2024. But it’s savers, unfortunately, who may lose out. So now’s a good time to lock in a CD, whether it’s for a 1-year term or a 5-year term. The longer you wait, the lower the rate you might end up with.

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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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Yes, you can find gaming while you’re on a cruise vacation. Here’s what you need to know about the rules regarding gambling taxes on cruise ships. 

Cruise ship casinos follow U.S. tax law, even when sailing in international waters. If you’re a U.S. citizen, winnings are subject to federal income tax and are your responsibility to claim on your tax return.

If you win more than a certain amount of money, the casino will take your personal information, including a passport or driver’s license, plus your Social Security number, and will issue you a form W2-G.

When will you get a tax form?

For gambling on a slot machine, this threshold is $1,200. Any win over this amount is referred to as a “hand pay,” as the casino will pay the win by hand in order to ensure it collects your tax information.

With table games, winnings are generally not documented. The exception is if you win a large amount from a side bet or progressive jackpot, as the IRS rule is that if you win an amount that exceeds 300 times your wager, there needs to be proper documentation.

Gambling winnings are federally taxable income

Here’s one key point to know. If you receive a tax document (like a W2-G), you can be sure that the IRS will receive a copy as well. In other words, the IRS knows that you won a reportable jackpot.

Gambling winnings are considered federally taxable income. In addition, most states also consider gambling winnings to be taxable income. There are a few exceptions, but most of them are states that don’t have a state income tax at all.

However, perhaps the most important piece of information in this article is that gambling losses can be deducted from your winnings when claiming them on your taxes.

Think of it this way. While it does happen, most of the time you won’t win a slot jackpot the first time you hit the “spin” button. And even if it does, you aren’t likely to get up and leave, never to gamble again for the rest of the cruise.

So, any money you spent (and lost) in pursuit of your jackpot can be used to offset your taxable winnings. As a basic example, if you sat down at a slot machine, lost $200 of your money, and then won a $1,500 jackpot, your taxable winnings would be $1,300.

Be aware that the IRS may want to see documentation, especially if you claim that you lost an amount close to or greater than your winnings. In other words, if you won a $1,500 jackpot and lost $2,000 over the rest of the cruise, you wouldn’t have any taxable winnings — but the IRS may want proof.

The good news is that with modern gaming systems, this can be rather easy. Just make sure your player’s card is inserted in the machine, or that you give it to the table game dealer, every time you play, even if you use cash. This allows the casino to track your play, and you can then request a win/loss statement when it comes time to file your tax return.

How much did I pay in taxes?

In my case, I had a $1,500 win (approximately) on a cruise, but my win/loss statement from the entire five-day cruise that reflected the rest of my play showed net winnings of about $800. So, I had $800 in taxable winnings, which translates to less than $200 in taxes at my federal income tax rate.

The bottom line and key takeaway is that it’s important to make sure to have your play recorded by the casino, as it could help you document a major tax break in the event you win a jackpot. Plus, tracking your play allows the cruise line to see how much you’re spending, which can result in discounted or free cruise offers, free drinks, or other perks.

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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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Not all payment methods are created equal. Keep reading to learn why one writer keeps her debit cards in a safe place at home, rather than in her wallet. 

One relatively recent change I’ve made to my finances is that I no longer carry around a debit card. I have two, because I have checking accounts at two different banks, but I store both of them in a safe place in my home, rather than keeping them in my wallet.

Debit cards allow you to access the money in your checking account (and possibly other linked bank accounts), and can be used to make purchases in person or online, as well as to take cash out of an ATM. Sounds convenient, right? Well, I have a few good reasons for leaving mine at home.

1. I rarely need access to cash

These days, I don’t pay in cash very often. I try to keep some on hand, both in a safe place in my home as well as a little in my wallet, just in case. Some businesses only take cash payments, and it’s nice to be able to leave a cash tip for a coffee or a haircut. But to account for my cash-spending habits, visiting an ATM to take out a few hundred dollars once every few months is generally sufficient.

So I can decide when I want to stop by an ATM, take the card along, and then put it away after I’ve used it. This requires some advance planning, but I’m pretty good at that.

2. Losing it could put my finances at risk

If any piece of your financial picture goes missing, it could be a headache to secure your accounts and get your money back if someone’s made fraudulent purchases in your name. But losing a debit card has the potential to be more serious than losing a credit card. The reason for this comes down to your liability should the worst happen.

If your debit card goes missing, your liability varies based on when you report it to your bank. If you phone it in immediately, before any unauthorized charges are made, you’re responsible for $0. Within two business days, that jumps to $50. More than two days but within 60 days? $500. Wait longer than that and you could be out every dollar in the accounts linked to the card. Yikes.

3. Credit cards offer better benefits and protections

Debit and credit cards look a lot alike, don’t they? They’re both rectangular, often plastic, and feature your name and a series of numbers. But that’s where the similarities end. Remember, debit cards allow you to access money in the bank accounts they’re linked to. But credit cards draw on a line of credit that’s borrowed from the card’s issuer — you spend against the limit and then pay it back.

It’s that difference that makes me prefer using credit cards. For starters, repaying my credit card issuers on time every month keeps my credit score in good shape — payment history accounts for a whopping 35% of a FICO® Score, so making those on-time payments is absolutely worth it for that benefit. Plus, I earn rewards on my spending with a credit card — debit card rewards are rare and I don’t have an account that offers them.

In addition to building credit, credit cards come with better consumer protections than debit cards. Unlike debit cards, with the best credit cards, my liability for fraudulent purchases is $0, regardless of when I report the theft of my card or any unauthorized charges. And if I were to have a problem with a purchase I made with my credit card (say, an item I ordered online never arrived and the seller was unwilling to refund my payment or send a replacement), I could dispute the charge with my card issuer.

Ultimately, leaving my debit card at home most of the time works for my finances, and I’m not alone. I recommend considering your own spending habits and making a decision that works for you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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