Money Management

It takes money to buy a home — but not just for the reason you think. Read on to learn more. 

One of the things that tends to motivate people to boost their savings account balance is wanting to own a home. To buy one, you’ll generally need to come up with some sort of down payment (though some mortgage programs, like VA loans, allow you to buy a home with no down payment). And the higher the price of the type of home you want, the more savings you need on hand.

But that’s not the only reason it’s important to have a nice amount of cash reserves when you’re buying a home. Believe it or not, the state of your bank account could have an impact on whether you end up qualifying for a mortgage loan or not.

When your mortgage lender needs reassurance

Mortgage lenders are in the business of writing large loans that get paid off over lengthy periods. And so they take on a fair amount of risk.

That’s why these lenders tend to do a thorough job of vetting home loan applicants. When you apply for a mortgage, you’ll have your credit score checked, your income scrutinized, and your current level of debt relative to your income assessed.

One thing that your mortgage lender might look at is the amount of cash reserves you have beyond what you’re bringing to the table as a down payment on your home. The reason? If you leave yourself with very little cash in the bank after putting money down at your closing, you may be more likely to miss future mortgage payments in the event of a lost job or another negative financial situation.

That’s why it’s really important to have a larger savings account balance when you’re buying a home. Having extra cash in the bank could actually help you qualify for a mortgage.

You also need money for home repairs

In 2022, the average home-related emergency cost $1,953, according to Angi. But if something major goes wrong with your home after you buy it, you might end up needing a lot more money than that to tackle the situation.

That’s another reason to boost your savings before buying a home. You want to leave yourself with cash reserves to tap in the event of an unplanned repair bill. And let’s be clear — it’s often the case that home repairs aren’t things you can plan for calmly and methodically, but rather, things that pop up at the least convenient times, like your heating system going kaput in the middle of winter.

The more money you have in savings, the more confident you can be going into homeownership and the mortgage application process. So do your best to boost your cash reserves if you know that homeownership is on your radar.

Even small changes like cutting back on leisure spending here and there or ordering takeout one fewer time per week could add up. And if you don’t want to cut your spending, you can always turn to the gig economy to drum up extra cash.

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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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Sam’s Club members have access to some great perks. Keep reading to learn about five that are sometimes overlooked. 

Life is busy, and unless you have time to sit down and read the fine print, it’s easy to miss out on the kind of details that would make things easier while leaving a little extra money in your checking account. So, sit back, enjoy a cup of something warm, and consider the ways Sam’s Club will have your back.

1. You could be ordering ahead

There are those who do not enjoy shopping, and others who don’t mind a trip to the store but have to fight the urge to make impulse buys. If either of those descriptions applies to you, why not take Sam’s Club up on its offer to do your shopping for you? Here’s how you do it:

Grab your shopping list and log in to SamsClub.com or open the Sam’s Club app.Shop for the items you need. Anything marked “pick up in club” is eligible.Once you’re ready, pay for your purchases.Head to your Sam’s Club and park in a spot marked “Curbside Pickup.”Check in via text, email, or app notification.A Sam’s Club employee will bring your order out and load it into your vehicle.

Whether the service is free to you because you’re a Plus member or you pay $4 as a regular Club member, imagine the time and hassle you’ll save.

2. You could beat the crowds

Of course, there are also those who don’t mind shopping but do not enjoy crowds. If you’re lucky enough to be a Plus member, you’re allowed into the store an hour or two before regular Club members. That gives you plenty of time to look around without having to deal with the dreaded cart traffic jam.

3. You could pay less for prescription drugs

There’s no denying that medical costs are out of control. So why pay more for prescription medications than you absolutely must? All Sam’s Club members have access to Rx Savings and a long list of generic medications for $4. In addition, Sam’s Club Plus members can pick up some of the most common prescription medications for free.

4. You could stop playing games with auto dealers

If you’d rather have a root canal than wander around a car lot and deal with pushy salespeople, buying a car through Sam’s Club auto website may be just what you’re looking for. The search engine makes it easy to look for the new or used car you’re most interested in. Once you narrow down your search criteria, you’ll be presented with a list of available vehicles for sale.

Once you select a car, the site provides you with an analysis comparing MSRP and TrueCar Market Average prices. That way, you’ll know if the deal you’re offered is worth your time.

5. You could save real money with gift cards

It’s easy to overlook the values to be found in gift cards. Whether it’s a card for discounted Omaha Steaks or Walt Disney World souvenirs, the sheer variety of cards available at any given time increases the odds that you’ll find one you can use.

Sam’s Club can’t be all things to all people, but it does allow savvy shoppers to save money. So, whether you’re building an emergency fund or need to pay for a wedding, you’re one step closer to your goal.

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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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It’s still possible to own a home by 40, but it’s a goal that requires planning and preparation. Here’s how to get started. 

The process of purchasing a home is, in itself, a complex and lengthy endeavor. But there is a lot involved in getting to the point where you’re ready and able to purchase a home.

Buying your own home is something you typically have to prepare for not just months, but years in advance. If you’re currently in your 20s or 30s, and you want to own your own home by the time you turn 40, here’s what you need to do now.

1. Get a credit card

If you are super, duper fortunate, you may be able to buy a house without a mortgage loan. With the median sales price of a house in the U.S. more than $416,000, however, chances are good you’re going to need some help from a bank.

You will have a significantly easier time getting a mortgage if you have a well-established credit history with many years of on-time payments. (Lenders will be more eager to give you a six-figure loan if they’re sure you can pay it back.) A good credit history will also give you access to lower mortgage rates.

One of the simplest ways to establish your credit is to get a credit card. Use it to pay for your everyday purchases, and pay it off in full every month before your due date. Wait six months, then get another card. Always pay in full, always well before your due date. Enjoy your purchase rewards while you watch your credit grow.

What cards do you pick? If you’re in college, student credit cards are fantastic starter cards. Otherwise, secured credit cards are easy to get even if you have no credit (though they require a deposit). You can also try getting a card from your current bank, as an existing banking relationship can often help you get your first card.

2. Open a high-yield savings account

Another move that can make getting a mortgage much easier is making a healthy down payment. Most experts recommend saving up 20% of the purchase price for your down payment. (This is the amount that is generally required to waive mortgage insurance, which is a costly extra fee that can hike your monthly payment.)

In most cases, it’s probably going to take a few years to build enough savings for your down payment. This isn’t quite enough time to expect to see good returns from something with a lot of short-term volatility, like the stock market, which is more often recommended for long-term savings.

Instead, the best place for your down payment savings is likely a high-yield savings account.

While high interest rates are bad for mortgages, they’re great for down payments. What I mean is, you can get a high-yield savings account with an APY in the 5% range, which not only helps you grow your savings, but will help protect it against the eroding power of inflation.

3. Set up automatic savings deposits

Once you have your high-yield savings account, it’s time to start, you know, saving.

I know this is easier said than done. Finding money to save, and doing it regularly, can be tough. That’s where automation comes in.

Most banks will let you set up automatic transfers. For instance, you could set it up so you automatically move $100 into your savings account every two weeks after you get paid.

Taking the thought out of it makes it easier to keep up with the habit. And you can set it up on any schedule — and, more importantly, for any amount — that fits your finances.

4. Take a first-time home buyers course

Some mortgage lenders will ask you to take a first-time home buyers course if you’ve never purchased a home before. But you shouldn’t wait until they ask for it.

Taking the time to go through an intro course — such as this free one from Fannie Mae — can help you learn some important basics about the home-buying process. And the earlier in your journey you gain those skills, the better off you’ll be.

It’s never too early to start learning what you need to know when it comes to something as important as your home.

You don’t (and shouldn’t) stop there, of course. Do some follow-up research on any questions or topics that seem relevant to you that crop up during your course.

5. Find an affordable market

The biggest cliche in real estate is “location, location, location,” but it’s a cliche for a darn good reason. Your ability to afford a house is going to entirely depend on where that house is located. What may be a great 20% down payment in one area could be barely 5% in another.

If your target market is in a high-cost-of-living area, you have an uphill battle. Your ability to reach that goal by 40 is going to depend a lot on your specific circumstances. If you’re in your 20s and already have a high-paying job, you’re probably on a good track. The older you are, the harder you will need to save to get there by 40.

If you’re priced out of your current area, it may be a good time to start thinking about where you’d like to live — and buy. Long-distance moves are extremely expensive, so it could be beneficial to relocate a year or two before you’re looking to purchase a home.

Defining your housing goal

Buying a home is a big deal. It takes a lot of prep and a ton of money. In other words, it’s not something that happens by accident. You need to make buying a home a goal that you consistently work toward achieving. This guide can help you figure out how to get started.

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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.Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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There’s no way to predict for certain the future of CD rates. But here’s what we can probably expect in 2024. 

Wouldn’t it be great if we all had a crystal ball that told us what the interest rate environment would do? We could figure out the best time to get a mortgage or the best time to buy a car. And of course, we would know exactly when to put all of our money into certificates of deposit (CDs) to maximize our yield.

Unfortunately, that isn’t the case. Nobody knows what interest rates are going to do in the future — not even the people in charge of setting benchmark interest rates. However, we can use the latest economic projections to consider the most likely scenario and what else could happen instead. So here’s what we know (and don’t know) about what CD yields will do in 2024.

Where do CD yields come from?

The short explanation is that CD rates are a combination of three main factors:

The current interest rate environmentThe bank or financial institution that offers themThe maturity term

In other words, when benchmark interest rates rise, CD rates generally tend to rise along with them. However, the rates paid by CDs can vary dramatically between banks.

For example, as I write this, our top 12-month CDs have APYs ranging from 4.25% to 5.65%. The same is true for CDs of other maturity lengths as well. But because the Federal Reserve has raised benchmark interest rates so aggressively in the past couple of years, this range is significantly higher than it was.

When it comes to different maturity lengths, it’s a little tricky to explain, but the general idea is that shorter-term CDs tend to track benchmark interest rates rather closely. The current federal funds rate (the most important interest rate the Fed controls) is set to a range of 5.25% to 5.5%, and this is certainly aligned with most of the top 1-year CDs we track.

With longer maturities, there are a lot of economic factors at work, but the simple explanation is that CD yields are a combination of the current interest rate environment and expectations for future interest rate movements. In most environments, longer-maturity CDs tend to have higher yields, since banks typically pay a premium if customers agree to leave their money on deposit for a longer time. But as of Oct. 2023, the range of 5-year CD yields on our top CD list is 3% to 4.85%, with the average yield significantly lower than the average 1-year CD.

This makes sense. According to the latest projections from the policymakers at the Federal Reserve, the benchmark federal funds rate is expected to fall to 4.6% by the end of 2024 and to 3.4% by the end of 2025.

What will CD rates do in 2024?

There’s no way to predict with accuracy what CD rates will do next year. Even the Federal Reserve’s own projections can be very wrong. In fact, the Fed’s projections in Sept. 2021 called for a federal funds rate of just 1% at the end of 2023.

Having said that, the latest projections call for one further quarter-point rate hike by the end of 2023, which would likely push CD yields slightly higher to start 2024. And if the Fed’s projection of a 4.6% federal funds rate proves to be accurate, we could expect 1-year CD rates to gravitate towards that level, with other maturity terms drifting generally lower as well.

However, it’s tough to overemphasize that we don’t know what is going to happen. If inflation proves far more difficult to control than the Fed expects, it’s entirely possible that several more interest rate hikes will be needed and CD yields will be much higher at the end of 2024. On the other hand, there’s the possibility of a recession coming and the need for the Fed to aggressively cut rates if the economy takes a worse downward turn than expected.

The bottom line is that CD rates are higher right now than they’ve been in a long time, and the best course of action is to put your money in CDs that make sense for you now — not to leave your cash on the sidelines in anticipation of rates rising even further.

However, one smart strategy could be to create a CD ladder, which gives you the best of both worlds. If rates end up rising in 2024, you’ll end up with some money to take advantage. And if rates fall, most of your money will be locked in at today’s rates.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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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Costco’s Executive membership offers a world of benefits with pretty much no risk. Read on to learn more. 

If you’re someone who visits Costco on occasion, then a basic membership might make sense for you. At just $60 a year, it’s a cost-effective way to gain access to your local warehouse club store (or any Costco store, for that matter).

But if you can swing the $120 fee you’ll have to pay for an Executive membership, it could be worth doing. As of the end of Costco’s last fiscal quarter, the company had a whopping 32.3 million paid Executive memberships, according to CFO Richard Galanti. And you may want to join the ranks of those 32.3 million people for the benefits involved.

You might come out ahead financially

Costco’s Executive membership comes with a few lesser-known perks, like a free Costco Connection magazine every month. But the main benefit of an Executive membership is earning 2% cash back on all of your Costco purchases (with limited exceptions).

What this basically means is that if you spend $3,000 a year at Costco, your $60 back on that sum covers the cost of your Executive membership upgrade. And every dollar you spend beyond that means you win financially by buying the upgrade.

At first, $3,000 might seem like a lot of spending. But let’s say you go to Costco once a month and typically spend $250 on your grocery and paper product haul. Guess what? That’s $3,000 right there.

Also, buying a single bigger-ticket item at Costco might get you past the $3,000 threshold easily. Let’s say, for example, you normally only spend $200 a month at Costco but decide to buy a TV there on Black Friday. If that TV costs $1,000, you’ve made money on your Executive membership upgrade.

Similarly, you may decide to book a vacation through Costco Travel. If you’re taking your entire family, the cost of that alone could easily be $3,000 or more.

There’s really no risk upgrading to an Executive membership

It may be that you decide to pay for an Executive membership and you don’t end up spending $3,000 at Costco in the course of the following year. In that case, you’re still okay. All you need to do is go to customer service and ask to downgrade your membership.

From there, you’ll be able to see how much cash back you racked up. And if the total isn’t at least $60, Costco will actually refund you the difference. Really.

So all told, signing up for an Executive membership really isn’t risky. The worst that’ll happen is that you spend the extra $60 upfront instead of keeping it in your checking account.

Of course, if you’re absolutely certain you won’t come close to spending $3,000 a year at Costco, then you might as well skip the Executive membership — especially if you’ve been a member for years and know exactly what your annual spending tends to amount to. But if there’s a part of you that’s not sure, then you might as well spring for the upgrade and see what happens.

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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 no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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