Money Management

The monthly car payment on a $50,000 car could be $724 or much more depending on your circumstances. Find out more here. 

The average price of a new car is just over $48,000 and could soon hit $50,000, according to industry experts. That’s a lot of money to save up for a vehicle, so chances are good you’ll probably have to borrow to buy it.

If you don’t have the cash in a high-yield savings account and need a loan to get a new car, how much would the monthly payments be? Here’s what you need to know.

This is how much a $50,000 car could cost you

When you buy a car, you’ll typically need a down payment. Generally, you should aim to put around 10% down to help you qualify for the best rate on an auto loan. This will also ensure you don’t find yourself owing a lot more than the car is worth, since vehicles depreciate (or go down in value) pretty fast.

So, if you wanted to buy a $50,000 car, you should save up around $5,000 for the down payment. That would leave you with a car loan balance of $45,000. And the monthly payment on that amount would vary depending on two factors: the interest rate you were offered and the term of your car loan.

The table below shows how much your monthly payment and total interest costs would be at different loan rates with different term lengths (including if you borrowed at 6.07%, which was the average loan rate to buy a new car as of the end of 2022):

As you can see, a longer payoff term comes with lower monthly payments that could be more affordable. But you significantly increase your interest costs over time if you take many years to repay a loan.

And even with a pretty reasonable interest rate and a long payoff time, the monthly payments on a $50,000 car are still very expensive.

Can you afford a $50,000 car?

In general, you should try to keep your monthly car payments to 10% of your take-home income or less. If you wanted to stick to this rule of thumb and buy a $50,000 car, you would need a monthly take-home income of at least $7,240 if you got a car loan at a below-average rate and stretched out your payoff time for a long time.

Many people will find that purchasing such an expensive car really isn’t affordable. If that’s the case, that’s OK. You have a few options, including:

Buying a less expensive used car. This is often your best bet, since cars depreciate quickly and you take a huge financial hit if you buy brand new.Saving up to buy a more expensive car so you don’t have to borrow as much. If you want a nice new car, there’s nothing wrong with prioritizing this in your budget and saving up enough money to make a larger down payment so you can purchase the car and keep your monthly payments reasonable.

One technique that worked great for me was buying a cheap used car, paying it off quickly, and then continuing to make “monthly car payments” into a savings account (basically diverting the money I was using to make car payments into savings).

After driving the reliable used car for a long time, I ended up with enough money to buy a really nice used car for cash, which I drove for well over a decade while continuing to make “car payments.” That, in turn, gave me a big enough balance to finally buy the brand-new car with cash that I’m driving now.

Committing to a huge car loan you might not be able to afford is not a smart financial move, so you may want to try my approach — especially with the price of new cars climbing to a point where borrowing for them may be beyond reach.

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Investors are buying fewer homes. Read on to see how that might help everyday buyers. 

There’s a reason so many buyers have struggled to purchase a home this year. Not only have mortgages gotten expensive to sign, but there’s been a glaring lack of real estate inventory to choose from.

And let’s face it — if you’re going to be paying a high interest rate on a home loan, you want to be able to find your dream home, or the closest thing to it. When housing inventory is low, it becomes much harder to find the type of property you want.

But adding to buyers’ struggles is the fact that they commonly have to compete with real estate investors who have been known to scoop up loads of residential properties for their portfolios. Investors are able to make money on residential real estate by flipping homes and selling them at a profit or by renting them out on an ongoing basis.

But new data from Redfin shows that investor home purchases are on the decline. And that’s great news for everyday buyers.

The less competition, the better

Real estate investors bought 45% fewer homes in the second quarter of 2023 than a year prior, according to a Redfin analysis of 39 of the most populous U.S. metropolitan areas. This decline drove the total number of homes bought by investors down below pre-pandemic levels.

A fair share of regular buyers have been turned off this year by expensive mortgage rates. But investors commonly don’t need to turn to mortgage lenders for financing because they have capital to access.

However, home prices also happen to be fairly elevated. In July, the median existing-home sales price rose 1.9% from a year prior to $406,700, according to the National Association of Realtors. And that may be driving investors out of the residential real estate market.

Of course, investors pulling away is a great thing for buyers, because the less competition there is, the better. But it’s important for buyers to realize that even with fewer investors in the fold, the competition is still pretty stiff. So it’s important to take steps to get an edge.

How to beat out the competition

If you’re trying to buy a home today, you may end up having to duke it out with other buyers once you find a home you really like. But there are a few things you can do to give yourself an advantage.

One easy step to take in this regard is to get pre-approved for a mortgage. This shows sellers that you’re a serious buyer and that your financial picture has already been evaluated by a lender.

Another savvy move to consider is making an offer that’s a bit over a seller’s asking price. At a time when home prices are up, that might seem far from ideal. But let’s say you’re looking at a $500,000 home listing. If you can swing $515,000, that may be enough to get a seller to accept your offer on the spot rather than entertain other offers that land you in a bidding war.

Remember, once a bidding war starts, the price of the home you’re looking to buy could be driven upward in a notable way. In the end, offering $515,000 on a $500,000 home might prevent the price from eventually rising to $530,000 or more.

The fact that investor home purchases are declining could spell relief for buyers who haven’t given up on finding a place of their own. But it’s not just investors you’re competing with for the limited number of properties available today. So make sure to do what you can to edge out the competition.

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After overcharging customers for nearly a decade, Wells Fargo is now making restitution. Keep reading to learn more about what happened. 

For years, Wells Fargo overcharged customers for investment advice. While Wells Fargo admitted no wrongdoing, it recently repaid $40 million to nearly 11,000 clients who had been over-billed. In addition, Wells Fargo paid a $35 million civil penalty to the Securities and Exchange Commission (SEC).

Excessive fees

According to the SEC, each of the affected accounts was opened prior to 2014, and account holders continued to pay excessive fees through December 2022. In total, investors paid more than $26.8 million in excessive fees and interest.

At least part of the problem stems from practices carried out by legacy firms AG Edwards and Wachovia. AG Edwards and Wachovia merged in 2007, while Wells Fargo and Wachovia merged in 2008.

In a written statement, Gurbir Grewal, director of the SEC’s enforcement division, wrote, “For years, Wells Fargo and its predecessor firms negotiated reduced advisory fees with thousands of clients, but failed to honor them.”

The SEC contends that, in some cases, Wells Fargo’s internal systems failed to account for the reduced fees. At a minimum, fees continued to accumulate for nine years.

Impact of fees

Investment fees are like termites, slowly nibbling away at your portfolio. The problem is that many investors don’t think of 1% to 2% as too much to pay professionals to manage their portfolios. While it may not seem like much, fees add up. Worse yet, they compound as your investment returns compound. You don’t just lose the amount you pay in fees; you also lose the growth that money may have enjoyed for years to come.

Let’s say you have $50,000 invested, and your investment earns an average annual return of 7% for the next 25 years.

In this case, paying 2% in ongoing annual fees means leaving over $102,000 on the table.

How to know what you’re being charged

To understand how you’re charged, it helps to understand the different types of fees. Typically, there are two — ongoing fees and transaction fees. Ongoing fees are charged regularly, such as an annual account maintenance fee. Transaction fees are charged each time you make a transaction. For example, if you buy a mutual fund, you’ll pay a one-time fee.

The simplest way to learn the type of fee you’ll be charged and how much you can expect to pay is by reading the material provided by your brokerage. Look at the opening documents, account statements, confirmation, and any product-specific documents to find both the type and the amount of fees. Naturally, you know that an ongoing fee of 2% will eat into your investment more than a fee of 0.25%.

Important questions

According to the SEC, these are some of the questions you should ask a financial professional before committing to an investment:

How do these fees and expenses compare to other products that can help me meet my financial objectives?How much will this investment have to increase in value before I break even?How do you get paid? If it’s by commission, how are your commissions determined? (This question will give you a better idea of whether you’re being pushed in a particular direction to make more money for the advisor).What are all the fees relating to this account? Can you provide a fee schedule that lists all the fees that I will be charged for investments and maintenance?What fees will I pay to purchase, hold, and sell this investment?Will fees appear clearly on my account statement or my confirmation? If not, how will I know about them?How can I reduce or eliminate some of the fees I’ll pay? For example, can I buy the investment directly without a financial professional?Do I need to maintain a minimum account balance to avoid fees?

Yes, it seems like a lot, but when you consider how much money you can lose to fees, asking these questions is worth your time.

Check your statements

If the Wells Fargo situation teaches us anything, it’s that we should check our statements to ensure that we’re not being overcharged for fees. It’s up to you to check your statements and to raise an alarm if you are being overcharged.

Just as you would shop around for any other product or service, shop around before you invest.

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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.Wells Fargo is an advertising partner of The Ascent, a Motley Fool company. Dana George 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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How much is a Costco membership really worth? It could be more than you think. Read on to find out how much you could save. 

A basic Costco membership costs $60 per year and the Executive level costs $120. But how much is a Costco membership really worth? It’s fair to say that many Costco members get significantly more value from their memberships than they paid for them, and in some cases, the annual savings could even be $1,000 or more. Here are four of the biggest Costco perks, and how they could potentially save you hundreds, or even thousands of dollars.

1. Costco gas

Many people (especially those who aren’t yet Costco members) are often surprised that you can financially justify a Costco membership if all you do is buy your gas from the retailer’s pumps.

Most reports indicate that Costco gas is at least $0.20 per gallon cheaper than comparable gas stations in the same area. And based on the average number of miles driven annually (13,476 miles) as well as the average gas mileage of U.S. vehicles (25.4 miles per gallon), this means that the typical driver would save about $106 just by purchasing their gas from Costco. If it’s a two-driver household, the potential savings could be doubled.

2. Executive membership

Sure, the Costco Executive membership will cost you more money initially. You’ll pay a $120 annual membership fee instead of the regular $60 fee, but if you shop at Costco regularly it could be a major financial benefit.

The most significant benefit of the Costco Executive membership is an annual 2% reward on qualifying Costco purchases.

I’ll spare you the math. The breakeven point is $3,000 in annual Costco purchases. Upon spending this amount, you’d have a $60 reward that can be used at Costco and would justify the higher cost of Executive membership. Any spending above this amount would be a bonus.

Costco limits the benefit to a total reward of $1,000 per year ($50,000 in spending), but even the average shopper could get hundreds of dollars from this perk. According to Mint, the average family of four spends $600 to $1,200 per month on groceries. Throw in some non-food Costco purchases, and annual spending could quickly soar into the five-figure range.

3. Costco Travel

Costco Travel offers hotels, cruises, and vacation packages to members, and to be fair, the jury is still out on whether they are cheaper through Costco than other discount travel sites like Expedia. However, there are two main reasons why Costco Travel could be a far better value.

First, Costco typically offers extra perks compared with its competitors. For example, Fodor’s found that Costco’s cruises offered onboard credit equal to about 8% of the fare paid, on average. And there are Kirkland Signature deals that can be much cheaper for select cruises.

Second, Costco Travel offers additional benefits and discounts to its Executive members. For example, a current offer gives Executive members an additional $100 resort credit on certain resort stays. And don’t forget that Executive members also get 2% back on purchases, including travel packages.

4. Pharmacy

If you take prescription medications regularly, Costco’s pharmacy benefits could put some money back into your checking account. According to Costco’s website, the Costco Member Prescription Program offers medications at prices ranging from 2% to 40% less than the competition. Consumer Reports has also found that Costco’s pharmacy is cheaper than other national pharmacy chains. Costco even offers pet medications, and I can tell you firsthand that they’re likely to be much less than what you’ll pay at a veterinarian’s office.

This is on top of the in-store savings

As a final thought, these four perks could certainly combine to produce savings in excess of $1,000 for Costco members. However, keep in mind that they are in addition to any savings you receive from buying products in Costco stores. While it’s sometimes tough to quantify the savings versus traditional grocery stores simply because you’re buying in such large quantities, I’ve estimated that I save roughly 20% on things I buy at Costco on average, compared with my local grocery store.

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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.Matthew Frankel, CFP® 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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Digital asset owners may have extra tax paperwork in the next few years. Read on to find out how new regulations may change your taxes. 

During the height of the pandemic, the popularity of investing in digital assets soared. Many investors used pandemic-era stimulus money to invest in cryptocurrencies like Bitcoin, rapidly driving up its value over a short period.

Investors also spent money on other digital assets during that time, including non-fungible tokens (NFTs), which are digital files that show ownership of things like a work of art, image, song, or other assets.

While the interest in digital assets has tapered off a bit over the past few years, the global crypto market is still worth an estimated $1 trillion right now, according to CoinMarketCap, and the NFT market was worth about $2.9 billion in the second quarter of 2023, according to DaapRadar.

And that’s put the digital asset market on the radar of both the IRS and the U.S. Treasury Department. The U.S. government recently released new proposed tax regulations on digital assets that will likely have a significant impact on both taxpayers and brokerages.

What the proposed crypto regulations say

Currently, cryptocurrency investors and people who have bought and sold other digital assets have to tell the IRS whether they bought, sold, exchanged, or received any digital assets and then self-calculate their gain or loss for the year.

However, the IRS and Treasury Department are proposing a significant ramp-up of digital asset reporting by proposing that online brokerages and other trading platforms also begin reporting sales and exchanges.

Not only do the proposed regulations affect traditional brokers, but the definition of a broker would expand to include centralized and decentralized trading platforms. This means that online crypto exchanges, trading platforms, crypto payment processors, and digital wallets would also have to report on digital assets.

All brokers will do this by submitting a Form 1099-DA, which will be sent to digital asset holders and the IRS, to help taxpayers determine if they owe taxes, according to the Treasury Department. The proposed regulations, if enacted, will require brokers to begin reporting in 2026, which means that all crypto, NFT, and other digital asset sales and exchanges for 2025 will be included on Form 1099-DA.

The Treasury Department is accepting public comments about the changes until the end of October and will issue final regulations after a public hearing in early November.

How the crypto reporting rules could impact your taxes

The U.S. government is making a significant move to regulate the reporting of digital assets sales, purchases, and exchanges so that it can collect taxes on these assets in similar ways to that for stocks and bonds.

The government hopes that if the proposed rules are enacted, it will help boost tax revenue and keep people from evading taxes with digital assets.

“This is part of a broader effort at Treasury to close the tax gap, address the tax evasion risks posed by digital assets, and help ensure that everyone plays by the same set of rules,” the Treasury Department said on its website.

This means that your reporting of cryptocurrency ownership will be more detailed in the next couple of years. And as such, you could end up owing more taxes than before. The good news is if you get a Form 1099-DA, you’ll have a better understanding of how much you owe.

But that doesn’t mean you can avoid reporting digital assets right now. Under current laws, people are required to pay taxes on any gains from selling digital assets. In that sense, the new proposed changes are an extension of your responsibility to report your crypto and digital assets.

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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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

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There’s no standard amount that works for everyone. But here’s how much you might need to save and how you should withdraw your money. 

I remember someone asking me when I was about to graduate college what I would do after school. Thinking I was clever, I told them I planned to go straight into retirement. That was my catch-all answer for not knowing what I would do with the rest of my life. Thankfully, I got an internship, then some more education, and eventually a job.

I didn’t have a real plan to retire early, but some people do. And more than a few are very interested in the idea. A 2021 Vanguard survey found that 22% of millennials want to retire before age 60.

But how much do you need to stuff under the mattress to make early retirement a reality? Because everyone’s circumstances are different, there’s no catch-all number to achieve an early retirement. But you can use a couple of formulas to help you figure out your ideal amount.

How much money you need depends on your spending

If you’re looking for a quick formula to determine how much money you need to retire early, some people in the FIRE (financial independence, retire early) movement suggest saving 25 times your annual expenses in a retirement account, like a Roth IRA, or even in a traditional brokerage account.

For example, if you have $40,000 in annual expenses, your goal would be to build your investments — including owning stocks in a brokerage account — to $1 million. The second part of this strategy is to use the 4% rule when withdrawing your money each year. This formula says you should spend 4% or less of your retirement savings in your first year of retirement and then adjust for inflation in the following years.

Following this plan, your retirement money should last about 30 years if you follow the withdrawal rate very closely, according to Charles Schwab.

For example, if you saved $1 million for retirement, you would withdraw $40,000 in the first year to live off of. You would take out the same amount the next year, adjusting for inflation. So, if inflation was 2% in the second year of retirement, you would multiply $40,000 by 0.02 to get $40,800, according to Vanguard.

While the 4% approach is a good rule of thumb for retirement, Vanguard says its success rate declines the longer your retirement is. For example, Vanguard says the 4% rule has an 82% probability of success for a 30-year retirement but only a 53.7% success rate for a 40-year retirement.

Instead, Vanguard suggests a dynamic spending rule to make your hypothetical $1 million more likely to stretch to 40 years. Under the dynamic spending rule, investors start with the 4% rule but then increase or decrease spending based on how well or poorly the market is doing. For example, if you spend $40,000 in retirement the first year, but the market does poorly in your second year of retirement, you cut back on spending.

Using the company’s dynamic spending formula, Vanguard says the probability of stretching your $1 million to last 40 years goes from a success rate of 56% with the 4% rule to 90%.

If you’re looking for a more conservative approach to spending in retirement, Morningstar says a withdrawal rate of between 3.3% and 4% each year will help make your savings last as long as possible.

The tricky thing about retirement formulas

The thing to remember about retirement formulas is that there will always be expenses that pop up in retirement that you didn’t plan on. It could be an expensive medical bill, replacing a car, or helping out family members. Additionally, inflation can significantly dent your retirement savings, causing your money to lose value over time.

So, no matter what formula you decide to use to determine whether or not you can retire early, remember that you’ll probably have some unexpected expenses, especially if you have a longer retirement.

If you need help planning your retirement, it’s always a good idea to talk with a financial planner. Or, if you prefer to do things yourself, some robo-advisors have retirement planning features built into them.

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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.Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2023 $47.50 puts on Charles Schwab. The Motley Fool has a disclosure policy.

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