Money Management

Keeping up with car payments might be a struggle given how expensive they’ve gotten. Read on for tips to spend less. 

Many of us need a car to get to work, run errands, and generally function. So it’s reasonable to call a vehicle an essential expense.

But just because you need a car doesn’t mean you can easily afford one — especially today. Limited supply has driven the cost of vehicles up. And it’s also gotten very expensive to finance a vehicle now that interest rates are up following hikes from the Federal Reserve.

In fact, Experian, one of the three major credit bureaus, says that the average monthly auto loan payment for a new vehicle is $725. That’s up from $650 in 2022.

An auto loan payment that size, however, might wreak serious havoc on your finances. It’s best to find ways to spend less on a car so you can keep your payments down.

Shop around and set priorities

You may not be able to find a reliable vehicle that comes with a monthly auto loan payment of $350. But there are ways to avoid spending as much as $725.

First, take your time trying to find a new vehicle if you have that luxury. Visit different dealerships, test drive different models, and compare your costs.

Next, set priorities on the features you want. If seating is the most important item on your list (meaning, you need to be able to fit a certain number of passengers), first focus on cars that meet that need. Then, work your way down your list.

The more features you’re willing to forgo, the less you might end up spending. But it’ll help to make a list in order of priority so you can better make that call. For example, if heated seats are more important to you than a better sound system, it’s good to know that going into your vehicle search.

Boost your credit score before buying a car

Whenever you need to finance a purchase, whether via an auto loan, home equity loan, or personal loan, the higher your credit score is, the more competitive a borrowing rate you’re likely to snag. And the lower the interest rate you get on your auto loan, the easier it might be to afford your monthly car payments.

You can boost your credit score by doing a few things. First, avoid being late with bills. Your payment history carries more weight than any other factor when calculating your credit score (35%), so it’s important to focus on submitting payments for bills when you’re supposed to.

Next, if possible, whittle down your current credit card debt. Even if you’re making your monthly payments on time on your credit cards, the simple act of having too much of a balance relative to your total spending limit could drag your score down.

Finally — and this is an easy one — check your credit report for errors. If you see something like a delinquent account that was never yours to begin with listed on your credit report, you can work with the bureau in question to get that mistake corrected. And that could lead to a nice bump in your credit score.

For many people, a $725 monthly car payment is a stretch. But you don’t necessarily need to buy a car and take on a payment that high. If you do your research and prioritize the features you’re looking for, you may find that your monthly car payments are a lot lower and far more manageable.

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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 a disclosure policy.

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Getting a mortgage can be tricky when you’re new to a job. Read on to see what options you might have in that situation. 

Most people can’t afford to purchase a home outright. That’s what mortgages are for. And there are different factors that mortgage lenders consider when evaluating home loan candidates.

One of the most important things a lender will look at is your credit score, as it speaks to how risky a borrower you are (or not). Your lender will also look at your debt-to-income ratio, which measures the amount of debt you’re on the hook for relative to your earnings.

What’s more, your mortgage lender will want to see what your actual earnings look like. If you’re applying for a mortgage that results in $1,200 monthly payments, your lender will want reassurance that you’re capable of making those payments based on your salary.

But simply having adequate earnings to cover your mortgage payments isn’t enough. Mortgage lenders also want to see some form of income stability. So if you’ve recently started a new job, you may want to hold off on applying for a mortgage until you have more of an established history at your company. However, there may be exceptions to this rule.

Why mortgage lenders look for consistency

Mortgages, by nature, aren’t short-term loans. Many people spend 30 years paying off their homes.

Now, just because you’re gainfully employed today doesn’t guarantee that you’ll manage to hold down a steady job five, 10, or 15 years from now. But mortgage lenders want to know that you at least have an established job history at the time you sign your loan. So if you’re new to a job, you may have a hard time qualifying for a mortgage.

Rocket Mortgage says that lenders generally like to see a two-year history in your current job position before agreeing to a loan. This gives them some confidence that your job is a keeper. So if you’ve only been at your job for two months, you may not get your application approved.

When you’re okay to apply for a mortgage soon after starting a new job

If you’re a recent college graduate who’s been working for a few months at a software company, you may not be able to get a mortgage by virtue of your limited employment history. Similarly, if you spent several years working as an accountant and this is your first year working as an art shop assistant, a mortgage lender might hesitate to loan you money.

But if you recently started a new job in the field you’ve already been working in, you may have better results. It’s very common to move from one company to another. If you spent four years working as an accountant at one firm and have recently switched to another, a lender may not be bothered by that, because you’re basically doing the same job in a different environment.

Similarly, if you recently started a new job within the same company you’ve worked at for years, it may not be a problem. This holds true even if your actual line of work is different — such as, if you moved from the finance department to the marketing department.

All told, mortgage lenders have one objective — to get repaid on the loans they write. A new job might make it so your lender is worried it won’t get its money. And so you shouldn’t be shocked if your mortgage application is denied by virtue of you being new to the workforce or your particular field.

You can try to sway a lender to work with you in that situation by making a larger down payment. But whether that does the trick will really depend on your specific situation.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Do you always need to file a claim with your auto insurer when something happens to your car? Not necessarily. Read on to see why. 

The whole purpose of having auto insurance is to protect yourself in the event that your vehicle is damaged. An accident could, for example, result in $8,000 worth of damage to your car. If your auto insurance company picks up that entire tab minus a $500 deductible you have to pay, it could spare you from having to go into debt to the tune of $7,500.

But while there are plenty of situations where it pays to file a claim after a car accident, you may want to avoid doing that for an incident that was truly minor. Here’s why.

You may not get any money from your insurance company

You may be familiar with the concept of deductibles in the context of health insurance. If your health plan imposes one, you’ll need to spend a certain amount of money before your insurer picks up the tab for your healthcare services.

Auto insurance works similarly in that each time you file a claim against your insurance policy, you’re required to pay a deductible. Your insurer will then pick up the rest of the tab for your repairs, provided your claim is approved.

So, let’s say you have a $500 deductible and your car sustains $2,000 worth of damage. In that case, you’d spend $500, but your auto insurer would pay the remaining $1,500 for an approved claim.

In some cases, though, you may be looking at minor damage that costs less than your deductible, or costs the same. So in that case, there’s no sense in filing an auto insurance claim because you’re not going to get any money out of it.

For example, say another car sideswipes you and destroys your passenger-side mirror only. If the cost of replacing that mirror is $300 and you have a $500 car insurance deductible, it wouldn’t make sense to file a claim because you wouldn’t be getting any money in that scenario.

You don’t want your insurance costs to rise

Forbes Advisor found the average cost of car insurance is $2,150 for full coverage this year. That’s not a small amount of money.

The problem with filing a claim against your auto insurance is that it could result in higher premiums when your policy comes up for renewal. So if you’re looking at getting a very small payday from your insurer after meeting your deductible, then it may not make sense to file a claim after a minor accident.

Let’s say you got sideswiped by another driver and your passenger-side door got scratched up, but not dented. A body shop might quote you $550 to get it fixed. If you’re looking at a $500 deductible, it means that filing a claim won’t put more than $50 back in your pocket.

But what if you file a claim for that incident and get reimbursed your $50, only to then have your annual premium rise by $60 the following year? In that situation, you’re down $10.

Of course, this isn’t to say that filing a single claim will always and automatically result in a rise in your premium costs. But if you’re talking about getting very little money from your insurer, then you may want to consider not filing a claim.

Auto insurance is an unavoidable expense when you drive a vehicle. And while it’s important to have coverage, that doesn’t mean it always makes sense to file a claim against it.

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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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Homeowners insurance isn’t cheap, but some home features could make it even more costly. Learn when you should expect higher rates. 

Homeowners insurance is a necessary purchase that can save you a lot of money if the worst happens. And if you’re buying a home with a mortgage loan, you’ll be required to purchase a policy (and it’s HIGHLY recommended that you buy one even if paying for a home outright with cash).

Unfortunately, getting a homeowners policy isn’t always cheap or easy, and it all has to do with your home. Let’s take a look at some factors that could make it more difficult to find the most affordable homeowners insurance policy.

1. Where you live

When it comes to real estate, the three most important things are location, location, and location. This is also true of homeowners insurance policies and how much they’ll cost — or even whether you can get coverage at all. Some major insurers are no longer writing policies in states prone to expensive natural disasters. Since these are on the rise thanks to climate change, if you live in a state like hurricane-battered Florida or wildfire-ridden California, it’s likely that you’ll have to spend more and perhaps do more legwork to put a policy in place.

Even if you live in a state without this degree of extreme weather, you might find coverage more expensive or hard to come by if you live in an area with higher crime rates. Insurers might also consider your proximity to police and fire stations when writing a policy. According to Bob Vila, a homeowners insurance policy could be 4% cheaper if you live near a fire station.

2. The size of your home

It stands to reason that a larger home (or one with more buildings on the property, like a detached garage) will be more expensive to insure than a smaller one. If the home is completely destroyed, it’ll be a lot more costly for an insurer to rebuild a larger house and other structures on the property. The cost of rebuilding and repairs also varies from place to place.

3. Your home’s age

An older home will come with higher insurance bills because components of a house don’t last forever. If you buy new construction, it could be many years before you have to file a claim on your home. But if you buy a century-old home, it’ll come with a whole history, and that might include an older roof, home systems in disrepair, and other expensive surprises. According to Experian, insurance coverage for a home that’s more than 30 years old is 75% more expensive than that for a new home.

4. Any extra risks on your property

Got an aggressive dog? How about a swimming pool? Any aspect of your home (or the beings that dwell within) that is considered potentially dangerous can raise the cost of your insurance or make it difficult to find decent coverage. If your dog bites someone, that could result in a homeowners insurance claim for damages. A swimming pool is an “attractive nuisance” and you might need more liability coverage in case someone gets hurt.

How can you save on homeowners insurance?

Now that you know some of the reasons it might be difficult or more costly to get coverage, you’re probably wondering if it’s possible to cut some of your costs. Here are a few things to try:

Shop around: Talking to multiple insurance companies and getting multiple quotes is the easiest and most effective way to save. If you go with the first insurer you get a quote from, you could miss out on a less costly policy from another company. But you won’t know if you don’t shop around.Ask about discounts: There are lots of home insurance discounts out there. Are you a veteran? Can you bundle your homeowners policy with an auto policy? Maybe you’re a member of a specific professional group. Ask your insurer what you might qualify for.Lower your risk: If you take steps to make your home safer (such as by upgrading old electrical wiring or installing a fire sprinkler system), you could save. Similarly, you can take steps to get your home ready for natural disasters, like hurricanes.Raise your deductible: Raising your home insurance deductible from say, $500, to $1,000 per claim should save you money on your premiums.

If you’re struggling to find affordable coverage, take the above steps and see how you fare. If it’s proving impossible, you might need to turn to your state for help. States offer FAIR (or Fair Access to Insurance Requirements) plans, which can help you get insured — these may be more expensive than a regular homeowners policy and may cover less, but homeowners insurance is too important to forgo altogether.

Our picks for best homeowners insurance companies

There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.

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 a mild controversy, as those things go, but one hotly debated nonetheless. See both sides, and whether you should join them. 

There’s a strange place on the internet where social media, fandom, and personal finance merge in a truly fascinating way: the Costcosphere. It’s made up of posts, threads, and subreddits where Costco fans debate the merits of the beloved warehouse brand.

Often, they talk about the latest deals or the quality of various Kirkland items. Sometimes, they stumble upon something a bit more controversial. Recently, it was this sweatshirt, a simple gray affair delicately smothered in Costco logos.

It’s hideous. At least, that’s what about half the folks think. The other half? They like it. They love it. They want some more of it.

So ugly it’s beautiful

As far as I can tell, the heart of the argument for those in favor of the fabric monstrosity is that it’s so truly ugly, it’s actually weirdly endearing. Like a smooshy-faced dog eating peanut butter.

On the other side of the argument are the folks who say, no, ugly is ugly — and that thing is hideous. (I found multiple accounts of people who wanted to wear them, but had the decision vetoed by their spouses.)

So, which side are you on? Is it hideous? Is it fabulous? Is it fabulous because it’s so hideous? The internet may never know for sure.

Should you buy it? (Spoiler: Probably not)

For those who have to know, this 66% cotton (34% polyester) fashion statement costs $7.97 on Costco.com. Unlike most of Costco’s online items, the price for this one even included shipping and handling.

Sadly, it’s currently sold out, likely due to its stunning popularity on social media. But even if it weren’t, I’d caution you against buying it.

Although it can be fun to partake in these silly debates online, there’s a more serious side to all the social media shenanigans that really needs to be kept in mind: The push to overspend.

Social media, fandom, and our wallets

We’ve all been there. You get so caught up in the social media fandom fervor that you make a spontaneous purchase you regret the moment it clears your credit card.

Social media has become a major driver of spending, and it’s not just younger folks. One survey found that more than three-quarters of consumers buy things they see on social media. And around 80% of people are more likely to buy something they see in a friend’s posts.

And this is before we start to talk about the buying pressure that comes with fandom itself. Because you’re only wearing a Costco-bedecked sweatshirt for one of two reasons: You’re doing it ironically, or you really like Costco.

But how many of the products we buy because of social media and fandom are things we’d otherwise spend (read: waste) our money on?

Much like that sweatshirt, a lot of items that trend on social media tend to be, at best, a bit off-beat — and, at worst, downright useless. And the same goes for the countless products marketed to “super” fans. (Sure, the sweatshirt isn’t inherently useless, but how many years are you really going to pull out an ironic Costco sweatshirt when the weather turns?)

So while it’s probably harmless to weigh in with your upvote on which side of the various social media debates you land on, be sure you’re not also weighing in with your bank account.

If something truly looks interesting, let the product season a bit before you buy. Not only will this give all those social media users time to weigh in on whether the item really works, but it will also likely come down in price when it’s no longer the hot, sought-after product in every post.

P.S.: Please don’t gift this

One last note, for those who are already thinking about it: Please don’t buy this sweatshirt and dump it on an unsuspecting friend. Unless you’re 100% certain they will wear it, year after year, settle for sending them a screenshot. You’ll both get the same laugh out of it, but no one will have wasted money — or closet space — on something that won’t get used.

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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 Costco Wholesale. The Motley Fool has a disclosure policy.

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With the right strategy, you can avoid paying taxes when you sell stocks at a profit. Read on to learn more. 

The whole purpose of investing in stocks and other assets is to make money. One way to do that is to sit back and watch dividend income hit your brokerage account. Another way is to sell stocks and other assets at a price that’s higher than what you paid.

If you buy 10 shares of a given company at $100 a pop, or $1,000 total, and then sell them once that share price climbs to $200, you’ll make $1,000. And that’s a good thing.

But you should also know that when you sell stocks at a profit, you’re charged capital gains taxes. In some cases, though, it may be possible to avoid those taxes completely. And if you can’t do that, you can at least minimize them.

When capital gains taxes don’t apply at all

Capital gains are broken down into two categories — short term and long term. Short-term capital gains apply to investments sold after a year or less. Long-term capital gains apply to investments that are held for at least a year plus one day prior to being sold.

The capital gains category you fall into matters for a big reason. Long-term capital gains are taxed at a much more favorable rate than short-term capital gains.

Short-term capital gains are taxed the same as ordinary income. So your rate there depends on your tax bracket. Your tax bracket represents your tax rate on your highest dollars of earnings.

Long-term capital gains, meanwhile, are capped at 20% for very high earners — singles making over $492,300 and couples making over $553,850. That’s lower than most tax brackets.

If you earn an average wage, you can expect to pay 15% for long-term capital gains. But if you’re a lower earner, you can avoid taxes entirely on long-term capital gains.

Specifically, your long-term capital gains tax rate will be 0% if you’re single with an income of $44,625 or less, or if you’re married with an income of $89,250 or less. And it doesn’t matter what sort of gain you’re looking at. If you hold a given stock for at least a year and a day before selling it, your capital gains tax bill will be $0.

When you owe some taxes but are able to minimize them

To pay 0% on long-term capital gains, you need to earn a relatively low income. But even if you can’t get out of paying taxes on capital gains completely, you can still sell assets strategically to minimize your tax hit.

If your income is between $44,626 and $492,300 and you’re single, your long-term capital gains tax rate is 15%. So, let’s say you’re looking to sell stocks and walk away with a $1,000 profit, and you earn $100,000 a year. Your capital gains tax rate for short-term gains is 24% based on that salary. That leaves you with a $2,400 tax bill. If you wait until at least a year and a day to sell those stocks, you’ll face a $150 tax bill instead.

In fact, as a general rule, you should always check the date on which you purchased a given stock before selling it so you know what sort of tax implications you’re looking at. In some cases, waiting just a handful of days could lower your tax bill substantially.

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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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