Money Management

The median existing home sale price climbed again in August. Find out how to decide whether you can fit the costs of homeownership into your budget. 

According to the National Association of Realtors, in August of 2023, the median home price hit $407,100. This is the third month in a row when the median price was higher than $400,000. This is pretty high, and it’s up 3.9% compared to the median price of a home a year prior.

Unfortunately, home prices are climbing at the same time as mortgage rates. As of mid-October, the average interest rate on a 30-year fixed rate mortgage hit 7.63%, per Freddie Mac. This is compared to rates of 3.00% or less during the heart of the pandemic.

With the median price of a home so high, and mortgage rates so high, you may wonder if it’s even possible for you to afford to buy a home.

Can you afford to buy a house in this environment?

For many people, the sad reality is that it is not possible to take out a mortgage loan and buy a home with today’s rates and prices.

To avoid devoting so much of your income to your home that you cannot accomplish other financial goals, you generally need to keep your housing costs to about 25% or less of your post-tax income (that’s the amount you bring home after taxes).

If you bought a median-priced home with a 20% down payment, you’d be borrowing $325,680. If you took out a 30-year mortgage for that amount at the average rate of 7.63%, the monthly payment on your mortgage for principal and interest would be $2,306.

On top of that, you’d be looking at additional costs for taxes and homeowners insurance, which would have to be factored in. These vary based on where you live. In Pennsylvania, for example, you would most likely be looking at somewhere around $543 in additional monthly costs for property taxes and insurance.

With a total monthly payment of around $2,849, you would need a monthly after-tax income of around $11,396 to keep your housing costs below that 25% threshold. So if you didn’t make close to $140,000 annually, you would not be able to comfortably afford the median-priced home.

What should you do if you can’t afford to buy?

Most people simply do not make $140,000, and so buying a median priced home may not be a good decision.

Now, you can buy a house that comes with a monthly payment that exceeds 25% of your income. Most lenders will allow you to have much more debt than that. But if you take on a bigger financial obligation, you could find yourself with housing payments that eat up so much of your budget that you can’t do other important things. Do you really want to be unable to go on vacation or save for retirement because you spent so much on your house?

Rather than pushing your housing budget to its limits, your other options include:

Waiting and hoping prices and/or mortgage rates come down. The problem with this is, there’s no guarantee it will happen, and you could find yourself really priced out of the market if things get worse.Saving more money to put down. If you can make a larger down payment, you won’t have to borrow as much — so your payments could be more affordable. You could also perhaps get a better rate on your loan since the mortgage lender is taking on less risk.Buying a smaller, cheaper home. You don’t have to buy a median-priced home. You can buy a less expensive one, such as a starter home or as a fixer upper. You could also opt to buy a home that checks most of your boxes but isn’t perfect, as it will still enable you to begin building home equity without overtaxing your finances.

The reality is, it’s not an ideal time to buy a house right now. But if you’re financially ready and you can keep your housing costs to 25% of your income, you may decide to move forward anyway since there’s no way of knowing how long it will take for a better time to come along.

Just be sure you don’t push yourself into buying something that’s too expensive — especially because you could be stuck with it and unable to sell for what you paid if the market does take a turn.

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Almost 25 million American households have limited access to banking services. See how much this costs them and what banking options might be available. 

Around 5.9 million American households don’t have a bank account, and an additional 18.7 million households have limited access to financial services. According to FDIC data, that means there are almost 25 million households who are reliant on prepaid debit cards, money orders, and online payment providers to carry out essential financial transactions.

Some people choose not to have a bank account because they don’t trust banks. Others may have had trouble in the past or worry about meeting minimum balance requirements. If you don’t have a bank account, those are all understandable concerns. The difficulty is that the costs of living without a bank can really add up.

The costs of not having a bank account

Unfortunately, there are both direct and indirect costs to being outside the traditional banking system. It can be time consuming, for starters. For example, you may have to go in person and wait in line so you can pay certain utility bills. It can also be harder to access credit if you need to borrow money, and put a drag on everyday money management. Plus, it’s often more expensive. Here’s how some of the costs break down.

Prepaid debit cards and online payment services

A third of unbanked homes use prepaid cards to pay bills, receive money, and make purchases and other transactions, per the FDIC. Costs and benefits vary depending on the card, so it’s worth shopping around for one that suits your needs.

For example, Bluebird by American Express (Member FDIC) has no monthly fees, a decent network of ATMs with free withdrawals, and ways you can add cash to your account at no charge. Other cards have monthly fees (often waivable) and charge for various transactions. The Walmart MoneyCard charges a $5.94 monthly fee unless you deposit at least $500 a month. It also rewards you for shopping at Walmart.

Many transactions with online payments apps such as PayPal, Venmo, and Cash App are free, particularly if you aren’t using a debit or credit card. However, you may have to pay if you need an instant transfer, and you’ll need a non-bank way to top up your payment app.

How to save money: Research prepaid cards that are free or have waivable fee requirements you can meet.

Money orders and cashing checks

If you don’t have a checking account, you might use a money order to send money. If you do it via the U.S. Postal Service, it can cost $2 or $2.90, depending on the amount you need to send. Costs also vary for cashing a check. Walmart charges a maximum of $4 for checks up to $1,000.

How to save money: Use payment apps to send money for free rather than money orders. You may be able to deposit checks for free if you use the check writer’s bank. Several prepaid cards allow mobile check deposits, which may help if you regularly need this service.

What to do if you don’t have a bank account and want one

The fees above give you some idea of the costs of being unbanked. Let’s say you’re paying a monthly fee of $5 for a prepaid card and another $8 a month for money orders and cashing checks. That’s more than $150 a year.

You might feel that you don’t have another option — or that banking fees would cost you even more. But if you want a bank account, there are moves you can make.

1. Look into second-chance bank accounts

If you have had difficulties before, such as overdrawing an account or unpaid fees, you might have trouble opening a bank account. Banks use something called ChexSystems to track this type of activity and may decline applications as a result.

This is where second-chance banking comes into play. These accounts are designed for people who may not get a high enough ChexSystems score. Shop around for one with a low (or no) monthly fee and requirements you can meet. Over time, you can rebuild your ChexSystem score and qualify for an account with more perks.

2. Look for a no-fee bank account

If you’re concerned about bank account fees, there are several free checking accounts that might suit your needs. Be aware that even if the account doesn’t charge monthly maintenance fees, you may get hit for expenses like ATM fees or overdraft fees. For example, a lot of banks will charge you for using an ATM that’s not in their network.

Overdraft fees can be nasty, but you can avoid them. If your bank account is regularly low on funds:

Look for a bank that won’t charge non-sufficient funds (NSF) fees. NSF fees are charged if a transaction gets declined because there isn’t enough money in the account. Many banks have scrapped this fee.Say no to overdraft protection. Overdraft protection means the bank will process a transaction, even if you don’t have the funds, and charge you a fee. Don’t opt in to this service. That way you won’t get charged for each overdrawn transaction.

3. Look for an account that doesn’t require a minimum balance

Minimum balance requirements can be another big concern. Nobody wants to get charged just because their balance slips below a certain amount. But there are a number of top checking accounts that don’t have account minimums offered by online banks, such as Discover, Ally, and Chime.

Bottom line

If you don’t have a bank account, you could be paying unnecessary fees to pay your bills or otherwise manage your finances. Not only that, you may be missing out on some of the convenience and consumer protections that banks offer. The good news is that there are a number of ways to avoid banking fees, particularly unexpected ones. There are also second-chance options if you’ve had difficulties with banks in the past.

You can do a lot with prepaid debit cards and online payments apps, but a bank account may actually work out to be cheaper and more secure.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Ally is an advertising partner of The Ascent, a Motley Fool company. Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends PayPal and Walmart. 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.

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There are steps you can take to boost your net worth — though some are easier than others. Read on to learn more. 

Your net worth is one of those things you probably don’t think about often. Or maybe you do. But either way, you may be interested to know that in the three-year period from 2019 to 2022, Americans’ net worth grew by a rather impressive 37%, according to data from the Federal Reserve. To give that context, if you had a $10,000 net worth and it rose 37%, you’d be at $13,700.

Now, there are different reasons why Americans saw their net worth rise so much. Part of it had to do with home values soaring. Stock market gains also help account for that uptick in net worth.

If you’re eager to boost your net worth, there are a few key steps you can take. But first, let’s make sure you understand what net worth is. The formula is simple: Your assets minus your liabilities equal your net worth. If you have $30,000 in your savings account and own a home worth $300,000, but you also owe $130,000 on your mortgage, you have a net worth of $200,000.

With that in mind, here’s how to set yourself up to grow your net worth.

1. Put more money into savings

It’s a good idea to have money in savings for emergency expenses. And the more savings you have, the higher your net worth can grow.

But if you’re good on near-term savings, you can fund your long-term savings by contributing money to an individual retirement account (IRA) or 401(k) for retirement. These are assets that also count toward net worth.

It’s not always so easy to come up with money for various savings accounts. But one trick that might help is setting up an automatic transfer.

Employer 401(k) plans do this by default, since contributions are deducted from your paychecks. But if you’re funding an IRA, for example, you can set up an automatic contribution every month so money leaves your checking account and lands there instead. If that money gets moved automatically, you may be less likely to spend it on something else accidentally.

2. Pay off your credit card debt

Your debts are part of your net worth calculation. So the less debt you have, the more your net worth can grow.

You may have different types of debt, including a mortgage, car loan, and credit card balance. But of those, it pays to focus on your credit cards first, since chances are, your home and auto loan have lower interest rates, and fixed rates at that.

Of course, it’s possible to have a variable rate mortgage. But even so, the typical mortgage has a lower interest rate than a credit card does, even with borrowing rates for homeowners being higher today than they were just a few years ago.

One thing you may want to do is consolidate your credit card debt if you’re carrying multiple balances at high interest rates. A balance transfer could work in this situation, but be mindful of the fees and limited-time introductory rate these offers tend to come with. Another good option is to consider consolidating credit card debt via a home equity or personal loan.

3. Invest in the stock market

Funds you need for near-term expenses should not be invested. But putting your spare cash into the stock market could grow your net worth in a very meaningful way.

Over the past 50 years, the stock market has averaged an annual 10% return. If you have $10,000 you don’t need for other purposes and you invest it in stocks for 20 years, you might grow it into almost $62,000.

And if you’re worried that investing in the stock market is too risky, know that you can mitigate the risks involved by investing over a long period of time. That gives you an opportunity to recover from downturns. Diversifying your holdings can also help minimize your losses and lend to nice gains in your portfolio.

Homeownership can boost net worth

Whether your net worth increased in recent years or not, there are steps you can take to boost that number in the coming years. Of course, it’s worth mentioning that buying a home can be a great way to grow your net worth, since home values have a tendency to rise over time. But right now, home prices are up, mortgages are expensive to sign, and there’s not a lot of inventory. So you might face a host of challenges in today’s housing market.

If homeownership isn’t attainable soon for you, don’t despair. Boosting your savings, paying down credit cards, and investing your money are all other very effective ways to give your net worth a lift.

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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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Dreading the usual Thanksgiving prep? Read on to see how you might be able to outsource that work to Costco instead this year. 

Some people absolutely love hosting Thanksgiving and getting creative in the kitchen. But if you’re someone who dreads Thanksgiving and the hours upon hours of preparation that tend to come with it, then you may be in luck.

Costco is selling a Thanksgiving meal kit for $199.99 that’s designed to feed a party of eight. You’ll need to pre-order yours by Nov. 5, but it could be worth it for the time-related savings involved. And you may even find that Costco’s Thanksgiving dinner kit saves you money, too.

When you’re looking to outsource your Thanksgiving meal

Even if you’re someone who likes to cook, being in charge of Thanksgiving isn’t easy. There’s a lot of pressure to throw together a massive feast, and you may not have the time or desire to spend an entire day preparing food.

If you’re not at all looking forward to a day of cooking, let Costco come to your rescue. For $199.99, you’ll get the following:

Five pounds of skin-on turkey breastA two-pound tray of stuffingA 1.5-pound trap for mashed potatoes with a side of gravyA 1.6-pound tray of macaroni and cheese A two-pound pack of sweet cornA two-pound pack of green beansCranberry relish12 dinner rollsOne pumpkin pieOne apple pie

All of this food will ship frozen, and you can expect delivery to your home between Nov. 8 and 17.

Will Costco’s Thanksgiving meal kit save you money?

You probably won’t save money by purchasing Costco’s meal kit compared to buying ingredients for the above dishes at Costco, or even elsewhere.

At your local grocery store, turkey might cost about $3.50 per pound. So a five-pound turkey might cost you just $17.50.

A Costco pumpkin pie, meanwhile, is generally only $5.99 (though prices can vary). So right there, you’re looking at $23.50 for 20% of your meal.

The cost of the other items included in Costco’s Thanksgiving dinner kit can vary based on how you prepare your sides. But macaroni and cheese, for example, can be an extremely inexpensive dish to prepare. A single box of Kraft might cost under $1.50, so even if you need five boxes, you’re looking at $7.50 or less in total. (Of course, if you insist on making yours from scratch with high-end cheese, that’s a different story.)

All told, you can probably throw together a Thanksgiving meal for eight for under $200 — but not so much under. So the question you’ll want to ask yourself is how much time you want to save.

Also, if you’re so not looking forward to cooking to the point where you think you’ll pay to cater your Thanksgiving dinner, then you’re likely to put more than $200 on your credit card by going that route through a local restaurant or caterer. In that regard, Costco’s offering could save you some money.

All told, Costco’s Thanksgiving dinner kit may be worth considering if you’re not excited to cook for the holiday this year. But chances are, this meal kit is going to be a popular item, which means it may sell out soon. If you are interested in ordering it, do so quickly so you don’t miss out.

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

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Winning the lottery is a dream for many. Keep reading to learn how lottery winners sometimes get it wrong — and lose money along the way. 

Just this month, a single player hit one of the largest Powerball jackpots ever and now finds himself $1.76 billion richer and with about a million decisions to make. For any of us who can’t imagine having that kind of money, it seems like a dream come true. But for some past lottery winners, that dream turned into a nightmare. That’s because there’s no book that tells us how to handle such a large windfall. Here are five of the biggest mistakes a lottery winner can make.

1. Losing the ticket

Unless they can prove they had the winning ticket, a person is out of luck. It’s recommended that anyone who plays the lottery should take a picture of the ticket, front and back. Then, they should put it somewhere secure, like a safety deposit box or personal safe. Also, they should save copies of the pictures they took to the cloud.

Some experts recommend signing your name on the back of the ticket immediately, so no one else can find it and claim it as their own.

2. Telling the world they’re rich

Ideally, lottery winners would tell only those who need to know they won. However, that appears to be difficult for some. In their excitement, they tell the entire world that their lives have changed. Suddenly, people they barely know or haven’t seen in 30 years contact them with sad stories of financial need and amazing investment opportunities.

It’s your better bet to enter a lottery that allows you to remain anonymous.

3. Believing they can handle the money by themselves

Although the percentages vary depending on the source, there are plenty of stories of lottery winners who’ve lost their fortunes. Here are some of the professionals they should have hired:

A financial advisor: A great one can help a lottery winner keep their feet on the ground, as well as help them manage their wealth and to accomplish their goals. For example, if a lottery winner wants to buy a small town in Idaho, there’s a good chance their financial advisor will point out the reasons it wouldn’t be a good idea.The right attorneys: An estate attorney or family law attorney can help a winner draw up a new will, create a trust, and, if needed, write a prenuptial agreement.A tax attorney: This attorney will help a lotto winner pay as little in taxes as legally possible. This person will also keep them right with the IRS by making sure their taxes are properly prepared and filed on time.A certified public accountant (CPA): A CPA can further ensure that the winner is good with the IRS and give them tax-saving ideas through the years.

4. Thinking they don’t need a budget

There’s a reason why you’ve probably heard several stories about people filing for bankruptcy after claiming to be super rich. They never learned to properly manage their budget.

Just as we all need a solid household budget to stay on track, lottery winners need to know where their money is going and decide when it’s time to stop spending.

5. Giving into guilt

An article in Grunge talks about lottery winners feeling guilty about suddenly becoming rich. In fact, there’s a name for the phenomenon: “sudden wealth syndrome.” Money can solve some problems and make life easier, but it doesn’t do a thing to help people maintain their emotional well-being. And once someone is down, it’s easier for others to take advantage of them.

Lottery winners experience attention they’ve never had and suddenly hear from people who wouldn’t bother to talk to them before. They’ll also hear so many sad stories that they’re likely to be worn down.

This is where a great financial planner and CPA can come in. As long as the lottery winner is willing to listen to professional advice, they’re likely to make fewer decisions based on emotions.

Perhaps the lesson to be learned is this: If you’re dreaming of winning the lottery, also take time to imagine what you would do if you won, including hiring good people to help you invest wisely and keep money in the bank.

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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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