Money Management

Making too small of a down payment could cost you. Read more about it here to find out why. 

If you’ve been looking to buy a home, you’re probably aware that it’s hardly an inexpensive prospect these days. Not only are mortgages more expensive to sign, but a persistent lack of real estate inventory has driven U.S. home prices up in a very big way.

You’ll generally hear that it’s a good idea to try to make a 20% down payment on a home when you’re signing a conventional mortgage. The reason? If you don’t put down 20% at closing, you’ll be hit with private mortgage insurance, or PMI. Private mortgage insurance is an extra fee you’re charged on top of your monthly mortgage payments (there can be other ways to pay PMI, but paying it monthly is most common).

PMI might sound like an extra means of protection for you, but don’t be fooled by the word “insurance.” The purpose of PMI is to protect your mortgage lender in the event that you fail to make your home loan payments when you’re supposed to. So it’s a good idea to try to put down 20% on a home purchase to avoid it.

Unfortunately, though, recent Realtor.com data shows that while home buyers are making larger down payments these days, many aren’t hitting the 20% mark. And that means a lot of people are sentencing themselves to PMI on top of the generally high expense of owning a home.

What buyers are putting down today

Realtor.com reports that down payments on homes actually reached a new peak during the third quarter of 2023, with a median down payment of $30,400. A year prior, the median down payment was $27,300. And the year before that, it was $22,300.

But a down payment of $30,400 still only amounts to an average of 14.7% down at closing. That’s below the threshold required to avoid PMI.

Why it pays to avoid PMI

The good news about PMI is that you can eventually get it canceled once you have enough equity in your home. The bad news, though, is that if you make a down payment of less than 20%, you could get stuck paying PMI for a pretty long time. And that added cost might make an already large expense — homeownership — even harder to manage.

PMI usually amounts to 0.5% to 1% of your mortgage amount. So if you’re taking out a $240,000 mortgage, PMI might amount to $1,200 to $2,400 a year. That’s an extra $100 to $200 a month. Imagine you’re spending that extra money on top of your mortgage payments, property taxes, maintenance, and repair costs. That’s a lot to swing.

Plus, putting down less than 20% at closing leaves you with less equity in your home to start off with. If the housing market tanks shortly after you buy your home, you could end up in a situation where you’re underwater on your mortgage — meaning, your home’s market value is less than what you owe your lender. This could be a problem if, say, you need to sell your home right away to take a new job or to deal with the loss of a job.

That’s why it may be a good idea to consider buying a less expensive home or putting off homeownership if you don’t have enough money to make a 20% down payment. This isn’t to say that paying PMI for a period of time is the worst thing in the world. But it’s an added expense you may be able to avoid if you reset some expectations on the home-buying front or otherwise sit tight for a few months.

If you don’t want to do that, know that you won’t be alone in paying PMI. But make sure to budget for that expense accordingly. Find out what your PMI will amount to and make certain you can afford that expense on top of your other homeownership costs.

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 

You’ll generally face penalties for tapping a 401(k) prior to age 59 1/2. Read on to see how there can be an exception to this rule. 

There’s a benefit to saving and investing for retirement in a 401(k) or IRA, as opposed to a regular brokerage account. With a traditional 401(k) or IRA, your contributions go in on a pre-tax basis. This allows you to shield some of your income from the IRS.

Plus, with a regular brokerage account, when you sell investments at a profit, you’re required to pay capital gains taxes for that tax year. With an IRA or 401(k) plan, gains are tax-deferred until you take withdrawals.

But there’s a drawback of saving in an IRA or 401(k). These plans come with rules that dictate when you’re allowed to access your money.

If you tap an IRA or 401(k) prior to age 59 1/2, you’ll generally be assessed a 10% early withdrawal penalty. There are a few exceptions, such as being allowed to tap an IRA early to buy a first-time home. Otherwise, you risk losing a large chunk of your savings by accessing that money early.

But what if you end up in a position where you want to retire sooner than 59 1/2? Or what if you’re forced to stop working sooner than that because your company folds and you can’t find another job?

The good news is that in some cases, you can tap your 401(k) early without facing a penalty. But you’ll need to know how the rules work in that situation.

You may be able to get your retirement money at age 55

If you have a 401(k), you may be able to take withdrawals from it without penalty if you turn 55 during the calendar year you lose or leave your job. And to be clear, it doesn’t matter whether your departure is voluntary or not. However, there are some rules to follow.

First, you can only take penalty-free withdrawals from the 401(k) plan the employer you separated from was sponsoring.

In other words, let’s say you work for the Smith Corporation and have $40,000 in that 401(k). You might also have a $25,000 balance in a 401(k) sponsored by the Jones Corporation, a company you formerly worked for.

If you’re leaving the Smith Corporation at age 55, you can tap the 401(k) the Smith Corporation was sponsoring without penalty. But you can’t start withdrawing from your balance in your Jones Corporation 401(k).

Similarly, you can’t decide to roll the balance of your Smith Corporation 401(k) into an IRA. That’s a common thing for people to do once they separate from an employer. But in that case, you’ll have to wait until 59 1/2 to take withdrawals penalty-free.

Also, you must actually leave your job at age 55 or later to be able to take advantage of penalty-free 401(k) withdrawals. Let’s say you leave the Smith Corporation at age 54. You can’t just wait until age 55 and then start taking withdrawals from its 401(k). In that case, you’ll be penalized.

However, 55 is the minimum age where this leeway applies. So if you leave the Smith Corporation at age 56, you can take penalty-free withdrawals from its 401(k) plan then.

A good 401(k) option to have

You never know when you might end up retiring early — whether by choice or due to circumstances outside of your control. So the fact that you can, in some cases, tap a 401(k) at age 55 without penalty is a good thing.

However, you may want to take steps to protect yourself from penalties in case this option doesn’t end up being available to you but you wind up retiring early. Consider housing a small portion of your retirement savings in a regular brokerage account. You’ll give up the aforementioned tax breaks on that chunk of your savings, but you’ll have the flexibility to tap your portfolio penalty-free whenever you want.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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 

More than 218 million Americans have shopped online this year. If you’re one of them, find out how you can save money every time you shop. 

More than 218 million Americans have shopped online so far this year, spending an average of $5,381 per person. And shopping online is not a trend that’s likely to fade away. If you’re one of the 218 million who log on to do your shopping, you may wonder how to find the best deals on the internet.

Fortunately, there is an abundance of shopping sites designed to sort through the best deals for your personal finances, so you don’t have to. Here, we highlight our favorites.

Capital One Shopping: Best overall

Capital One Shopping is a free browser extension and app. As you shop online, Capital One Shopping automatically searches for online coupons, lower prices, and rewards at over 30,000 online retailers.

When it finds a lower price, Capital One Shopping shows you where you can pay less and how much you’ll save. Capital One Shopping also recommends any available online coupons and promo codes. Even better, it tests the coupons and promo codes, looking for expired ones.

Just when you forget you have Capital One Shopping, it reminds you by popping up in the corner of your computer screen to show you a lower price. And no worries if you don’t have a Capital One credit card. You don’t need one to take advantage of Capital One Shopping. It’s available to download on your desktop, iOS, or Android device.

Google Shopping: Best for price comparison

By far, the fastest, simplest way to compare prices is to log into Google Shopping. Let’s say you’re shopping for Ugg slippers but want the lowest possible price. You would simply type “Ugg slippers” into the search bar at the top of the Google Shopping page, and a list appears. Not only does the list show where Ugg slippers are available, but the price is clearly displayed.

Whether you’re shopping for a chainsaw or a teapot, Google Shopping makes it easy to know where the best deals are to be found and helps preserve your checking account balance.

PayPal Honey: Best for locating coupons and promo codes

You can access Honey by adding the Honey browser extension to your computer or smartphone. Like Capital One Shopping, Honey can tell when you’re shopping, and as you choose items, it combs through more than 30,000 retailers to figure out whether you’re getting the lowest price. At the same time, it looks for relevant promo codes and automatically applies the one offering the biggest discount to your order.

The PayPal Honey app is currently available only for desktops, iPhones, and iPads.

DealNews.com: Best for discovering daily deals

Available on your desktop, tablet, iOS, or Android device, DealNews scours the web to find the best deals of the day. And if you’re someone who appreciates organization, you’ll be pleasantly surprised by how easy DealNews makes your search.

Let’s say you’re searching for a new television. A pull-down menu takes you to electronics and then to any televisions currently available at a bargain. If a promo code is necessary, DealNews provides it, and even links you directly to the retailer’s site.

We only have one word of advice: Check when deals were listed and explore the latest deals first. It’s possible that some of the older deals have expired but have not yet been pulled down from the site.

Finally, another way to score a discount is by shopping with a cash back credit card. Some of what you spend will come back to you via check or statement credit. Any time you can save money upfront and on the back end, it’s a win-win.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and PayPal. The Motley Fool recommends Discover Financial Services and recommends the following options: short December 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.

 Read More 

Is your Prime membership worth hanging onto? Read on to find out. 

Many of us have no problem walking into a store, doing some shopping, swiping a credit card, and heading along on our merry way. For those of us, however, who prefer not to leave the house and deal with crowded aisles, Amazon Prime can be a lifesaver.

An Amazon Prime membership costs $139 if you pay your yearly fee in full. In exchange, you get free two-day shipping on most orders, plus other perks, like the option to try on clothing and footwear before committing to a purchase and access to streaming content.

You may be paying that $139 for a Prime membership now. But should you keep that membership in 2024? Ask yourself these questions to find out.

1. How often did I use my Prime membership this year?

Each time you place an order on Amazon Prime, you save yourself the hassle of going to the store — and the gas money to get there, too. But if you don’t seem to be using your membership all that often, then it may not be worth paying to keep it.

Go through your Amazon orders from the past year and figure out not just how many you placed, but how many you placed that otherwise would not have qualified for free shipping. Amazon orders typically ship free at the $25 mark, though in some cases, you need to meet a $35 minimum requirement.

So let’s say you’ve placed 22 different Prime orders in 2023 so far, or about two per month. If pretty much all of those order totals were high enough that you would’ve gotten free shipping anyway, then perhaps you don’t need a Prime membership in the new year.

2. Are my circumstances changing in 2024?

Maybe you didn’t use your Prime membership so much in 2024. But if you’re anticipating a big life change in the new year, that could be justification to keep your membership.

One example? Let’s say you have a baby on the way. When you’re caring for a newborn, you might barely have time to shower and sleep, let alone drive to Target to stock up on the supplies you need. So in a situation like that, a Prime membership could be worth hanging onto, even if you didn’t use it as much as expected in 2023.

3. Is there another similar service that might be a better fit for me?

Amazon Prime offers its share of benefits. But before you commit to another year of it, figure out if there’s a similar service that might work just as well, or better, at a lower price point.

Walmart+, for example, costs $98 a year, which is considerably less expensive than Prime. Included with that membership is free shipping on all orders without a minimum and free grocery delivery from your local store with a $35 minimum order (a threshold that’s not too hard to meet these days, given the cost of food). Your Walmart+ membership also gives you savings on gas at select fuel stations and access to streaming content from Paramount+.

For plenty of people, keeping an Amazon Prime membership is an easy decision. But if you’re on the fence about keeping yours, or you’re trying to take steps to trim your costs and improve your personal finances in the new year, then run through these questions to figure out what to do.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

 Read More 

A business class ticket offers more than a better seat and extra comforts. You can expect perks that improve your entire travel experience. Find out more. 

Flying in business class differs greatly from the standard economy class travel experience. The most attractive benefits include a more spacious and comfortable seat, not being pressed against strangers, and the ability to recline your seat much more than a few inches. But a business class ticket includes other valuable benefits that can improve your travel experience.

These additional perks could give you more reason to prioritize flying in business class.

1. Priority check-in and expedited baggage handling

When you book a business class ticket, you can expect an improved airport experience. Most airlines offer priority check-in to travelers flying in business class. That means you can use the priority check-in counter to check into your flight and check your bags. Not having to stand in a long line while you wait to check your bags can feel like a major win.

You may also get expedited baggage perks. If this service is included with your ticket, a priority tag will be placed on your checked bags. Bags with these tags are loaded on the baggage carousel first. This benefit can allow you to collect your luggage sooner upon arrival. Wasting less time at the baggage carousel can free up more time for you to explore.

2. Priority boarding

Another perk you can expect when flying business class is priority boarding. You’ll get on the plane sooner than the majority of passengers. Some airlines allow other passengers to board before travelers with premium tickets, like fliers with elite status. But getting on the plane earlier can be a nice perk if you like to have extra time to get settled and relaxed before you depart.

3. Expedited security screening

Another benefit often included with a business class ticket is expedited security screening. This benefit is extra advantageous when traveling on a busy day or during a busy season. I had the privilege of flying in business class last month and was amazed at how quickly I made my way through security, thanks to being able to get in the expedited security screening line.

4. Complimentary airport lounge access

Your business class ticket will likely provide you with access to an airport lounge. Depending on the airline, route, and departure airport, the lounge you get to use will likely include a mix of travelers, such as individuals who have paid for an airline lounge membership, those with elite status, fliers with premium airline credit cards, and business class fliers.

But if you’re flying out of a major airport as a business class traveler, you may get access to a premium airline lounge. Exclusive lounges like this are accessible to a select few, like elite status members and business class fliers like yourself. These lounges have more premium food and drink offerings and amenities. Research before your flight to know what to expect.

5. Upgraded entertainment offerings

Entertainment offerings vary by plane, route, and airline. But it’s not unusual for business class travelers to get upgraded entertainment offerings. On long-haul flights, most airlines offer headphones to all passengers, regardless of fare type. But you can expect a better, more comfortable pair if you’re sitting in a premium cabin. You may also notice your seat includes a larger monitor, which could improve your entertainment experience.

6. A more generous baggage allowance

Your business class ticket may also include a more generous baggage allowance. If you struggle with packing light and prefer to check two bags for your European getaway, you may be able to do so without paying extra fees. But check with your airline on the specifics, as exact baggage allowance rules can vary significantly by airline, route, and destination.

7. Premium food and drink offerings

Another perk you can expect when you fly in business class is premium food and drinks. On long-haul international flights, most airlines provide free meals and drinks, including alcoholic beverages, to all passengers. But when seated in economy class, the food served will likely resemble a microwave TV dinner. Passengers sitting in premium class can expect their dining experience to be of higher quality or at least plated in a more appetizing way.

A business class ticket doesn’t have to break the bank

While business class tickets can come with a high price tag, that isn’t always the case. If you want to experience the plentiful benefits outlined above, take advantage of money-saving business class flight deals so you can continue to honor your financial goals. Don’t forget to pay for your airfare using a travel credit card so you earn rewards on your spending.

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

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. 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.Natasha Gabrielle 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