Money Management

You might be able to get a lower mortgage rate if you opt for an ARM. Learn what to consider if you go this route. 

As a personal finance writer and someone who is hoping to buy a home in the near future, I pay pretty close attention to the mortgage market. And boy, it is so depressing right now. As of this writing, the average rate for a 30-year fixed mortgage comes in at 7.31%, per Freddie Mac. Two short years ago, you could’ve gotten that same mortgage for an average rate of just 3.01%.

But it does us no good to focus on the past — gotta keep moving forward and play the hand we’re dealt. One way you might save some money on a home loan is by opting for an adjustable-rate mortgage, or ARM. These mortgages start out with a slightly lower rate, since it doesn’t remain the same over the life of the loan.

For example, if you take out a 5/1 ARM, the initial rate will stay the same for the first five years (that’s the “5”), and after that, it can change once per year (the “1”) based on market conditions. There are other options available, including 7/1 and 7/6 (rates change every six months for those). And as of this writing, Forbes reports that the average rate for a 5/1 ARM is 6.04% — definitely lower than for a fixed-rate mortgage! But is getting an ARM a good idea right now? Let’s discuss.

An ARM could be worth considering…

Depending on where rates are next year, when I’m ready to buy, I might end up giving serious thought to going with an adjustable-rate mortgage. And you might want to follow my lead. For one thing, starting off homeownership with a slightly lower mortgage rate could be a good thing — personally, I expect my monthly costs to double when I go from renter to owner. Owning a home is more costly than renting one. Paying a little less for a mortgage will give you time to adjust to all the homeownership costs you’ll be responsible for.

And getting to lock in that lower rate for a period of five or seven years gives the market time to cool down. Perhaps by the time my rate changes, rates will be lower across the board and I can look forward to a smaller mortgage payment as a result.

…but be careful

An ARM could be risky, however. If rates don’t drop, and are instead even higher than they are now, your ARM rate could go up. So it’s even more important to resist the temptation to stretch your budget to afford a home if you’re opting for an ARM — you don’t want to find yourself unable to cover your payments once the rate changes.

With this in mind, if you do opt for an ARM, plan to refinance to a fixed-rate loan when rates drop. Refinancing isn’t free, of course, but you’ll end up with the peace of mind that comes from knowing your payments won’t change. If I do get an ARM, I’ll start putting aside money to cover those refinancing closing costs so I’ll be able to refinance to a lower rate when one appears.

Other ways to get a decent mortgage rate

This sure isn’t an ideal time to be shopping for a home, no matter how you slice it. But if you’ve been saving and planning for a while, you might decide to go for it anyway (and I feel you here). Follow these tips to get the best rate you can under less-than-ideal market circumstances.

Pay down existing debt: You might think that a little credit card debt is nothing compared to taking on mortgage debt, but it’s a really good idea to pay it down if you can. Not only will improving your debt-to-income ratio make it easier to qualify, but having fewer bills to pay will also make it easier to handle your new mortgage payments.Boost your credit score: Paying down debt will improve your credit score, but you should also recommit to making on-time payments and get a copy of your credit report. If you see errors on it (like accounts that aren’t yours), ask the credit bureau to remove them. This can improve your credit, too.Shop around: Resist the urge to go with the first mortgage lender you talk to. Instead, submit your info to a few and see what kind of rates you can qualify for. Different lenders have different programs and mortgage terms, so by shopping around, you have a better chance of finding the right one for you.Aim to make a solid down payment: A 20% down payment is recommended for a conventional loan so you can avoid having to pay for private mortgage insurance. If you can swing it, it’s a good idea. However, if putting 20% down will leave you flat broke, try for 10% instead. The larger the down payment you can make, the smaller your payments will be and the less risk you’ll present to a lender.

An adjustable-rate mortgage could be your best bet of getting a decent mortgage rate right now, but these are best approached with caution. If you decide to get an ARM, plan to refinance as soon as rates drop, and definitely don’t buy at the top of your budget, just in case your payments go up.

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Costco frequently runs promotions on the same items. Learn which products you should only buy on sale here. 

Costco has never had wide profit margins on its product. Its average markup — what Costco charges above the product’s cost to cover its overhead — is about 11%, which is lower than Walmart (24%), Home Depot, (35%), and most supermarkets (30%), according to Business Insider. It’s a miracle Costco makes any profit at all. It’s even more shocking when you see Costco cut prices for products you actually want, like a new laptop.

Over my time as a Costco member, I’ve seen the same discounts on goods. So predictable are its promotions, in fact, it would be silly to buy certain goods at full price. Like these four.

1. Laptops

Average savings: $150 to $200

Costco may not have the widest selection of laptops, but it frequently has the lowest prices on the ones it sells — even without a discount. Add in a promotion and you could easily save between 10% and 15% off the market price of a new laptop.

For instance, I’ve been eyeing a 16-inch Macbook Pro (M2 with 512 GB) for quite some time. Normally, this laptop is priced at $2,449.99, which is $50 cheaper than buying it from Apple. But every now and then, Costco will cut $200 off the listing price, making it $2,249.99. The promotions never last long — for example, the last one ran between Sept. 17 and 30 — but they happen frequently enough that I just need to wait to avoid paying full price.

2. Tires

Average savings: $50 to $100

Costco’s tire center regularly has promotions when you buy a set of four. Back in the day, these promotions were usually $150 off. But ever since it waived the $19.99 installation fee ($79.96 per set), its promotions have ranged between $50 and $100. My tip: if you know you’ll need a tire change within the next four to six months, I’d act on a tire promotion as soon as you see it. If you wait until it’s too late — like, you’re basically skating on bald tires — there may not be a promotion and you might get stuck paying full price.

3. Mattresses

Average savings: $150 to $300

Costco loves to sell mattresses below full price. For instance, during its Labor Day sale, Costco was giving away $200 to $300 Shop Cards with the purchase of certain Tempur-Pedic mattresses. These kinds of discounts aren’t rare for the warehouse retailer: Last holiday season, Costco had discounted certain Beautyrest mattresses by $150 to $200. If you’re in the market for a mattress, keep your eyes on this year’s holiday savings.

4. Costco memberships

Average savings: $30

Finally, new members (and former members who come back after 18 months) can make a rookie mistake by paying full price for a Costco membership. While memberships aren’t too expensive to begin with — $60 annually for a Gold Star and $120 for an Executive — Costco makes it even cheaper by frequently running promotions. For instance, you can get a $30 Shop Card when you sign up for a new membership with code CJPROMO and enroll in auto-renewal.

How to stay on top of new Costco deals

Costco sales can improve your personal finances by cutting prices on things you actually want. To get updated frequently on deals, download the Costco shopping app and enable push notifications. This will ping you when Costco has new deals. The app isn’t super advanced (it won’t, for instance, ping you when Costco is running a promotion on something you want), but it can keep sales top of mind and perhaps prevent you from buying something at full price.

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

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A debit card can be an important part of your personal finances. Keep reading to learn the risks of having too many. 

Plastic has sure become a popular way to pay. We talk a lot about credit cards here at The Ascent, but debit cards are also a common part of many Americans’ wallets. Research from The Ascent found that in 2020, 83.14% of us had a debit card, and those numbers were projected to rise, so it’s likely a higher percentage now.

Debit cards and credit cards might look similar, but they are different. A credit card is linked to a line of credit (which isn’t your money; it’s money you borrow from the card issuer by using the card, and then repay). But a debit card is directly linked to a bank account. This can be a checking account, savings account, or a money market account. So when you use the card to make payments or to withdraw from an ATM, you are directly tapping money you have in the bank.

If you have multiple bank accounts, you might have more than one debit card. This is my situation — I have two checking accounts with different banks, and as a result, I have two debit cards. But is there a risk in having multiple debit cards?

Greater risk of fraud or money loss

If you have multiple debit cards, you could open yourself to greater risk of losing money through fraud. Credit cards are an extremely safe way to pay for purchases, as opposed to debit cards. Credit cards have more robust protections for fraud — if someone uses your card without your authorization, the most money you’d be liable for is $50 (and the best credit cards have $0 liability).

With debit (or your bank account in general), your protection decreases the longer you wait to report an incident. Within two days, you’re liable for $50. After 60 days, your liability rises to $500, and beyond that, you have no legal protection.

Plus, since debit cards are directly connected to your bank account, the risk to your personal finances is a lot greater than when you use a credit card since the latter is money borrowed from a credit card issuer.

Potentially more fees to pay

A lot of checking accounts have fees, like monthly maintenance fees, ATM fees, overdraft fees, and more. More debit cards means more bank accounts, and a greater likelihood that you’re paying fees.

Overdraft fees are actually becoming less common, but when you spend with a debit card, you’ve got to be careful not to overdraw your account, lest you incur them.

Less ability to build credit and earn rewards

Since using a debit card doesn’t involve borrowing money, using one doesn’t do anything to improve your credit, like using a credit card responsibly can. However, you may be trying to avoid the temptation to overspend that might come with a credit card.

In that case, a secured credit card (which has a credit limit based on a cash deposit you make when you open the card) might be just the thing for you. You can build your credit and have more guardrails in place than a traditional credit card offers. And credit cards (even some secured ones) offer the chance to earn cash back and other rewards. Most debit cards don’t.

More complications to managing your finances

Finally, having multiple debit cards could complicate your finances. Managing multiple bank accounts could end up taking more time and effort. I do have to spend a good chunk of time passing money through my various accounts, but thankfully, my second checking account only has one job: giving me cash and payment access to the linked savings account, as necessary (and it’s not necessary very often). I pay no bills out of that account, and in fact, I don’t regularly carry either of my debit cards in my wallet.

A few tips for smart and safe debit card usage

Whether you’ve got one debit card or multiple, here are some pointers for using them safely:

Don’t use debit at gas stations: Gas station card readers have a greater chance of being tampered with, so thieves can steal card information. Plus, buying gas on debit sometimes means having a large hold put on your account for more money than you actually spent.Think twice about using debit for online purchases: Again, credit cards are a much better choice for online shopping — many offer purchase protections, should you encounter a problem with an online order.Cover the keypad when entering your PIN: Better safe than sorry. Keep your PIN from prying eyes by shielding it with your hand.Stay on top of your bank balance: Today’s banking apps are better than ever, so it’s easy to check your balance from anywhere. You definitely don’t want to overdraft your account.

Debit cards could be a cornerstone of your personal finances, and that’s perfectly fine. Just be aware of the potential issues, and always spend safely with your debit card.

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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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Before agreeing to spend your life with someone, make sure they’re an ideal match for you. Find out how to assess money compatibility. 

When choosing a partner, there are many things to consider to decide whether you’ll be a compatible match. Many couples discuss personal belief systems, politics, past relationships, future goals, and overall expectations for the relationship.

Talking about all these things is wise if you’re in a new relationship or starting to date again.

But you don’t want to forget to discuss another subject: personal finances. Whether you blend your finances with a partner or not, having financial compatibility can be beneficial.

Taking time to determine if you’re both a solid financial match can save you time and stress. Here are a few ways to determine if you and your partner are a good financial match.

1. Discuss your spending and saving habits

It’s essential to discuss your individual spending and saving habits openly. While you don’t have to have the same money management style, if each person has very different financial approaches, it may result in incompatibility.

For example, if one partner is a big spender and the other is a big saver, serious financial concerns and disagreements could come up down the road. By talking about this early on, you can avoid uncomfortable (and potentially expensive) surprises.

2. Be open and honest about existing debt

Having debt can be uncomfortable, but it’s not something to hide if you’re involved with someone and plan to share your life with them. Credit card debt and educational debt are two of the most common types of debt people have, so don’t be ashamed if you have debt.

But it’s not fair to your partner if you’re dishonest about your debt — so don’t try to hide it. Each person needs to know what type and how much debt exists before putting a lot of time and effort into the relationship. Having this conversation can also help you both determine how to pay off the debt to eliminate it faster.

3. Discuss your short-term and long-term financial goals

When it comes to money, many people have short- and long-term financial goals that they’re working toward. Examples could include establishing an emergency fund, paying off debt, and saving for a down payment for a home.

Discussing your individual and shared financial goals is an excellent way to determine if you’re a good financial match. It can also open up a broader discussion about goal setting, allowing you both to establish new money goals as a couple.

4. Review your credit scores

Your credit score shouldn’t be ignored, even if it needs work. It’s an essential factor that can determine what kind of loans you qualify for, like if you ever want to buy a car or a home.

You and your partner should know where each of your credit scores stand. If you need a loan in the future and intend to apply for one jointly, and your partner has a much lower score than you, it could impact your shared financial situation. Don’t let discomfort keep you from having this discussion.

5. Discuss financial expectations

Not every relationship is the same. What works for one couple may not work well for another. Before getting far into a relationship, it’s a good idea to discuss your financial expectations to avoid disagreements in the future. Here are some questions to ask yourselves:

Do we plan to merge our finances or keep them separate?Will both of us share financial obligations?If we both intend to contribute financially, will one partner pay more than the other?If we plan to have children, how will we manage that financially?

Being on the same page about financial expectations early in your relationship is essential.

Don’t delay the money talk

At first, talking about money may feel uncomfortable. But that doesn’t mean you should delay the conversation. Having difficult money discussions with your partner is healthy and can be a win for your relationship and finances.

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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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