Money Management

It’s important to think carefully when applying for a new credit card. But read on to see why the start of October might be a good time to put in an application. 

Credit card companies are constantly advertising their products in an effort to get consumers to apply. And generally speaking, it’s a good idea to be cautious when applying for a new credit card.

For one thing, your credit score will usually take a small hit when you apply for a new credit card. And while that may not matter if your credit is great, if you’re right on the cusp of a less-than-favorable score, a drop might compromise your ability to get financing when you need it.

Also, the more credit cards you have, the more you might be tempted to spend. And while that’s a fine thing to do if you have the money, if funds are limited, you don’t need the temptation to start racking up additional balances.

But if you’re doing well financially and aren’t already grappling with piles of credit card debt, then it could pay to apply for your next credit card in early October. Here’s why.

1. It’s a good time to snag a welcome bonus

Many credit cards offer welcome bonuses that require you to spend a certain amount of money within three months of opening your account. If you meet the spending threshold, you’ll get a lump sum of cash back or reward points.

Credit card welcome bonuses aren’t always so easy to snag. If you get a new card that requires you to spend $3,000 within three months for a $250 bonus, but you normally only charge $700 worth of expenses on a credit card each month, you’ll be $900 shy.

But remember, the holidays are coming up. And your spending might increase substantially in November and December because of that. So it’s a good idea to have your three-month welcome bonus period fall during a time when your spending is likely to naturally increase.

2. It’s a good time to set yourself up for more cash back

You might find a credit card that offers extra cash back on everyday expenses like groceries and gas. If you apply for that card in early October and use it a lot that month and the next, then come late December, you might be sitting on your share of cash back you can use for holiday spending. That could, in turn, help you avoid debt, or minimize the holiday debt you rack up.

So, let’s say you typically spend $800 a month on groceries and gas, and your new credit card gives you 3% back in those categories. This means that you could end up with almost $50 in cash back by the end of the year.

3. Travel benefits might come in handy during the holidays

You may be planning holiday travel in November and December. If that’s the case, early October is a good time to apply for a new travel rewards credit card. That way, you might have your card in hand in time to book your flights.

Many travel reward cards offer money-saving perks like free checked bags on flights and bonus cash back or points on bookings. At a time when travel is apt to be expensive, that’s a nice thing to benefit from.

Plus, let’s face it. Air travel can be a bit of a nightmare during the holiday season. Jam-packed flights and weather-related delays can result in lost luggage and messed-up itineraries. Many travel reward cards offer insurance or other protection in situations like that, so it’s good to have one at your disposal in time for the holiday rush.

Remember, applying for a new credit card might open the door to added spending you can’t afford, and your credit score might take a small hit. So if either of those things are likely to be a problem for you, then it’s probably best to hold off for a while on applying for a new credit card. But if you’re otherwise in good financial shape, then it pays to consider the upside of applying for a new credit card at the start of October.

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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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The average 401(k) has a balance of about $112,000. Here’s who is saving the most and how you can jumpstart your retirement savings. 

Let’s be honest: It’s always interesting to find out how much money someone makes or how much they’ve saved for retirement. Most of us are curious how people in other industries and with different skills than us make and save money.

And some of the latest 401(k) data from Vanguard certainly piqued my interest. The research showed that the workers with the largest amount of money, on average, in their 401(k)s come from the agriculture, mining, and construction industries.

Here’s what the latest data says about which demographic groups are saving the most (and the least) and a few steps you can take to jumpstart your retirement investments.

A closer look at America’s 401(k)s

Vanguard said that a combination of factors influences 401(k) balances, including someone’s income, age, and job tenure. The company also noted that these factors are intertwined, meaning that, generally speaking, the longer someone has been at their job, the more income they have and the more they may contribute to their retirement plan.

Here are the top five industries with the most money in the 401(k)s and how much they’ve saved on average:

Agriculture, mining, and construction: $185,201Finance, insurance, and real estate: $160,975Media, entertainment, and leisure: $133,404Business, professional, and nonprofit: $133,228Manufacturing: $126,497

Some averages were influenced by age, income, and participation rates in 401(k)s. For example, 62% of employees under 25 participated in a retirement plan, while more than 86% of workers between 35 and 64 contributed to one.

Also, employees in the finance, insurance, and real estate industry group were the most likely to have a 401(k), with 9 out of 10 workers in this group a part of one. Meanwhile, just 67% of workers in the wholesale and retail trade group were enrolled.

Unsurprisingly, the higher a worker’s income, the more likely they are to have a 401(k). Vanguard’s data showed that 76% of eligible employees with an annual income between $30,000 and $50,000 had a 401(k) plan, compared to more than 90% of workers with incomes of $100,000 or higher.

As for the industries with the least amount of savings in their 401(k)s, here are the bottom three:

Transportation, utilities, and communications: $100,729Wholesale and retail trade: $96,150Education and health $73,377

Vanguard also found that women at all income levels were more likely to participate in an employer-sponsored 401(k) program than men.

How to jumpstart your savings

Vanguard’s report says that the average 401(k) amount is $112,572, while the median balance is $27,376. No matter what industry you’re in or how much you have (or don’t have) in your 401(k), focusing your attention on jumpstarting your retirement savings will be worth the time.

If you’re not sure where to start, here are a few easy steps you can follow to get back on the retirement saving path:

Enroll in your employer’s 401(k) plan: This can be as easy as speaking with someone in your company’s HR department and then filling out some simple paperwork.
Sign up for an employer matching program: Many employers offer a 401(k) matching program, which matches the amount you contribute to the plan, up to a set amount of your income. For example, some companies may match 50% of your contributions until you reach 3% of your salary. No matter what matching plan your employer offers, remember that any money your employer puts into the plan is free money for you.
Open a brokerage account: If you don’t have a job offering a 401(k), you may need to open your own brokerage account to start saving your retirement. These accounts allow you to buy stocks, bonds, or index funds. You can find a list of the best online brokers here.
Automate your monthly savings: if you sign up for an employer-sponsored retirement account, you can opt to have a certain amount deducted from each paycheck. Automating savings is the best way to ensure you do it and keeps you from spending money that should be saved. You can still sign up for automatic deductions into your brokerage account if you don’t have an employer program.

Saving for retirement can seem overwhelming. But getting started now, rather than later, can have big benefits. The S&P 500 index has an annualized return (adjusted for inflation) of 7.3% over the past 30 years. Based on that assumption, if you invested $200 per month over 25 years, your retirement savings would turn into nearly $160,000.

While no estimate will be exact, the point is that the earlier you get started, the more time you’ll have to let compound interest do its work. And if you don’t have anything saved right now, there’s no time like the present to start.

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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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If you spend more than 25% of your income after taxes on a home, you may find yourself house poor. Find out what you need to know to avoid this fate. 

When you buy a house, you’ll want to make sure that it is affordable. If you commit too much of your money every month toward housing payments, you could find yourself unable to do other things that are important to you, because all the spare cash in your bank account is being sucked up by your mortgage.

So, how can you determine if you’ll be able to comfortably make your mortgage payments so you don’t become “house poor,” or left with too little due to your big housing commitment? Here are the consequences of being house poor and what you need to do to avoid it.

Avoid becoming house poor

Devoting too much of your income toward your house could mean:

Being unable to save for retirementHaving a hard time saving an emergency fund (and needing a larger emergency fund due to your big monthly payment)Being unable to make any career changes that could leave you with less money to pay your housing costsNot having enough money to save for big purchasesConstantly feeling like you have to skimp on spending and having too little money to do other things you enjoy

Remember, you will have your mortgage for decades to come and you don’t want to struggle and have to sacrifice other important goals every single month just to be able to pay your housing bills.

This simple calculation will tell you if you’ll be house poor

To determine your risk of ending up house poor, here’s what you need to do:

Figure out your post-tax income. This is the money you bring home in your paycheck each month after taxes are accounted for by your employer (or you, if you’re self-employed).Determine your total housing costs. This is the amount you can expect to spend each month. It includes your mortgage principal and interest, but also property taxes, insurance, HOA fees, routine upkeep, and utility costs. You can find out a lot of this information by looking at the house listing, which should detail your HOA costs and taxes. You can also ask the current owners what they pay for utilities and get quotes from some home insurers.Make sure your total housing costs are 25% or less of your post-tax income. So if you bring home $4,000 a month after taxes are taken out, you’d be able to comfortably afford monthly housing costs of $1,000. If you spent any more than that, you would be house poor and could find yourself struggling to meet your financial obligations.

By doing this math, you can avoid a potential financial disaster that could result if you overcommit yourself to a house that costs too much.

What should you do if you discover that you’ll be house poor?

If you do this math and find out that your housing costs will equal too large a percentage of income, you have a few options.

One solution is to increase your income. This can take time, though, as you’ll likely need to take on a side gig, look for a new job, negotiate a salary increase, or expand your skills to qualify for better paying work. And you wouldn’t want to commit to a high housing payment based on your new income level unless you were certain that you could consistently make the extra money for years to come.

Another option is to try to decrease your housing payments. You could do this by shopping around for a cheaper house, finding a mortgage lender that will charge you a lower interest rate, or making a larger down payment so you don’t have to borrow as much.

It may seem disappointing to have to pass on a house because it would leave you house poor. But it’s a lot worse to find yourself saddled with a home you can’t comfortably pay for that’s nothing more than a major source of financial stress for years to come.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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