Money Management

When you change your mortgage loan terms, it’s called refinancing. Learn why the chance to do so for “free” may be too good to be true. 

However you slice it, it’s just not the most ideal time to be an aspiring home buyer. Inventory is limited, which makes sense when you consider the current mortgage rates — as of this writing, the average for a 30-year fixed loan is 7.29%, according to Freddie Mac. At the beginning of 2022, you could’ve gotten that same loan at 3.22%. A ton of homeowners who bought in the pandemic-fueled frenzy of 2020 and 2021 when rates plummeted are reluctant to give up their cheap mortgage loans, leaving buyers without much home inventory to choose from.

But let’s say that you’re intending to grit your teeth and buy a home in the near future, regardless of how rates look. I’m in this boat, too — I’ve spent more than a year saving for a down payment and a home emergency fund, and am growing steadily more tired of renting. Some mortgage lenders are offering what sounds like a pretty sweet deal: a buy-now-free-refinance-later mortgage loan. This gets you in a home now, and you can swap your loan for a cheaper one later. When I first heard about this phenomenon, it sounded attractive to me, too. But what happens when you go for one of these? Let’s find out.

You’ll still pay some fees

The odds of that “free” refinance actually being free are low. Sorry to burst your bubble, but I had to say that right upfront. The reason for this is simple: Not all the fees you pay for a standard mortgage refinance are charged directly by your lender.

There are also third-party refinancing fees involved, such as those paid to the appraiser who ensures the home is worth enough to secure the refinance. Your lender may cut you a break on some of its own processing and credit-check fees (although, as noted by Experian, the fees may only be capped, not eliminated entirely). But you’re still probably going to have to cough up some money to swap your old mortgage for a new one.

You may not appreciably lower your mortgage rate

Another potential issue with a “free” refinance included by your mortgage lender when you buy a home is that you might be required to refinance within a certain period of time. And as we say so often around here, none of us has a crystal ball to see how mortgage rates will change in the future. If you’re required to take advantage of the refinance offer within, say, two years, who’s to say rates will be lower?

Some of the biggest names in the business do have predictions, and some of them are encouraging. For example, the National Association of Realtors’ October 2023 Economic Outlook data suggests we could have mortgage rates under 7% by the middle of 2024, and possibly even as low as 6.3% by the end of 2024. So that’s something to hope for. But it’s definitely not a guarantee. And if rates aren’t lower by the time the clock runs out on your “free” refinance, you might have to forgo it — and pay for a refinance later on down the line.

How can you cope with higher rates?

While we have seen some slightly lower rates these last few weeks, they’re still above 7%. Personally, I’m resigned to paying a higher rate than I’d like when I buy in 2024, but there are some moves you can consider to get the lowest rate possible for the time, whenever you decide to buy.

Focus on your credit score: Your credit score is a major factor in determining how much you’ll pay to borrow for a home purchase, so now is the time to make it sparkle. Get a copy of your credit report (AnnualCreditReport.com) and check for errors that could be dragging your score down. And pay down some existing debt, if you can — doing this boosted my credit score by 100 points in less than a year.Talk to a range of lenders: Different mortgage lenders have different rates and different mortgage programs, so take the time to talk to a handful of them and see what rate you’ll be offered. Resist the urge to go with the first one you investigate.Pad your down payment: Depending on where you’re buying, a 20% down payment may not be feasible for you, but it’s good to put some amount of money down on a home if you can. It’ll reduce the amount you’re borrowing (meaning a lower monthly payment), give you more equity in your home right away, and make you a more attractive buyer to lenders and home sellers alike.Consider an adjustable-rate mortgage: ARMs can be a gamble, but it is a good way to start off your mortgage term with a lower rate. Ideally, rates will fall during the initial fixed-interest period of your loan (often five or seven years) and you can refinance it then.

There is no free lunch — and “free” refinancing offers are similarly dubious. Do your homework, read the fine print, and take the above steps to make yourself a better borrower, even in this time of higher mortgage rates.

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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.
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Eager to get a new job? Read on to find out why waiting till the new year might benefit you. 

Today’s job market is pretty strong. And that’s a good thing, because an October survey by Yoh Services, an outsourcing firm, found that almost 1 in 7 employed Americans wants to leave their current job for a new one in the next 12 months.

You, in fact, may be so eager to get a new job that you’ve been blasting out resumes aggressively in the hopes of securing a different position by the end of 2023. But waiting until 2024 to apply for a new job could benefit you even more.

Do you really want to give up the holidays?

Many people look forward to the December holidays and use them as a time to travel and see family. That might prove difficult, however, if you’re deep in the throes of an interview process with a given employer.

And if you’re hired in the next week or so and are asked to start your new job immediately, you may find that it’s downright impossible to get time off around the holidays as a brand-new employee.

Are you willing to forgo a year-end bonus?

Although not all companies give out bonuses at the end of the year, many do. If you’re usually entitled to a bonus, then switching jobs now might mean forgoing a big pile of cash. That’s money you can potentially use to pay off credit cards, pad your savings, or use for other important financial purposes.

One thing you can do in that sort of situation is try to negotiate a sign-on bonus with your new employer. If you explain that starting your new job right away will mean giving up a big bonus, your new company may be willing to work with you if they want you to accept their offer immediately.

But otherwise, be careful. Even if your new employer pays year-end bonuses, you shouldn’t expect to pad your personal finances with one after having only worked there for a handful of days.

Do you want to risk accepting the wrong role?

It’s hard to get a sense of how a company really operates when you apply and go through the interview process in late November and December. During that time, it’s common for key people to be out of the office and for big projects to be put on hold.

Come January, companies tend to be more focused on work matters and less distracted by the holidays. So it may be a better time to start applying for jobs for that reason alone. Otherwise, you may find that you’re asked to attend interviews in December that are tough to fit into your schedule — only to then have to repeat the process in January once all of the right people are back to work.

There are plenty of good reasons to pursue a new job if you’re unhappy with your current one. But at this point, it generally pays to wait until the new year to go through those motions. Applying for a new job now could mean giving up money and causing yourself undue stress.

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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.
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The younger set is prioritizing experiences in the here and now over saving for long-term goals. Keep reading to learn how to find a good balance. 

Part of getting older is watching younger generations live their lives and feeling at least a little puzzled by their slang terms, their favorite musical acts, and what they do with their money. I’m not quite ready for the old folks’ home yet; I am a millennial (although an older one). And when I heard the term “soft saving” (or #softsaving, as it is tagged on that most Gen Z of social media platforms, TikTok), I had to investigate further. So what is soft saving?

The idea of soft saving is related to living a soft life, another Gen Z trend (and one that I can absolutely get behind). If you’re living a soft life, you’re rejecting hustle culture and embracing self care, enjoyment, and good mental health — all of which is important. Soft saving means you’re not putting aside as much money for future goals, such as investing for retirement, saving money for a rainy day, and so on, and are instead spending more on enjoyment in the here and now.

Unfortunately, this can be a dangerous move for your finances. Let’s take a closer look at two reasons why and explore some options for softer saving that are healthier for future you.

1. You’ll miss out on compound growth

In personal finance spaces, it’s very common to hear how important it is to get started with investing early. This is because the longer the time window you have to contribute to a 401(k) or IRA, the more your contributions will grow thanks to compound interest. When your money earns more money (say, as stock market returns) and is then reinvested, continuing to grow, that’s compounding at work.

Let’s say you start contributing to an IRA account when you’re 25 years old, and you can save $250 per month. You invest that money in an S&P 500 exchange-traded fund (ETF), which measures the performance of the 500 largest companies in the market. The stock market’s average return over the last 50 years is 10%, but let’s be conservative here and say you earn 8%. If you retire at age 65, you’ll have 40 years in the market and end up with more than $782,000. But if you wait even just 10 years, until age 35, to get started with this monthly investment, you’ll end up with about $342,000 — less than half of your total from before. If you wanted that same $782,000 return, you’d need to invest about $572 a month, more than double the $250 monthly tab that would have been sufficient a decade earlier.

Saving and investing can be difficult when you’re just getting started and likely dealing with low wages, debt, or probably both. But as you can see, it’s worth making the effort. And hey, if you contribute to a traditional IRA or 401(k), you’ll lower your current tax bills.

2. Living without adequate savings is extremely stressful — and expensive

Until very recently, I lived paycheck to paycheck without real savings, and let me tell you, it wasn’t any fun. If you don’t have an emergency fund, the first time you have an unplanned expense (and life is absolutely chock full of them), you’ll end up struggling to cover that bill or going into credit card debt to pay it off — and incurring interest in the process.

It’s a far better move to save some money every month. Even if all you can afford is adding $25 or $50 a month to your savings account, when an emergency pops up, you will have some cash to tap that you won’t be borrowing.

A lot of people find it hard to save because they simply don’t earn enough to cover the bills and put money aside, and I absolutely get it. In my experience, the best way to free up money to save is to bring more money in. This could look like taking on a very part-time side hustle (perhaps 10 hours a week walking dogs or driving for a ride-hailing service) or asking for a raise at your main gig.

It’s about finding a balance

So what’s the solution? For starters, I caution against fully embracing any trend you happen to see on social media. I think you can find a balance between prioritizing your mental health, well-being, and happiness, and also planning for the future. If you have money left over after you pay your essential bills every month, I recommend allocating some of it for financial goals, like investing for retirement and building that all-important emergency fund.

Another option to consider is trying to reduce the cost of your fixed bills, such as your cellphone service, home internet, or car insurance. Shopping around for a new car insurer likely won’t take you a tremendous amount of time, and it’s certainly less painful than trying to cut all the fun spending out of your life — especially if you’re hoping to embrace a soft life.

Mental health, happiness, and comfort are all extremely important, and not just for Gen Z — for all of us. But to avoid a negative impact on your personal finances, try to find a balance between saving and spending.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Saving money is important, but there are more effective and less harmful ways to spend less. Learn why one writer just says no to dollar store shopping. 

Does it feel as if everything is so much more expensive than it used to be? Well, you’re not imagining it. We’re still coping with higher inflation than usual (thankfully lower than it was during summer 2022, at least). As of the last Consumer Price Index Summary report, inflation was holding steady at 3.2% between October 2022 and October 2023. So if you’re hoping to spend less money on your everyday purchases (and who among us isn’t?), shopping at dollar stores seems like the natural choice.

Dollar stores are everywhere — Statista reports that there were over 37,000 of them in the U.S. last year. Plus, shopping at dollar stores comes with some perks — for example, they can be a great place to buy low-cost gift wrap and greeting cards (why spend more for something that will be thrown out in short order?).

If dollar store shopping works well for you and your personal finances, I absolutely get it, and think you should keep saving money in any way you can. But my own issues with dollar stores supersede my desire to save money. Here’s why I avoid dollar stores.

1. I have concerns about product safety

Chances are good that you’ve been impacted by a product recall at least once in your life — manufacturers and sellers implement these to get potentially unsafe products out of the hands of consumers. Earlier this year, Family Dollar undertook a recall of almost 300 drugs and other medical products that had been stored improperly and then sold at stores in almost two dozen states.

The fact that so many different products, from toothpastes to allergy medicines to painkillers, were affected is extremely concerning and points to bigger issues with how dollar stores handle their supply lines and distribution. (Some of this relates to staffing problems; see below for more on that.) Dollar stores certainly aren’t the only retailers who occasionally have to recall products for safety issues, but it’s definitely a reason I would never buy medication or similar items from a dollar store.

2. I don’t like the way they operate

Dollar stores have a nasty habit of moving into rural areas of our country and undercutting local small businesses with their seemingly lower prices on essential items. In some places, they can even push out grocery stores, making dollar stores the only place to buy grocery items. And since the number and types of items sold are limited (particularly the selection of fresh produce, assuming it’s available at all) at dollar stores, this can be extremely limiting for consumers.

Going beyond the impact on local businesses and the food supply, dollar stores have also gotten in trouble with the federal government for not providing a safe working environment for staff members. As recently covered by Last Week Tonight with John Oliver (as well as other outlets), dollar stores can be severely understaffed, terribly disorganized, and even beset by rats and violent criminals. I’ve lived and worked in small rural towns, and the residents there deserve better. In some places, locals are fighting back — NPR reported that 50 communities in the U.S. have put limits on new dollar stores opening in their area.

3. I’d rather spend more upfront for items that last

While paying less for an item you buy is a more straightforward way to find savings, dollar stores don’t always sell the highest quality of a given item. I’m fortunate that I am able to put a bigger charge on my credit card for a purchase and in exchange, have it last for longer. Batteries, tools, and toys are all examples of items best avoided from dollar stores because they just aren’t as well made or long lasting as items you might pay more for from brands you’ve heard of.

I can buy an eight pack of AAA batteries from Dollar Tree for $1.25. But if those batteries end up leaking, or even just not lasting very long, I’ll use them up more quickly than I would if I sprung for Duracells from Amazon. There are other ways for me to save on higher-quality items, such as waiting for holiday sales or buying in bulk, rather than buying them at dollar stores.

Personal finances are just that — personal. So just because dollar store shopping isn’t a fit for me doesn’t mean it isn’t for you. I do recommend taking the time to compare prices using product sizes, however, as this is one way you might be fooled into thinking dollar store prices are lower. That way, you’ll be able to tell in real numbers whether you’re saving money.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon. The Motley Fool has a disclosure policy.

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