Money Management

Why would you invest in a brokerage account if you aren’t good at it? Find out here why buying stocks is key to your wealth-building efforts. 

I am not very good at picking stocks to invest in. I don’t like doing the necessary research into different companies, and looking at charts to monitor trends in stock price performance isn’t something that I find to be very fun or enjoyable.

While I have no interest in building a portfolio full of individual stocks, I still have a brokerage account. Here’s why.

A brokerage account opens up the door to getting my money in the market

Investing when you aren’t good at picking stocks may seem really risky. But there’s a simple reason why that’s not the case — and why foregoing a brokerage account and passing up on putting your money into the market would be a huge mistake.

Here’s the big problem. You are usually not going to be able to get rich if you have to personally work for every dollar that you end up with. You have limited time and the majority of us don’t earn millions of dollars a year, so you’re going to need some help building wealth.

For most people, the best place to get this help is from putting their money to work for them (unless they happen to have rich family members who just give them cash — in which case, can they adopt me?). You can put your money to work for you by earning returns on the funds you have, and then reinvesting those returns. This is called compound growth.

Your money doesn’t need to take vacations or limit its hours to work — it can keep earning returns every day, and those returns can keep being reinvested, and your money can keep growing. Your money also never has to retire, so it can keep working for you forever.

But you want to earn a reasonable rate of return for this to be effective. And that usually means you have to invest in the stock market, since most safer investments (like savings accounts) provide a very low return on investment (ROI). And most investments that could potentially provide a better ROI than stocks are complicated and present a high risk of losing money.

Enter, ETFs

Opening a brokerage account actually makes it really easy to earn a great return on your investment with minimal risk — even if you know nothing about stocks. You can pick a broker that helps you invest in exchange-traded funds (check out the best ETF brokers to find one). ETFs are traded just like stocks, but your money goes into a big pot and is used to invest in a bunch of different companies.

Different ETFs might invest in different aspects of the market, like marijuana ETFs that give you a stake in companies in the cannabis industry, or healthcare ETFs, or whatever other field you’re interested in. You can also just pick an ETF that tracks the performance of the market as a whole — which is what I did. ETFs charge very minimal fees when they track financial indexes, and you minimize your risk because your money is spread around in so many investments.

I invest in ETFs that track the performance of 500 of the largest U.S. companies because I know those funds produce consistent returns over time — typically an average 10% annual return over the long haul.

My brokerage account helped me find my ETF and get my money into it, so I can grow rich.

Investing in the stock market is crucial to building wealth

To understand why investing in an ETF is critical to building wealth, compare how much you would end up with after 20 years if you put $300 a month into a savings account paying the national average rate of 0.46% versus if you put that same $300 a month into an index fund offering a 10% average annual return.

As you can see, you absolutely need to put money into the market to build real wealth. So, even if you are like me and you’re not good at picking stocks, open a brokerage account and look for an ETF to invest in. When your money works harder for you and helps you grow richer, you’ll be very glad you did.

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Lots of people would love to retire early. Discover the best money moves you can make this year to turn an early retirement dream into reality. 

Retirement has been happening later for Americans, and that trend is likely to continue. The average retirement age is 61, up from 57 in the 1990s. But the full retirement age (when you can get full Social Security benefits) is 67 for those born in 1960 or later.

While some people are fine with retiring on the typical timeline, not everyone wants to wait that long. In fact, there’s a movement called FIRE, short for “financial independence, retire early.” Members aim to reduce their expenses, earn more, and invest heavily with the goal of retiring at a younger age — normally 50 or younger.

The methods people use can get pretty extreme. Some have gone as far as living in a van to save more. But there are plenty of easier money moves that can get you on the path for early retirement.

1. Start saving more — aim for at least 30% of your income

Achieving early retirement isn’t that complicated. It’s ultimately about your savings rate, which is the percentage of your income that you save and invest. When you save more, that speeds up how soon you can retire.

A popular rule is to save at least 20% of your income and divide it between your savings account and investments. But that’s for retiring on a normal timeline. For early retirement, you’ll need to save much more. While the exact amount depends on your age and when you want to retire, you’ll likely need a savings rate of at least 30%.

You may not be able to reach that level right away, and that’s fine. Start with what works for you. If you can bump up your savings rate by 1% or 2% of your income this year, do that, and continue raising it whenever you’re able.

2. Invest with retirement and non-retirement accounts

It’s widely recommended to invest for retirement with retirement accounts, because they help you save money on taxes. If your employer offers a 401(k) plan, you can contribute to that with pre-tax income. Many employers also offer a 401(k) match, where they match your contributions up to a certain limit.

You can also open individual retirement accounts (IRAs) on your own. Contributions to these are tax-deductible. And there are Roth IRAs, where contributions aren’t tax-deductible, but your withdrawals in retirement are tax-free.

However, these all have a key drawback: An early withdrawal penalty if you take out money before age 59 1/2. While you should use retirement accounts to save on taxes, make sure you also invest through a regular brokerage account. This type of account doesn’t have tax benefits, but you can withdraw from it at any time.

3. Find a way to increase your income

There’s a popular expression that “it’s not what you earn, but what you save.” That’s not entirely accurate. It’s what you earn and what you save.

It’s challenging to cover all your bills, spend money on things you enjoy, and save enough for early retirement. Although you don’t need a massive salary to retire early, a higher income helps. You’ll be able to save more earning $80,000 per year than $40,000.

Think about what steps you can take to increase your income this year. It could be as simple as talking to your manager at work about a raise. A promotion or a new job are other options. If you’re a freelancer or a small business owner, you could look for ways to improve efficiency or land higher-paying clients.

4. Look for a few areas where you can spend less

Spending less is a good way to increase your savings rate, provided you don’t overdo it. If you try to cut back on everything, you might make yourself miserable. These kinds of drastic changes are also difficult to maintain.

Don’t try to spend less on everything, or in areas that are important to you. Instead, look for expenses you can reduce without affecting your quality of life.

Maybe you’ve been spending a lot of money on a big apartment, but you realize you’d be just as happy in something smaller. Or you’ve found that having a nice car isn’t worth an expensive monthly payment to you. Go over your expenses to decide what’s worth paying a premium for and where you’re not getting much bang for your buck.

5. Resist lifestyle creep

One of the biggest benefits of working toward early retirement is it puts you in a much better financial position. Earning more income, saving more, and investing are all fantastic ways to improve your finances.

But there’s also a potential downside. When you’re earning and saving more, it’s tempting to start spending more, too. You may see what you have in the bank and decide you should treat yourself to nicer clothes, five-star hotels for every vacation, and so on.

There’s nothing wrong with spending more to improve your quality of life. Just be careful about how much you spend, and make sure your spending fits with your retirement goals.

You don’t have to retire at the same age as everyone else. If you’re interested in retiring early, the methods above can help you make it happen.

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It’s important to set financial goals that are attainable. Read on to make sure you don’t set yourself up for failure. 

Many people aim to better their personal finances when a new year rolls around. Recent research from The Ascent found that 67% of Americans were looking at making financial resolutions for 2024.

You might have a running list of money-related goals you’re looking to tackle over the next 12 months. Or maybe some of your goals are health-related.

Either way, it’s important to understand the factors that cause people to give up on their resolutions. That way, you’ll know which goals of yours are attainable and which ones are likely to make you miserable more so than anything else.

Here are the top reasons Americans failed at a New Year’s resolution in 2023.

1. It became too expensive

For 27% of respondents in the aforementioned survey, the cost of fulfilling a goal made it unattainable. When setting your objectives, make sure money won’t get in the way.

Let’s say your goal is to get into good enough shape to run a big race by the end of the year. You might assume you’ll need to hire a personal trainer and spend money on a gym membership to meet that goal. In reality, all you might really need is a new pair of sneakers. So before you start dipping into your savings account to meet your goal, see if there’s a lower-cost alternative.

2. The habits were too hard to maintain

For 22% of people, the habits associated with meeting their 2023 goals were too difficult to keep up with. The purpose of making New Year’s resolutions is to improve your life, not make it worse. If meeting your 2024 goal is likely to make you miserable, you may want to make some changes.

Let’s say your objective is to reduce your restaurant spending in 2024 and do more cooking. There’s nothing wrong with carving out time each week to hit the supermarket and buy groceries. But putting the pressure on yourself to whip up elaborate meals seven nights a week may be overkill. Instead, embrace the idea of leftovers and celebrate the fact that you’re working toward your goal — even if it means having to still order takeout once a week.

3. The resolution was too time-consuming to tackle

A good 19% of Americans didn’t meet their goal last year because it was too time-consuming. If you’re worried about falling into a similar trap, simplify things where you can.

Let’s say your goal is to invest more in 2024. That doesn’t mean you have to spend hours each week analyzing companies to build up a portfolio of stocks. If you don’t have the time for that, buy broad market ETF shares instead. That’s an easy way to assemble a diversified portfolio without having to put in a ton of legwork.

New Year’s resolutions aren’t always so easy to uphold. So rather than set yourself up for failure, aim to set goals that are reasonable and attainable given your finances, abilities, and free time. You’ll likely be better off achieving an easier goal than failing at a more difficult goal.

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Is it time to start paying more for a Costco membership? Read on to find out. 

One of the smartest personal finance decisions you might make is signing up for a Costco membership. Shopping at Costco could result in huge savings on items like groceries, household essentials, and larger purchases, like kitchen tools and electronics, when those things become a need.

Perhaps you’ve been a Costco member for years and have stuck with the basic membership. Right now, a basic membership costs just $60 a year, compared to $120 for an Executive membership. But an Executive membership offers one huge perk — 2% cash back on all Costco purchases. If your Costco spending was pretty substantial in 2023, then now may be a good time to make that upgrade.

It’s a matter of numbers

If you’re on the fence about a Costco membership upgrade, one thing it pays to do is review your 2023 Costco spending and see what it amounted to. Assuming you’re not anticipating major changes to your living situation or routine, your spending from 2023 is probably pretty indicative of what your spending might look like in 2024.

So let’s say you spent a total of $3,600 at Costco last year. It takes $3,000 in annual spending to break even on the cost of an Executive membership upgrade, since 2% of $3,000 is $60. If you spent $3,600 in 2023, then you may want to move forward with an upgrade now. If you spent $2,950, you might still want to do the upgrade, since a single additional purchase this year could put you over that $3,000 threshold.

For example, you may decide to buy new furniture at Costco this year. Or, you may decide to use Costco to book a vacation. Either purchase alone could put you over that $3,000 target.

Similarly, you might decide to buy holiday gifts at Costco in 2024. That, too, could make a big difference in your Costco spending for the year.

Costco offers a no-risk proposition

You may be hesitant to shell out an extra $60 for a Costco membership when the basic version costs so much less and seems to be meeting your needs. But here’s a lesser-known secret: Costco will make you whole financially if you don’t accrue enough cash back on your Executive membership to cover the cost of the upgrade.

In other words, let’s say you upgrade to an Executive membership but only spend $2,400 this year. That amounts to $48 cash back. At that point, if you choose to go back to the basic membership, Costco will allow you to do so, and it will also refund you the $12 of that upgrade fee you didn’t make back. So all told, you’re not really losing out on any money.

Now, if your circumstances are changing this year — say, you’re moving so you won’t be as close to a Costco store — then you may not want to upgrade your membership because it’s likely you’ll shop at Costco a lot less. But otherwise, it’s something to consider — because it could end up working out well for you financially.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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If you have a lien on your house, you typically must pay it off to sell. Find out how liens can affect the buyer, interfere with the sale, and cost a fortune. 

When you are selling your home, a number of obstacles could come up that prevent the deal from closing. There is one especially difficult situation that you could end up facing, though — and it could make it impossible to close on your home until you’ve addressed the issue.

Here’s what could happen, and what you’d need to do to fix it.

If you have liens on your home, closing could become impossible

One of the biggest potential snags a home sale could hit occurs when there are liens on the property. Unfortunately, this happens pretty often. The 2017 Realtors Confidence Index showed that as many as 11% of real estate transactions are delayed due to unresolved claims, with liens most likely to be the problem.

Here’s how it happens. When a home is sold, the owner of the property must transfer title. That’s a fancy way of saying transferring legal ownership to the buyer. But a property owner cannot transfer more rights than they have to a property — so if there’s someone else with an ownership interest, that won’t just go away when the property is sold.

Sometimes, a homeowner will do something that results in a lien being placed on the property, such as not paying a debt and getting a judgment against them or not paying their homeowners association fees and being subject to fines and penalties as a result. A lien is a legal claim against the property owner. Mortgage lenders have liens on properties because the house is the collateral securing the loan — but that’s not a big issue since the homeowner just repays the mortgage balance from the proceeds of the sale.

There could be other liens, though. If a homeowner was sued, lost, and doesn’t pay the judgment, the court could allow the defendant to put a lien on their property. This would mean the person who sued established a legal interest in the property so they get paid if and when the home is sold. Or, if a homeowner stops paying property taxes, their county could put a tax lien on the home.

Sometimes, lienholders foreclose. But even if they don’t, a home buyer isn’t going to want to purchase a property with a lien on it. That’s because the current owner would be transferring the property with the lien attached, since they can’t transfer more rights than they have.

New owners don’t want to get stuck with someone else’s financial obligations. Plus, their mortgage lender won’t allow them to — the lender wants to ensure the house can be used as collateral for the mortgage loan. So homeowners need to deal with their liens to sell a property.

How to deal with a lien on your property

If you have a lien on your home and you want to sell, one option is to just pay the amount needed to get the lienholder to release their claim. If you have the money in your checking account, you can just send in the money to the lienholder (the person with the claim) as long as you have an agreement with them that they’ll release their legal claim on the property if you do. Depending how much the value of the lien is, this could cost you tens or even hundreds of thousands of dollars.

You may also be able to make an agreement that the lienholder will get paid a certain amount out of the proceeds of the sale. In other words, they’d get paid from the profits you get from selling the home. The lender and the company issuing title insurance (a policy that protects the buyer and lender against unexpected claims against the property) would need to be OK with this option, but usually that’s not a problem.

Depending on the amount owed to the lienholders, property sellers could face losing a lot of money or even most or all of their profits from a home sale. While that’s disappointing, it’s crucial to remember that dealing with the liens is essential to find a buyer — and to prevent the lienholders from trying to foreclose and force the sale of the property to get back the money owed to them.

Buyers (and sellers) can do a public records search to find out if there are any liens on a particular property. If there are, it’s important to know this can complicate the sale — and cost the seller money to resolve.

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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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