Money Management

When you are looking for a home, you can’t forget to take property taxes into account. Keep reading to learn why you need to consider this cost. 

When you are buying a home, chances are good you’re focused on two things: How much your monthly mortgage payment is going to cost you, and what the kitchen looks like (or is that just me?)

It’s undoubtedly important to understand how much your mortgage principal and interest payment will be, as failing to pay the bank could have dire consequences — such as foreclosure. You do not want to take a chance on these costs taking up too much of your money.

But there’s another big expense to think about as well: Property taxes. If you haven’t owned a home before, you may not be used to being taxed on where you live. But you must prepare for this, as annual property taxes can sometimes cost as much (or more) than the amount you have to pay to your mortgage lender each month.

Property taxes can take a huge chunk out of your budget

It might not make sense that you have to pay your local government just for the privilege of owning a home in your area, but that’s the reality of life in much of America. In fact, the median property tax bill across the United States was $2,971 in 2021, and the effective property tax rate nationwide came in at about 1.11%.

This means if you buy a $500,000 home and you pay the median rate, you’d be looking at an annual property tax bill of as much as $5,550. If you aren’t expecting this added cost on top of your mortgage principal and interest, that could be a very unpleasant financial surprise.

To make sure you aren’t spending more than you should on your house, you’re going to want to be sure you keep your total monthly expenses — including your mortgage, property taxes, and any homeowners association dues, below around 25% to 30% of your income.

Now, in some cases, your mortgage lender is going to want you to make these monthly property tax payments as a part of your monthly mortgage payment. If that’s the case, it’ll divide up how much you owe each year into monthly payments and add that amount to your mortgage bill. So, if you owed $5,550, you’d pay an extra $462.50 a month. Your lender would put this money into an escrow account and take care of paying your taxes for you.

Not all lenders require escrow, though, so if yours doesn’t, be absolutely sure you are saving for property taxes all year long so you don’t get surprised by a huge bill when your county sends out a request for payment.

How much will your property taxes be?

Figuring out how much your property taxes are actually going to be can be more complicated than it seems. That’s because you aren’t usually taxed based on the price you paid for your house, but are instead taxed on the assessed value of your home. Depending on the formula your town uses, that’s typically going to be less than the market value.

You can get a general idea of what your tax bill might be by looking at property tax records to see what the prior owners were paying. However, if you make upgrades to the property or if the former owners qualified for special discounts you don’t (like a widower’s exemption), your tax bill may be a little different.

Don’t forget to take this into account when you’re looking at the home you buy. Since tax rates can vary from county to county, you may want to look at local rules when deciding where to make your purchase. If you could be located a few streets over and pay a lower tax rate, why not do that? Just check the tax collector website for the areas you’re interested in to get an idea of the rate you might pay, so you can make an informed choice — and not be caught off guard by your property tax bill.

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You’re never really too old to invest. But at a certain age, you may need to approach it more cautiously. Read on to learn why. 

You’ll often hear that it’s best to start investing your money at a young age so that it’s able to grow into a notable sum over time. Case in point: The stock market has delivered an average annual return of 10% over the past 50 years, as per the S&P 500 index’s performance. Investing $10,000 at age 25 would therefore leave you with a balance of almost $729,000 in your brokerage account if we were to apply that same 10% return over your 45-year investment window.

But the older you are, the more careful you have to be when it comes to investing in stocks. That’s because once you’re near or at retirement age, the investments you have might need to serve as an income source so you can pay your bills in the absence of having access to a paycheck. And you don’t want to run into a situation where you have to keep cashing out investments at a loss to access the cash you need to pay your expenses.

That’s why going heavy on stocks later in life isn’t necessarily the best bet. But if you’re 65 and on the cusp of retirement, it’s absolutely not too late to invest your money.

It’s all about the having the right asset allocation

When you’re 25, 35, or 45 and are looking to invest, it’s actually a good idea to keep the bulk of your portfolio in stocks. That’s because you want your portfolio to generate the highest possible returns at a time when you’re not close to having to tap that money. But as retirement nears, it’s a good idea to shift away from stocks to some degree and move toward less volatile investments, like bonds.

As such, if you’re 65 years old and are gearing up to invest for the first time, you don’t want to put 100% of your money into stocks. That’s because you might need that cash soon enough to pay your living expenses. But it’s also not unreasonable to put half of your money into stocks and the other half into bonds.

Bond values don’t tend to swing as wildly as stock values. So let’s say you have a portfolio that’s split evenly between stocks and bonds. If the stock market tanks and you need money, it may be that the bond portion of your portfolio hasn’t lost value at all. So in that case, you’d just sell your bonds if conditions aren’t great for selling stocks.

You don’t want to steer clear of stocks completely

Even though you don’t want to take on too much risk in your portfolio later in life, it’s generally a good idea to hold onto some stocks in retirement. That way, the stock portion of your portfolio can continue to generate stronger returns than the bonds portion (which is likely to happen, based on how the stock and bond markets have performed historically).

As far as finding the right percentages of stocks goes, one rule of thumb you can use is to subtract your age from 110. If you’re 65, that brings you to 45 — meaning, you can consider keeping 5% of your portfolio in stocks at that age. If you’re 70, you’d look at sticking to 40% stocks.

Of course, there’s wiggle room with this formula, and it’s really just a way to get started. And for many older investors, a 50-50 split of stocks and bonds is what’s preferred throughout retirement, and that’s fine, too.

The point, though, is that it’s never too late to start investing your money. And you certainly shouldn’t assume that stocks are off the table, even if you’re getting started later in life.

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Owning a home can be really expensive over time. Read on to learn whether the costs are worthwhile. 

It’s not exactly a secret that owning a home is an expensive prospect — especially these days, with mortgage lenders charging some of the highest rates we’ve seen in years. But even during periods when home values aren’t as high and mortgages aren’t as expensive to sign, owning a home can still be costly — more so than renting, since you have to factor in additional expenses.

It might surprise you, however, to learn that the average American will spend nearly $1.49 million to own a home in their lifetime, according to data from OneMain Financial. But while that might sound like a lot of money, it may be worth it to you.

Breaking down the cost of homeownership

There are numerous expenses homeowners have to cover that renters do not. These include:

Property taxesHomeowners insuranceRegular maintenanceRepairs that come up

Over time, these costs can add up to a lot.

But are they worth it?

Well, it depends. Let’s say your home costs you $1.49 million in your lifetime, but you end up living there for 50 years. All told, you’re spending a little under $30,000 a year, or a bit less than $2,500 a month, to own your own place.

When we compare the cost of owning a home to renting one, renters might get away with spending less in their lifetime. The average monthly rent today is $1,967, according to Rent.com data. So that’s about $23,600 per year instead of closer to $30,000, which is what the typical homeowner might spend.

However, there are other benefits of owning a home to consider. First, someone paying a mortgage may be able to deduct the interest portion of it on their taxes if they itemize, thereby making back some of that money. Property taxes may also be deductible. (Right now there’s a cap of $10,000 a year for state and local taxes, which include property taxes.)

But financial benefits aside, owning a home can lead to more stability. When you rent, your landlord could decide to sell their property at any time. Or, they could decide not to renew your lease even if you didn’t do anything wrong as a tenant. When you own a home, you can’t be kicked out provided you’re paying your mortgage and property taxes.

Plus, when you own a home, you get to make your own rules. When you rent, your landlord gets to dictate a lot of things, such as if you’re allowed to have a pet on the premises.

All told, it’s very easy to make the case that owning a home is more expensive than renting one over time. But it’s also easy to make the case that homeownership is worth it despite the higher cost.

So if you’re not sure whether to own or rent, consider all of these angles. Weigh the upside of stability and getting to call the shots against the downside of potentially paying more over time to come to your decision.

And consider the work involved, too. Maintaining a home doesn’t just cost money. There’s a time commitment as well. If you’re willing to make it, homeownership could be for you. If not, renting might be your better option.

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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.The Motley Fool has a disclosure policy.

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Trader Joe’s is known for affordability and positive customer experience. Learn why grocery delivery could undermine these qualities. 

Trader Joe’s is a beloved grocery store, but if you want to take advantage of all the retailer has to offer, you are going to have to leave your house and actually travel to a store in order to do that.

In today’s day and age, when everyone is so used to ordering from the internet and having things shipped to our doors, having to go out into the world and schlep groceries home may not be anyone’s idea of a good time (or at least it’s not my idea of a good time).

For those, like me, who are not really fans of visiting brick-and-mortar stores (to put it mildly), it’s natural to wonder if Trader Joe’s will ever join most of its competitors in offering grocery delivery. If you’re wondering about this all-important question, here are some answers.

Grocery delivery most likely isn’t going to be on offer

The bad news for those hoping to get their TJ’s fix from the comfort of their couch, is that Trader Joe’s is most likely never going to offer grocery delivery service. That’s because doing so would violate some of the key brand principles that set the retailer apart.

The issue was addressed in an episode of the Trader Joe’s (Inside) podcast recently, with the show’s co-hosts discussing some of the reasons why grocery delivery was not something likely to happen. Basically, the absence of the home-delivery option boils down to two big things.

First, it’s expensive to invest in an infrastructure that provides shipping services. Since Trader Joe’s is really well-known for its affordable food (in contrast to similar stores that have a reputation for taking your whole paycheck), the retailer is not likely to start making big investments in setting up a new shipping service that would necessitate raising prices and impacting consumers’ personal finances.

At a time when many Americans are stressed about food costs coming out of their checking account due to rising inflation, it would be a big blunder for Trader Joe’s to start a project that would raise the costs of groceries even further.

The other big problem with offering grocery delivery is that Trader Joe’s prides itself on the customer experience it provides in store. Grocery delivery takes that “experience” factor out of the equation, which means consumers would lose the chance to talk with crew members, try out samples, and discover new products if their groceries simply arrived at their house.

For those two big reasons, Trader Joe’s is simply not going to start delivering groceries to your door (or, sadly, to mine, despite my eagerness).

It may be for the best that you have to visit your local Trader Joe’s

While it may seem like a bummer that grocery delivery from Trader Joe’s will remain a fantasy, the actual reality is that maybe it is for the best.

Unfortunately, having groceries delivered is almost always considerably more expensive. In fact, research has shown using a delivery service could add $40 or more to an order even before accounting for a tip. And that can make sense. After all, how is it possible that you could get an entire person to shop for you and drive groceries to your house without paying a lot for the privilege?

Grocery delivery can also cost you in other ways. The quality of your products will be heavily influenced by your shopper. And while you probably take the time to buy products with longer expiration dates, check your blueberries for mold, and pick the biggest item when things are sold at a flat rate price, your shopper probably won’t.

So, rather than lamenting the fact that Trader Joe’s isn’t going to deliver to you, it may actually be worth re-evaluating whether you should let other companies bring your groceries home for you. You can do a test run by trying grocery delivery for a month and shopping in store the next and keeping track of your credit cards bills to see just how big the price premium is for getting things delivered.

Of course, you can’t do that if you’re shopping at Trader Joe’s — you’ll just have to visit to get your delicious treats.

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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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