Ditch the bungalow dream: These hotspots offer condos that many homeowners can afford. rawmn / Shutterstock.com
If today’s soaring home prices have you down, don’t fret: Adjusting your expectations just a bit can help you land a home you love. Home shoppers who purchase a condo or townhome generally pay prices that are 5% to 7% below the price of a single-family home, according to Realtor.com. But in some cases, the savings can be much greater than that. Recently, the staff at Realtor.
Wealth-building habits can make a dramatic difference to your finances over time. Find out what changes you could make in 2024.
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The last few years have been tough financially for many households. It is hard to even think about achieving millionaire status when you’re unsure about how you’ll pay your bills or worried about the rising cost of groceries or gas. Even so, it is possible for many of us to build wealth.
Moreover, you don’t need to invent a time machine, earn megabucks, or inherit a fortune to do it. The trick is to cultivate a mindset that helps you spend less and invest more. These habits followed by self-made millionaires may help you do just that.
There’s a common misconception that millionaires spend money on fancy restaurants and fast cars. In truth, many self-made millionaires are frugal and watch where each cent goes. If you spend less than you earn and save or invest the difference, over time, you will be able to accumulate wealth. The bigger the gap, the more cash you can put toward your millionaire journey.
That means looking for ways to spend less and/or earn more. For example, a Ramsey Solutions’ study into millionaire habits showed that 93% of millionaires use coupons all or some of the time. The study says they spend $200 less than the average American family on groceries. It shows that millionaires tend to avoid carrying a credit card balance so they don’t pay interest.
Conscious spending is a great antidote to one of my biggest wealth-building obstacles. I’ve labeled it my “it’s only” thinking. For example, I might think “It’s only $10” when I pay extra for speedy delivery or forget to use the coupons as planned.
Conscious spending does not mean you can never have any fun. Instead, it’s about being aware of where your money goes and spending on the things that are important to you.
Look at where your money went over the past week and think about what drove your decisions. Did you order takeout because you were tired at the end of a long day? Did you buy groceries that you didn’t eat or something else on sale that you now realize you’ll never use? How do you feel about those decisions?
Try not to judge yourself. The idea is to develop an understanding of why you spend money. If you can take that awareness into the choices you make moving forward, you can start to do things differently. That might be using coupons, maximizing credit card rewards, avoiding waste, or cutting back on spending that doesn’t bring you joy.
If the idea of making a budget or looking at your bank balance strikes fear into your heart, you are not alone. Sadly, no matter how good your intentions are, if you don’t know where your money goes, it will be hard to achieve your goals.
In Tom Corley’s rich habits survey, 96% of self-made millionaires balance their checkbooks every month. There are different ways you can keep tabs on your finances, so try to find ones that work for you. For example, I like to receive messages on my banking app every time money goes in or out of my current account. Other people may find that too much. You might prefer to schedule regular financial check-ins — and set a calendar reminder so you don’t forget.
Here are some tricks that might make it easier to keep tabs on your money:
Keep it simple: If you don’t like detailed spreadsheets, don’t make one. Try using a budgeting app instead. If you don’t want to plan out where every cent of your income will go, consider a broader budgeting approach (such as the 50/30/20 rule).Make friends with your budget: The biggest change in my financial life happened when I stopped seeing money management as a chore. Switching my thinking meant I started to see it as a tool that would help me sleep better and enable me to do the things I wanted to do. I stopped procrastinating. I even started to enjoy it.Treat yourself: It doesn’t have to be extravagant, but promise yourself a coffee at your favorite cafe or a long walk after you’ve paid your credit card or met your monthly savings goal.
Almost all (95%) of the self-made millionaires Corley spoke to saved or invested 20% of their net income. If you don’t feel able to invest 20% of your income, start with a smaller amount. You can always work upward once you’re in the habit. If you can invest a portion of your income every month, over time that money will add up.
Open an investment account and set up an automatic transfer so that the money goes out a few days after you receive your paycheck. If you don’t want to research individual stocks, use index funds or exchange-traded funds to build a diversified portfolio of assets.
If your work offers a 401(k) plan, talk to your HR department to find out more about the scheme. Not only are 401(k)s a tax-advantaged way to save for retirement, some employers might also match your contributions. If a 401(k) isn’t an option, look into individual retirement accounts (IRAs) instead. Any money you save on taxes is money you can use in your old age.
The journey to becoming a millionaire is a marathon, not a sprint. As such, the habits that could make you a millionaire are around finding small ways to save money every day. That will give you more money to invest, which is a proven way to build wealth over time.
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Sometimes the urge to save money on car insurance can go too far. Don’t cut these essential coverages that protect you from even bigger expenses.
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After the big car insurance price surges of 2023, you might be in the market for cheaper premiums on your auto insurance policy. But don’t cut your car insurance budget too far. If you have a skimpy amount of car insurance coverage, you risk massive financial losses and legal liabilities.
Let’s look at a few types of car insurance that should be essential.
Liability insurance is a must-have, because it protects you in case of an accident that is your fault. It helps pay for the car repair, property damage, and medical care for other people affected by a crash. Liability coverage can also pay for your legal defense in case of a lawsuit.
Most states require every driver to have liability insurance, and driving without insurance can be prosecuted as a crime. When shopping for car insurance, make sure you have at least the minimum amount of liability insurance required by law. This minimum liability insurance amount is different from state to state. Check with your state’s Department of Insurance, or other state insurance regulator to see your local minimum liability coverage laws.
For example, in my home state of Iowa, drivers are required to have liability auto insurance of at least: $20,000 of coverage for injuries per person, up to a total of $40,000 per accident, and $15,000 of coverage for property damage in any one accident. Another example: Texas requires drivers to have at least $30,000 of coverage for injuries per person, up to a total of $60,000 per accident, and $25,000 of coverage for property damage.
Keep in mind that liability insurance does not protect you or your car; it protects other people from you. You might be tempted to get the bare minimum amount of liability insurance to save money on premiums. But it’s often a better financial move to make sure you have plenty of liability coverage to pay other people’s bills and protect yourself from a lawsuit.
As someone who gets in a lot of car crashes, I have the maximum amount of liability coverage that my car insurance company offers: $500,000 of bodily injury coverage per person, $500,000 per occurrence, and $100,000 of property damage. Ideally, I will never need to use anywhere near these full amounts. But in case of a terrible crash that causes serious harm to others, having plenty of liability insurance makes sure that everyone’s bills are paid — and your bank account is protected.
Another form of must-have car insurance coverage, for most people, is collision coverage. This type of auto insurance is not required by law, but it can help save you money on car repairs and medical bills. With collision coverage, in case you get in an accident, whether it’s a one-vehicle crash or getting hit by another driver, your car insurance company helps pay for repairing the collision damage.
You can choose collision coverage that pays for all damages above a certain dollar amount: this is called your deductible. For example, my car insurance collision coverage has a $1,000 deductible. If I get in a crash that causes $5,000 of damage to my vehicle and I’m found to be at fault (or if I get hit by an uninsured or a hit-and-run driver), I will pay for the first $1,000 of damages, and then the insurance covers the remaining $4,000.
If your car is so badly damaged that it would cost more to repair than the total value of the car is worth, this is called a “total loss” or having your car “totaled.” For example, if your car has a fair market value of $15,000 and you suffer a head-on collision that wrecks the engine, the car insurance company might give you a check for $15,000 minus your deductible.
If you’ve taken out an auto loan on your vehicle, your lender will probably require you to have collision coverage. The lender wants to make sure to get its money back, in case your car gets totaled.
When should you skip collision coverage? Only if you have a very old car that’s not worth much money. If your car is only worth $1,000, it’s probably not worth paying hundreds of dollars per year on collision coverage.
Another type of must-have car insurance is called comprehensive coverage. This protects you from other types of damage to your vehicle, like colliding with an animal, having your car vandalized or stolen, or your car getting damaged by fire or weather events. If you hit a deer, if a tree falls on your parked car during a storm, or if your garage burns down with your car parked inside it while you’re out of town, comprehensive coverage can foot the bill.
Just like with collision coverage, if you have an auto loan, your lender probably will require you to get comprehensive coverage so the lender doesn’t get stuck holding the bag. Consider skipping comprehensive coverage only if your car is old, fully paid-for, and low-value.
Bottom line: Unless your car loan was paid off long ago, and your car is old and not worth insuring so heavily, you should consider keeping your collision and comprehensive coverage. There are so many ways that your vehicle can get damaged, and worst-case scenarios where you can get sued. Getting only the minimum liability coverage can leave you exposed to devastating financial losses.
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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.
Opening a new credit card won’t work for me next year for two big reasons. Find out what they are and if they apply to your situation, too.
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In 2024, I’ll be making a lot of financial moves. I won’t be opening a new credit card though. While a new credit card can come with great benefits, including gaining access to new cardmember rewards and perks, it’s not the right move for me this upcoming year. Here’s why.
There’s one huge reason why I’m not planning to open a new credit card in 2023: I’m hoping to refinance my mortgage.
In 2023, I took out a loan to buy a home. And, like most recent home buyers, I borrowed at a time when rates were pretty high. The interest rate I ended up getting on my loan was above 7.00%, which I’m not very happy about.
I am, however, hopeful that mortgage rates will fall in 2024 and if they do, I want to take advantage of that by refinancing my loan. Typically, since there are costs associated with refinancing, it only makes sense to do so if you can drop your rate by around half a percentage point at a minimum and if you plan to stay put for a long time to cover the upfront costs (which I do).
Since I’m hoping to lower my rate as much as possible, I want the best possible credit score so I can qualify for a very competitive loan. And opening a new card could mean lowering my credit score and not getting as good a deal.
Now, there’s not necessarily a huge decrease in your score when you open a new card. You’ll get a new inquiry on your credit record, which is a note that a lender has checked your credit, and that can drop your score by five to 10 points. The average age of my account history is also not as long as I would like it to be, and that factor accounts for 15% of your FICO® Score. Opening a new account and shortening the average length of my credit history even more could cause an additional reduction in my credit score.
Even a small difference in mortgage interest rates can make a big difference over time. For example, a loan at 6.00% costs $599.55 per month for each $100,000 borrowed and costs $115,838.19 in total interest over time for a 30-year loan. If my credit score was just a little worse and I ended up with a 6.10% rate instead of a 6.00% rate, the monthly payments would jump to $605.99 per $100,000 borrowed and $118,158.12 in total interest costs.
Those seem like small differences, but remember a mortgage is often for more than $100,000. On a $400,000 loan, for example, the monthly payment would be $25.78 more per month for the 6.10% loan and interest would be $9,279.73 more over time.
There’s no reason to take a chance of interfering with my ability to get the best and most affordable loan just to get a new credit card. And if you are going to be getting a mortgage, car loan, or other big loan any time soon, you should also avoid doing anything that could change your positive credit profile for the worse.
I’m also not interested in opening any new cards because my cards are already a good fit. I opened a new airline card not too long ago that provides the travel perks I need, and my card is well matched to my spending.
If I didn’t have a card that rewarded me for the things I buy often, I might look into getting a card at the end of the year after refinancing my mortgage. But as it stands, I don’t feel any real need to do so, especially since I won’t want to feel pressured to spend enough to get a new welcome bonus so soon after getting a loan.
If you aren’t getting a big loan any time soon and you don’t have a card that rewards the spending you do the most, or if you are looking for some new cardmember perks your current card doesn’t offer, then it may make sense for you to open a new card. But, if you’re like me and pretty content with your cards, you may want to wait — especially if you may be doing something big with your money this year.
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Interest rates are still elevated for mortgages. But read on to see why it could still make sense to move forward with a refinance.
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For many people, the goal of refinancing a mortgage loan is to lower the interest rate on it, thereby cutting their monthly payments. But given where today’s mortgage rates are sitting, many homeowners don’t stand to reap savings by going the refinance route.
As of this writing, the average interest rate on a 30-year mortgage is 6.61%, according to Freddie Mac. But many people signed home loans at much lower rates in 2020 and 2021, when mortgage lenders were offering up deep discounts. And a lot of people also opted to refinance their mortgages back then. So for a lot of people, refinancing today won’t result in savings.
But that doesn’t mean refinancing a mortgage is a poor choice across the board. In fact, there’s one specific scenario where it could absolutely make sense to refinance even with today’s interest rates being not so favorable.
A traditional mortgage refinance will have you swapping your existing home loan for a new one of the same value. With a cash-out refinance, you’re able to tap the equity you have in your home and use it to borrow more than your existing mortgage balance.
Here’s how that might work: Let’s say you own a home worth $500,000 and owe $300,000 on your mortgage. That gives you $200,000 in equity. Let’s say you also want to borrow an extra $100,000 to pay off a giant credit card tab.
With a cash-out refinance, you could swap your existing $300,000 mortgage for a new home loan in the amount of $400,000. The first $300,000 would pay off your existing mortgage balance, and the remaining $100,000 would be yours to spend as you wish (meaning, you could, and should, use it to pay off your credit cards).
Because homeowners today are sitting on so much equity due to elevated home values across the country, it’s a good time to try to do a cash-out refinance. When property values are lower, home equity levels tend to drop, making it harder to qualify for a cash-out refinance.
In fact, as of the third quarter of 2023, U.S. homeowners collectively had about $32 trillion in home equity. This doesn’t mean that every single property owner in the country has lots of equity to tap. But many people are in that situation. And if you’re one of them, and you have really expensive debt you’re trying to pay off, a cash-out refinance could be a good way to go.
Let’s say you have a 4% mortgage on your home and are looking at a rate of 6.61% to refinance. Clearly, 6.61% is higher than 4%. But if you owe $100,000 on credit cards charging you 24% interest, replacing that rate with a rate of 6.61% could result in savings on your total debt overall.
While it won’t pay for a lot of homeowners to refinance today, if you’re someone with a lot of home equity who’s looking to consolidate much costlier debt, then a cash-out refinance could be a smart move. But if you’re interested, make sure to compare offers from different refinance lenders.
And when you do, don’t just pay attention to interest rates. Also pay attention to closing costs, which are the various fees you’re charged to put a new home loan into place.
You may also want to wait a bit longer to refinance your mortgage, given that rates have been dropping steadily over the past number of weeks. Plus, the Federal Reserve may be in a position to cut interest rates in the coming months, and that could also drive the cost of mortgages downward.
Of course, if you’re sitting on expensive credit card debt that’s accruing interest by the minute, you may not want to wait on a refinance. But it’s something to keep in mind as you make your decision.
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