Money Management

New construction might sound tempting. Read on to learn about some pitfalls involved. 

There’s a reason buyers have struggled so much to purchase a home this year — and it’s not just the high cost of signing a mortgage. Housing inventory has been sluggish on the heels of elevated mortgage rates. And until mortgage lenders start to lower those rates significantly, we could get stuck in a holding pattern.

One thing that can help the problem of low housing inventory is an uptick in new home construction. And in July, new construction activity rose 3.9% compared to June. On an annual basis, it was up 5.9%.

To be clear, just because new construction picked up this summer quite a bit doesn’t mean those homes will be available for purchase anytime soon. It takes time to build a home, and to get the right permits and inspections. So all told, July’s uptick in new home construction may not start to benefit buyers until early 2024.

But at that point, you may find yourself looking at a newly built home. And you may be tempted to make an offer on one, despite the higher cost compared to a comparable home that’s already been lived in. But while there can be benefits to buying new construction, there can also be some major drawbacks.

When your home is in perfect condition

A home that’s been lived in before is apt to have its share of dings and scratches. One big benefit of buying new construction is that you’re getting a home in pristine condition.

Not only that, but you’re generally guaranteed to get a home that doesn’t have any major issues lurking. If those issues were to exist, the home wouldn’t be able to pass the necessary inspections needed to put it on the market.

In fact, it’s common for new construction homes to come with a one-year builder’s warranty that protects you in the event of workmanship issues. And if your home is loaded with newly purchased appliances, those will generally have their own warranties, too. So all told, you may not have to sink a lot of money into repairs during your first few years in your home.

But there’s a downside

The idea of buying a home in perfect condition might seem nice. But aside from the added cost of new construction, one thing you should realize is that builders commonly use lower-cost and lower-quality materials when putting new homes together. So while you may not encounter repair issues with your new home the first year or two of living there, over time, things might start to wear down on you more quickly due to them being inferior in quality.

For example, your home might come with a brand-new fridge that comes with its own three-year warranty. But that fridge might also stop running after five years due to it being lower in quality, whereas a better fridge might last a decade or longer. So not only are you generally looking at paying more for new construction, but often, you’re paying more for sub-par materials, fixtures, and appliances.

Is new construction right for you?

You may decide that you’re going to make an offer on a newly built home. But before you do, get all the right information.

Ask for a list of the appliances the home has and for details on the materials used in the course of construction. And also, try to negotiate your builders warranty from one year to two in case issues pop up after the 12-month mark.

You may also want to pay for a home inspection of your own just to make sure there aren’t any obvious immediate issues with workmanship. Often, buyers of new construction skip this step since inspections have to take place for the home to be listable. But spending a few hundred dollars on a second opinion could save you money if an issue is identified and addressed before you take ownership of the home.

New construction could be just the thing that helps solve the current housing inventory problem. But that doesn’t mean you should rush into buying a home that’s newly built without doing your research first.

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Many people lack savings for unplanned expenses. Read on to see how one employer is changing that. 

What happened

Delta Air Lines is giving employees up to $1,000 so they can boost their personal cash reserves. It’s estimated that more than 90,000 of the airline’s workers are eligible for this benefit.

So what

Employers have long upheld the practice of sponsoring 401(k) plans for retirement savings purposes and matching employee contributions to some degree. The problem is that these savings are restricted, and penalties are imposed for taking withdrawals prior to age 59 ½. This leaves workers with a 401(k) few good options in the event of a near-term financial emergency.

But the recently passed Secure 2.0 Act allows employers to offer eligible employees the option to link their retirement savings to an emergency savings account. Employees can make after-tax contributions of up to $2,500, and employers can opt to fund those accounts on their workers’ behalf.

Delta is making such a program available to all employees below the director level. Workers will receive $750 directly deposited into a Fidelity account after undergoing a financial coaching session. Delta will then match up to $250 of employee contributions per account for a total of $1,000.

“The ability for an employer to help their employees to feel they have solutions in place to manage their overall finances is really important,” said Katie Taylor, vice president of planning and engagement at Fidelity Investments.

Now what

Recent data from SecureSave, a company that partners with employers to offer emergency savings accounts to employees, found that 63% of Americans don’t have the cash reserves to cover a $500 surprise expense. As such, Delta’s $1,000 emergency fund could serve as a lifeline for people who would otherwise be at risk of costly debt in the face of unplanned bills.

For many people, an absence of savings means instant credit card debt when unexpected expenses arise. That could lead to loads of money lost to interest charges. Excessive amounts of credit card debt can also cause credit score damage, making it harder for people in that boat to borrow affordably in a pinch.

Of course, a $1,000 emergency fund is a step in the right direction for those without savings at all. But ideally, workers should aim for enough emergency savings to cover three months of essential bills. That way, those who find themselves unable to work or unemployed won’t automatically have to resort to debt.

However, building a complete emergency fund takes time. The fact that Delta is making it possible to go from $0 in savings to $1,000 in short order is a definite plus.

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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 recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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Even if you don’t read books, your library can save you money. Learn what services and apps a library can offer. 

Libraries just ain’t what they used to be — and that’s a good thing.

Yes, they still smell like old books. But many have turned into digital powerhouses offering patrons everything from audible book subscriptions to language learning software to newspapers and magazines and even streaming services. Often, all it takes is a ZIP code in your library’s vicinity and you can save thousands of dollars per year.

Or, if you’re like Karen from Mesa, Arizona, you could save $65,550 over 13 years — or an average savings of over $5,000 per year.

Recently, the Mesa Public Library featured Karen on its Facebook page along with her library receipt showing that she had saved $65,550.33 since becoming its patron. First off, kudos to the Mesa Public Library for a brilliant way of showing a library’s value. Second, good on you Karen for saving almost as much money as the median household income — $74,580 in 2022, according to The Ascent — just by using your library card.

You might think, “Wow, that’s a lot of books.” But even if you don’t read books, Karen’s savings could be your own. If you’re skeptical, here’s how a modern library could help you save money.

Magazines and newspapers

Average monthly savings: $15 to $30

Many public library cards give you access to digital newsstands. For example, my public library in Portland gives me access to PressReader, an app that lets me read The Washington Post, Los Angeles Times, The Economist, Forbes, plus over 7,000 other magazines and newspapers without individually subscribing to each one. Some libraries, like the Mesa Public Library, can even grant you use of a subscription to other newspapers, like The New York Times, just for being a patron.

Movies and TV shows

Average monthly savings: $40 to $50

Libraries understand there are multiple ways of telling a story and not all come through books. For years, they’ve assumed the role of community Blockbuster by letting you rent DVDs and Blu-ray discs. But recently, libraries have integrated streaming services and apps into their patron’s accounts, allowing you to download movies and TV shows from home. The most popular services used by libraries are Hoopla and Kanopy, both of which offer films, documentaries, and children shows.

To be fair, you might not get your streaming fix from a library membership alone (you won’t find great HBO series, like Game of Thrones or Succession). But it’s free and could be another service to add to your mix.

Audiobooks and ebooks

Average monthly savings: $15 to $20

If you have a library card, there’s really no good reason to subscribe to audiobook memberships, which could cost between $15 and $20 a month. Most libraries offer an excellent variety of audiobooks and e-books through apps and services like Libby, Axis 360, and Hoopla.

Find more perks at your local library

Many libraries also have free language learning software — like Rosetta Stone — and sometimes live tutoring with a fluent speaker. They can offer career advice through business videos and may help you with your resume. Some offer financial coaching, while others will give you access to online classes. I’ve even seen libraries that lend out tools, toys, and seeds.

In sum, don’t underestimate the value a public library card can bring you. If you’re trying to save money (and let’s be real: who isn’t?), library cards can be an invaluable tool for your personal finances. You never know — you, like Karen from Mesa, might end up saving an entire year’s salary simply by using your library.

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Homeowners insurance provides protection from financial loss caused by a covered disaster. But be aware that insurance won’t cover these calamities. 

Homeowners insurance is supposed to provide asset protection. A policy will be there to pay out if a home must be rebuilt or replaced after a covered loss. The money won’t have to come out of a homeowner’s bank account when something goes wrong.

It’s important to realize, though, that homeowners insurance doesn’t necessarily cover every possible calamity. Some common causes of problems are excluded from standard homeowners insurance coverage. It’s important to know that before a disaster strikes, so be aware that these issues usually will not be paid for by an insurer.

Flood damage

Standard homeowners insurance policies exclude flood damage. If there is a flood event that causes water intrusion and damages or destroys the structure of the home, insurance will not pay for it. This is the case with policies across the country, including insurance policies for homes in designated flood zones and elsewhere.

Homeowners who live in an area where a flood may occur should strongly consider obtaining a separate flood insurance plan through the National Flood Insurance Program (NFIP), which is managed by FEMA and delivered through 50 insurers and NFIP Direct.

To find a flood insurance provider, look at the database on FloodSmart.gov, or contact the NFIP via phone at 877-336-2627.

Earth movements

Earth movements, including earthquakes and sinkholes, are generally excluded from standard homeowners insurance policies. But, it is possible to get separate earthquake or sinkhole coverage.

Many insurers offer this as a rider or add-on policy that can be purchased in addition to standard coverage. There are also some state-specific options in high-risk areas. For example, in California, where earthquakes are a major risk factor, the California Earthquake Authority (CEA) offers earthquake insurance coverage.

Homeowners should check with their insurers and their state to explore options and put a plan in place before a problem occurs.

Wildfires

In areas prone to wildfires, home insurers generally exclude coverage for this type of damage. This means if a fire strikes, any resulting losses will not be paid for.

To find out if wildfires are excluded, homeowners should read their policies carefully. If there’s a clause saying wildfire damage won’t be paid for, it’s important to consider getting the necessary protections. Fair Access to Insurance Requirements (FAIR) plans can offer wildfire coverage where standard insurers don’t.

FAIR plans vary by state, but often come at a higher cost than standard home insurance policies. Still, it is best to get this coverage if no other protection is available from an insurer.

No homeowner wants to experience a disaster and then discover that their insurance will not pay for it. To avoid this, it’s crucial to read the fine print on a policy and to ask any questions necessary to understand the extent of the coverage provided — and the exclusions.

Homeowners who discover that a potential source of loss is not part of their policy should look into getting protection in place from other sources ASAP to avoid a devastating financial catastrophe if something goes wrong.

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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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The idea of getting audited can be scary. Read on to see why some tax-filers may now be less likely to have their returns scrutinized. 

Many of us have seen a tax audit play out in a movie or TV show. A big scary IRS agent comes knocking at the door, and the next thing you know, there’s a team of people coming in to ransack files and haul laptops away.

Scenes like that might make for interesting content, but you should know that’s not how audits work in reality the overwhelming majority of the time. The IRS does not have the financial resources to send teams of agents to the door of every single tax filer whose return seems a bit off.

Most of the time, an audit will involve getting a letter in the mail and having to respond with additional information or documentation. Not only will you not have to deal with an IRS agent invading your home, but you probably won’t even have to speak to one over the phone.

That said, most people would rather not have their taxes audited. And if you’re someone who typically claims the Earned Income Tax Credit, or EITC, going forward, your chances of having your tax return scrutinized may be significantly lower.

Focusing on higher earners

The IRS is changing its approach to tax audits as part of an ongoing overhaul. The agency recently announced that beginning in 2024, it will substantially reduce the number of audits for tax-filers claiming the EITC.

The EITC is a fully refundable credit designed to help low and moderate earners. Most tax credits are only partially refundable or not refundable at all, so the EITC is particularly valuable because it could result in a multi-thousand-dollar refund for someone with no tax liability.

Historically, though, the EITC has been associated with higher incidents of fraud. It’s for this reason that the IRS generally has to delay refunds associated with the credit until mid-February.

Starting next year, though, tax filers who claim the EITC may be less likely to have their returns audited. On the other hand, the IRS says it plans to leverage technology to go after unpaid taxes from higher earners, as well as businesses.

This shift makes sense. Who’s likely to be shielding more income from the IRS? Someone earning $30,000 a year or someone earning $3 million?

An easy way to avoid a tax audit

While audits don’t tend to be nearly as scary in real life as they are on screen, if you’re eager to avoid one, do one thing — be honest on your tax return. It’s that simple. Report all of your income and don’t claim deductions for expenses you never incurred.

Similarly, don’t fudge your deductions. If you bought yourself a new TV, so be it. Go enjoy it. But don’t claim it as a deduction for your pet-sitting business if that’s not what it’s used for.

Of course, in some cases, you might still end up getting audited despite having been perfectly honest on your tax return. But in that case, don’t panic. An audit is often nothing more than the IRS seeking out additional information. Provide it in a timely manner, and you’ll be able to move on with your life without having to worry about drastic repercussions.

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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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Medical care can be very expensive. Read on to see how you might save by getting yours through Costco. 

Many people associate Costco with affordable groceries and toilet paper. But the warehouse club giant offers members a host of services that can save them money on things like travel, home improvements, and even cars. And now, Costco members will be able to save money on medical care through a new and helpful offering.

Affordable medical care for those who need it

Healthcare can be a huge expense for Americans of all ages. Now, Costco is doing its part to make it less expensive.

Costco recently partnered with healthcare platform Sesame to offer members the option of virtual primary care visits for as low as $29. A more involved standard lab panel and virtual follow-up consultation with a provider will cost just $72, while online mental health visits will cost $79. Members can also enjoy additional savings on specialty healthcare appointments.

Should you use Costco’s new healthcare service?

One thing you should know about Costco’s new platform is that health insurance is not accepted on it. The primary purpose of it is to offer affordable medical care to people who are uninsured. You’ll need to run the numbers to see if it makes sense to use Costco’s platform if you’re someone who’s covered by insurance.

Let’s say you need a visit with a primary care physician because you’re not feeling well. Your copay under your insurance plan might be $20 or $25. So even if Costco’s service offers that same service for $29, in this case, you’re looking at a lower cost under your insurance.

Costco may be more convenient

If money isn’t particularly tight, there’s the convenience factor to consider, too. Having a virtual visit might help you avoid missed work time. So it could sometimes make sense to spend an extra few dollars.

Also, some health insurance companies reimburse enrollees for out-of-network services. So let’s say you can’t find a virtual provider who takes your insurance. You could, in that case, book an appointment through Sesame and try to get reimbursed by your insurer if your plan allows for that.

You might also, in some cases, find that it’s more cost effective to use Costco’s offering if your health insurance plan comes with a high deductible. Let’s say you have to meet a $1,500 deductible and need a standard lab panel and follow-up to determine what’s been ailing you. Under your insurance, the cost there might be $300 or $400. And if you haven’t yet met your deductible for the year, you’ll have to pay that $300 or $400 yourself.

With Costco’s offering, you may be looking at $72 instead. So in some cases, even if you are insured, it could make more financial sense to go through Costco for medical care. You’ll need to make that determination on a case-by-case basis, though, if you’re covered by an insurance plan.

Costco is constantly trying to find ways to offer great value to its members. And its latest healthcare service is yet another example of that. If you’ve been on the fence about joining Costco, make sure to keep this new benefit in mind, as it may be just the thing that makes the cost of a membership worth it to 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.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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