Money Management

Looking to own a new-construction home? Read on to see why you might encounter some issues if you sign a contract today. 

If you’ve been struggling to buy a home, you’re no doubt in good company. Housing inventory has been sluggish this entire year. And as of late September, there was only a 3.4-month supply of homes on the U.S. real estate market, according to the National Association of Realtors. That’s well below the four- to six-month supply that’s generally needed to meet buyer demand.

As such, you may be at the point where you’re willing to pay to have a home built from the ground up rather than wait for the right existing home to hit the market. Doing so will likely mean taking on a larger mortgage. And at a time when mortgage lenders are charging higher borrowing rates, that may not be ideal.

But if you can afford to purchase and finance a new construction home, you may decide to just go for it. Embarking on that project now, however, is a move you might regret for one big reason.

Will weather get in the way of your home-buying plans?

Any time you sign up to purchase new construction, you run the risk of delays. And those delays can stem from different places.

Homes being built from the ground up need to go through different stages of inspections. Sometimes, there can be a delay on the part of a township or municipality that holds up the construction process.

Similarly, home construction can be delayed if supplies aren’t available when they’re needed. There can also be delays if builders experience staffing issues, such as if their subcontractors cancel on them or fall ill.

There’s basically no time of the year that’s immune to delays when it comes to construction. But if you’re starting a new construction project in winter, you may be more likely to fall victim to weather-related holdups. And that could end up being problematic.

If your home build is delayed extensively, it might put you in a situation where you have to move out of your existing home before your new one is ready. From there, you might have to bear the expense of temporary housing and storage. You could also run into problems if your mortgage rate lock expires and the cost of borrowing rises.

Talk things through with your builder before signing on

Homes get built during the winter months all the time. But if you’re starting a new construction project going into winter, it pays to sit down with your builder and ask some questions first. Those might include:

What weather-related delays are most common?Are there steps you can take to mitigate them?What’s the longest delay you’ve experienced in the course of building a single home?

You may decide to move forward with new construction regardless of the season. But it’s important to know what you’re getting into so you can adjust your plans accordingly. That could mean extending your current lease by a few months so you don’t risk ending up without a place to live, in case your new home takes a lot longer than planned to become move-in ready.

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Buying into the wrong tax information could cost you. Read on to learn more. 

The U.S. tax code is loaded with rules designed to save taxpayers money. It’s a good idea to read up on the credits and deductions that can lower your taxes.

But it’s also important to understand which credits and deductions you’re entitled to. If you claim the wrong tax breaks, you might end up owing the IRS money and having a headache on your hands. With that in mind, here are three tax myths you should not buy into.

1. You can claim a home office if you work remotely

Many people work from home in the wake of the COVID-19 pandemic. But unless you’re self-employed or run a small business from home, you’re not entitled to a home office deduction — even if you do 100% of your job from your house.

Now that said, you can claim a home office deduction against any self-employment income you have. So let’s say you’re a salaried employee who earns a regular paycheck from an employer. If that’s your only income source, you don’t qualify to take a deduction for a home office. But if you moonlight as a web designer on the side for six hours a week and get paid for that work on a freelance basis, then you can look at claiming a home office deduction.

2. You can deduct child care costs if you’re self-employed

Self-employed people can deduct different expenses related to doing their jobs. For example, if you run a tutoring service, you can deduct the cost of getting to and from clients’ homes. You can also deduct the cost of scheduling software you use to maintain your calendar and materials you use to enhance your lessons, like flashcards.

But one expense you can’t deduct in this situation is child care. Even though you might need to pay daycare tuition so you can do your job, child care is not a deductible expense when you’re self-employed.

However, if you pay for child care, you may be eligible for a tax credit that covers some of your expenses. It’s called the Child and Dependent Care Credit. And while it’s a little complicated to calculate, with the help of good software or an accountant, you can figure out what percentage of your child care costs you can claim.

To be clear, though, if you have two kids in daycare and spend $20,000 a year on child care, you can’t just claim a $20,000 deduction. The Child and Dependent Care Credit will only allow you to claim a portion of up to $6,000 in child care costs for two children.

3. You can claim a pet as a dependent

Having a pet costs money. And in some cases, you might actually end up spending more on your pet’s medical care than what you spend on yourself or your children.

Unfortunately, though, you cannot claim a pet as a dependent on a tax return the same way you can claim a child. If you’re struggling to cover the cost of pet care, look at pet insurance policies to see how the right one might be able to help defray your costs.

Keep in mind, though, that pet insurance generally won’t cover pre-existing conditions. So if your pet has many of those, your best bet for paying for their care may be to pick up a side job. If you do, track your expenses if you’re paid on a freelance basis so you can claim the right deductions.

Nobody wants to pay the IRS more money than necessary. But before you rush to snag your share of tax breaks, make sure you’re entitled to do so.

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Home insurance can be pricey, but a single disaster could cost a lot more. See what you need to know about the costs of repairing a home without insurance. 

The average annual homeowners insurance premium in 2023 is $1,787, and this price can be a lot higher for those who live in areas prone to natural disasters and those who own large homes. It’s natural to wonder whether it’s worth paying thousands per year for home insurance, especially if you’ve owned your house for years and never filed a claim.

Below, we’ll take a look at what would happen if a homeowner chose to forego coverage — and why you might not be able to go without homeowners insurance even if you want to.

What happens if you skip homeowners insurance?

In the best-case scenario, not purchasing homeowners insurance could save homeowners a few thousand dollars per year. They could put that money toward debt repayment or saving for their long-term goals. But these benefits aren’t worth the huge risk homeowners run if they need to file a claim.

Only about 5.3% of homeowners filed an insurance claim in 2021, according to the Insurance Information Institute. But the average cost per claim was $16,048. In this scenario, homeowners without insurance would have to pay for all these damages out of their own pocket. And if they didn’t have enough money, they may have to take on debt to cover it, which could impede their ability to save for their future.

And that’s not even the worst-case scenario. If a home burns down or is destroyed by a tornado or hurricane, the homeowner might need to rebuild from scratch. This will almost certainly cost hundreds of thousands of dollars, even for a small home. And to make matters worse, building costs can get expensive very quickly in areas hit by natural disasters as many homeowners scramble to have their homes rebuilt at the same time.

Even though the risk of filing a claim is small, it’s much easier for a homeowner to make room for an insurance premium in their budget than to come up with the cash for a full rebuild on the spot. So it’s a good idea for all homeowners to ensure they have adequate home insurance coverage. And you might not have a choice.

Who needs homeowners insurance?

Homeowners with mortgages are almost always required to have a comprehensive homeowners insurance policy in order to get their loan approved. Mortgage lenders do this to ensure their asset is protected. After all, if the homeowner fails to make their mortgage payments, the house becomes the bank’s property.

If the homeowner didn’t have insurance, they could just stop making their payments in the event of a home-destroying disaster and the bank would be left with no way of getting its money back. And it probably wouldn’t be in business very long either.

That’s why homeowners are usually required to provide their mortgage lender with proof of insurance before their loan is approved. If the homeowner switches insurance providers and fails to notify the bank, the bank will likely reach out and ask for proof of insurance within a certain number of days. Without this proof, the bank can foreclose upon the home.

How do you save on homeowners insurance?

Rather than skipping homeowners insurance, try the following tips to keep insurance premiums as low as possible.

Shop around: Compare rates from several insurance companies before purchasing a policy. Every company assesses risk differently, which is why each gives a homeowner a unique rate.Check for discounts: All home insurers offer some discounts to help customers save. More discounts doesn’t always translate to the lowest possible rate, but they can help. Homeowners might be able to bump up their savings by taking steps like installing storm shutters or a new roof to take advantage of discounts for these items.Raise the deductible: Deductibles are the out-of-pocket costs that homeowners pay in the event of a claim. Going with a higher deductible can reduce monthly premiums.

Taking these steps can help homeowners strike the best balance between saving money and getting the coverage they need. It’s also a good idea to review homeowners insurance coverage every year. Homeowners might need to increase their policy limits to keep up with rising costs in their area, and they may also want to compare rates again to see if they can find cheaper coverage elsewhere.

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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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The holiday season can be pretty expensive. Take a look at five seasonal jobs that could help you cover your extra costs. 

The holiday season brings extra expenses for shoppers and extra traffic for businesses. Both these things on their own can be problematic, but there is a way for the two groups to help each other: seasonal jobs. Employers hire workers, often part-time, during the holiday season when they need extra staff, and seasonal employees can use their checks to fatten their bank accounts.

If you’re interested in making a little extra cash this holiday season, here are five seasonal jobs worth considering.

1. Mall Santa

The average mall Santa makes about $23.56 per hour, according to ZipRecruiter. But as with most jobs, actual pay rates vary depending on location. Those in large cities tend to get paid more, though there might also be increased competition for positions there.

Many malls try to hire mall Santas around this time, so start looking right away if you’re interested in this. Some businesses prefer to work with a staffing agency, so consider reaching out to one of these if you have no previous experience working as a mall Santa. You could also try contacting malls directly to see if they need any help this holiday season.

Obviously, you need to be good with children to take on this role, and you also have to be comfortable sitting for several hours. You may need your own outfit as well. Check with your employer to see if this is necessary.

2. Delivery driver

If you’re comfortable behind the wheel, look into delivery driver jobs. You have a few options here. Companies like UPS often hire seasonal drivers to work specific routes during certain hours. This might be the way to go if you want something predictable. Pay rates start at $21 to $23 per hour for seasonal workers, according to UPS’s website.

But working for a service like Instacart might be a better fit if you want something you can tailor to your schedule. You can do other people’s holiday shopping for them and drop items off at their homes. This enables you to take on as much or as little work as you want, which can also give you more control over how much you add to your personal finances.

3. Retail work

A lot of stores need extra employees to stock shelves and ring up customers, so there’s no shortage of retail jobs available right now. Pay varies by location and retailer, but these positions pay about $13.89 per hour on average, per ZipRecruiter.

You may be able to make more than this by working extra shifts or working weekends or evenings. Previous retail experience will be beneficial when seeking out these jobs, but most companies are willing to train you if you don’t have any.

4. House sitter

People travel a lot during the holidays, and some go away for a month or more in the winter. This creates openings for house sitters so those traveling can be sure their plants get watered and their mail gets picked up.

There are several house sitting job boards online, like TrustedHousesitters.com. You may also be able to find these jobs by checking social media groups for your area. Prices for house sitting vary depending on the duties required and the homeowner’s budget. Make sure you ask questions of the homeowner before agreeing to take the job to clarify what your duties will be and when and how you’ll get paid for your services.

5. Pet sitter

Similar to house sitters, those traveling for the holidays might be in need of pet sitters. Having prior experience owning or caring for a pet will be helpful here. There are online job boards for this as well, and social media might also help you turn up leads. Again, costs will vary depending on how many pets you’re watching and how much care they require.

These are just a few ideas to get you started. You may be able to find other seasonal jobs in your area by searching online or inquiring with local businesses. Think about your availability and how much you hope to make this holiday season and use this information to guide you to the best seasonal position for you.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. Kailey Hagen 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.

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Out of work? Read on to see if you should start raiding your emergency savings right away. 

In October, the U.S. unemployment rate hit 3.9%. That’s by no means a dire number. But it is a small increase from September, which indicates that more people who want to be working aren’t.

Now, it may be that despite a generally strong economy, you lost your job recently. Maybe your company was having financial difficulties. Or maybe it was determined that your specific role was no longer needed.

Either way, losing a job can be a huge blow. But if you have an emergency fund to tap, you can take some comfort in the fact that you won’t immediately have to resort to debt to cover your basic expenses. Before you start raiding your savings account, however, you may want to see if there’s money coming your way from your employer or the government.

Are you entitled to severance or other pay?

Some companies have a policy of paying severance to employees who are terminated through no fault of their own. If that’s your situation, it pays to review your company’s policy and see what pay you’re entitled to.

Perhaps you have a month’s pay or more coming your way in a lump sum. That might make it so you’re able to mostly leave your emergency fund intact.

Even if your employer doesn’t offer severance, you may, under the terms of your employment contract, be entitled to get paid out on accrued time off you didn’t use. Look at your employment agreement carefully and contact your benefits department if you think you’re entitled to be paid for unused vacation or sick time. If you get a check in your hands in short order, you can leave your savings alone for longer.

File an unemployment claim right away

Generally, when you’re terminated through no fault of your own, as opposed to being fired for cause, you’re eligible to collect unemployment benefits through your state. So if you’ve been laid off, it pays to file a claim for unemployment right away.

It can take some time to process an unemployment claim. So you might have to tap your emergency fund until your claim is approved and you start getting a weekly benefit.

You should also know that your weekly unemployment benefit will likely be a lot less than your regular paycheck. You may need to supplement that benefit with money you withdraw from your savings. But if, say, you normally spend $4,000 a month on essential living expenses and you’re able to get $2,000 of that in unemployment benefits, it means you only have to take $2,000 out of savings.

The whole purpose of having an emergency fund is to be able to get through a financial crisis, whether it’s an expensive home repair or a period of joblessness. But don’t assume that your emergency fund has to be your only source of cash after losing your job. You may have access to other funds that allow you to keep your savings more intact, so that money is there for you in a future crisis.

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The amount of money you’re pre-approved to borrow isn’t necessarily reflective of what you can afford — or want to spend. Read on to learn more. 

It’s not an easy time to try to buy a home. As of late September, there was only a 3.4-month supply of homes on the market, as per the National Association of Realtors. That’s well below the four- to six-month supply typically needed to fully satisfy buyer demand.

Because of this, it’s important to present yourself as a serious buyer when you’re making an offer on a home. At a time when there’s lots of competition, you want any seller you work with to feel confident in your ability to get a mortgage.

It’s a good idea to seek out pre-approval from a mortgage lender. A pre-approval letter isn’t the same as an actual mortgage, but it’s a step in that direction. Basically, if your financial situation doesn’t change for the worse between when you secure mortgage pre-approval and when you apply for an actual mortgage, you really shouldn’t have trouble getting that financing.

But it’s also important to take your mortgage pre-approval with a grain of salt and be open to borrowing less than the amount you’re approved for. Here’s why.

Your lender doesn’t know the whole story

In the course of getting pre-approved for a mortgage, you’ll need to provide a lender with certain pieces of financial information, like your annual salary, pay stubs, and recent tax returns. You may also need to provide information on any outstanding debts you have. That will give your lender a sense of how much of a mortgage you can afford.

That said, when getting pre-approved for a mortgage, your lender isn’t going to look at every single aspect of your financial life. So if you have certain bills that are notably expensive, your mortgage pre-approval may not reflect them.

Let’s say you’re an applicant with three young children. Your mortgage lender probably isn’t going to ask if your kids go to daycare and what tuition there runs. They’re simply going to look at your income and debts to see what sort of monthly payment you can swing. But if you’re writing a check to your daycare provider for $800 a week, that’s going to affect your ability to pay a mortgage.

Run your own numbers

It may be that you’re able to get pre-approved for a $300,000 mortgage. That’s helpful, because it gives you a budget to work with. If you have $100,000 saved for a down payment, it means there’s really no sense in looking at homes that are listed at upward of $400,000.

But remember, just because you’re pre-approved for a $300,000 mortgage doesn’t mean you can comfortably afford one. So figure out what mortgage amount works for you based on your expenses and income. And then look for homes that allow you to stick to a price range you’re comfortable with. You may decide you don’t want to borrow more than $240,000, and that’s fine. Plugging numbers into a mortgage calculator can help you find a home price target to aim for.

Remember, you know your own finances better than any lender. So don’t get too hung up on your pre-approval number. Instead, come up with your own.

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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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