Money Management

When I recently applied for a mortgage to buy a home, I opted out of paying points for one key reason. Keep reading to learn why I decided against it. 

Recently, I applied for and got a mortgage loan. Like most people, I needed to borrow to buy a home, so I shopped around to compare offerings, chose a lender, and applied. Unfortunately, like everyone else buying a house right now, I wasn’t offered a favorable rate on my loan since rates are very high right now.

Since I need to buy and the payments coming out of my checking account would still be affordable, I took the loan even though the rate is way higher than I would prefer. My lender offered me the chance to reduce the rate by buying points, but I opted not to. Here’s why I didn’t choose to lower my rate even though I was disappointed with the amount of interest I’ll be paying.

Here’s why I didn’t buy points on my mortgage

There’s a simple reason why I opted out of reducing my rate by buying points. I will likely not keep my loan long enough for it to pay off.

To understand why, you need to understand how mortgage points work. When you pay a point, you essentially prepay some interest. Each point costs you 1% of the loan amount. So, for example, if you are borrowing $200,000, a point would cost you $2,000. And each point lowers the rate on your loan by 0.25%. Paying one point could lower your rate from 6.50% to 6.25%.

If you keep your mortgage for a long time, eventually you’ll save more than the $2,000 the initial point purchase cost you because you’ll have a lower rate for the life of the loan. You’ll enjoy lower monthly payments and lower total interest costs over time. But, that’s a big if. If you end up refinancing (or selling your home) before your interest savings add up to at least the cost you paid upfront, you’ll end up worse off for having purchased points.

I don’t plan to keep my loan for a long time. I believe rates will go down in the coming years, and I will refinance my mortgage as soon as they do. With this mindset, it simply was not worth paying points when I got my loan.

Do the math before you buy points

If you want to decide if buying points is right for you, you should always do the math. This means figuring out:

What the point costs you upfront.How much you save by paying for the point (as calculated by how much lower your monthly payment will be at the lower rate the point buys you).How long you have to keep the loan for the savings to make paying the point worth it.

Say, for example, you’re thinking of borrowing $200,000 like in the example above using a 30 year loan at 6.50%, and you’re trying to decide if you should buy a point to bring your rate down to 6.25%.

The cost to buy a point would be $2,000, but your monthly payment after buying them would be $1,231 per month instead of $1,264 per month if you bought no points and kept the 6.50% rate. You’d save $33 per month thanks to buying points so you’d divide $2,000 by the $33 in monthly savings. You’d break even in about 61 months, or 5.1 years.

You can use any online mortgage calculator to compare the difference in principal and interest payments for a loan with and without points, and you can easily figure out what a point would cost by just taking 1% of your loan amount. If you do this simple calculation and then think about how long you plan to keep your loan, you can decide if buying points is right for you.

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CD rates are higher than they’ve been in 22 years. Learn what happens when you deposit $10,000 at today’s best rates. 

Before 2023, certificates of deposit (CDs) were hardly worth your time — or savings. Sure, it was possible to get a CD with a 2% or 3% rate in 2022, but with inflation at levels more than twice that, it was hardly worth the risk of locking money away for the long term.

Fast forward to the second half of 2023 and CDs are surprisingly cool again. Many of the top-paying CDs have rates far above 5%, with some banks and credit unions offering terms that are nearly 6%. With rates that high, now might be a good time to lock money you won’t need for the near-term, especially if you snag one of today’s top-paying CDs.

A $10k deposit could earn you $500 over 12 months

With these historic rates in mind, how much would you earn on a $10,000 deposit? For comparison, let’s take a look at a few different terms and potential APYs.

Earning between $500 and $550 on a 12-month CD sounds pretty good to me. But even a quick $120 to $135 on a three-month CD (or $247 to $272 for a six-month CD) can prove beneficial, especially if you don’t want to lock your money up for a longer term.

Long-term CDs, such as those that mature between two and five years, will have smaller APYs, but I wouldn’t dismiss them entirely. Truth is, at some point, the Fed will start cutting rates and CD providers will likely follow course. If you lock into a great rate on a 5-year CD, you can earn guaranteed interest even if the market’s CD rates fall below yours. A 5-year CD that has a 4.30% would earn you about $2,300 in total interest after your term ends — a solid amount of savings.

Keep the earnings going with a CD ladder

Considering the high rates on today’s CDs, now might be a great time to build a CD ladder. This would involve getting multiple CDs with short and long terms. The CDs that mature sooner ensure you’re only a few months away from accessing some cash. You will need a good amount of savings on hand to build a CD ladder, but $10,000 could be sufficient to string three or four CD terms together.

One thing to consider: CD rates are correlated with the Fed’s monetary policy, meaning when the Fed raises its fund rate, CD rates tend to follow. Since the Fed doesn’t have a clear long-term plan for its fund rate, many banks and credit unions are offering higher rates on short-term CDs, but those high rates won’t stick around forever. If you believe a CD is the best place for your savings, don’t hesitate to look at your options.

All in all, this is shaping out to be a great year for savers, with both CDs and high-yield savings accounts earning at rates we haven’t seen in decades. Who knows how long this will last — take advantage of it now if you have extra savings before rates start decreasing.

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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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Dollar General came out on top in our comparison between these leading discount brands. Find out what gave it the edge. 

Dollar stores have exploded in popularity in recent years as hard-up shoppers look for ways to shave their grocery bills in the face of skyrocketing prices. We compared two of the biggest names in dollar store shopping, Dollar General and Dollar Tree (which includes Dollar Tree and Family Dollar). Read on to find out which one came out on top.

Dollar Tree: More items that cost around $1

The dollar store concept started in the 1950s with a premise that no item would cost more than $1. Even before the sky-high inflation of recent years, that idea had started to become unfeasible — Dollar General pulled away from the $1 price point decades ago. This means it now has a wider range of products at budget prices, even though things often cost more than $1.

In contrast, Dollar Tree stuck to its guns and only pushed its prices up to $1.25 at the end of 2021. It’s now experimenting with other prices. This includes taking some items back to $1 while also selling products at $3, $4, and $5. In time, the higher price points will mean it can expand its range, but it’s not there yet.

Here’s the thing. Just because something costs $1 (or $1.25), it doesn’t automatically make it a good value. Sometimes it is, but you’ll only know if you look at the price per ounce or per fluid ounce. For example, Dollar Tree’s 8 fluid ounce bottle of Tide laundry detergent costs $1.25, which is $0.16 per fluid ounce. Dollar General sells a 115 fluid ounce bottle at $15.95, which is $0.14 per fluid ounce. It’s a different story if you only have $1 to spend, but often a bigger package works out cheaper in the long run.

Dollar General: Partnership with Ibotta

Most dollar stores accept coupons and you can also use cash back apps to get rewards on your spending, though the specifics vary from store to store. For sure, you can use Ibotta at both Dollar General and Dollar Tree. But Dollar General now has a specific partnership with Ibotta that lets customers earn cash back in their Dollar General Wallet.

Stacking coupons, cash back app rewards, and in-store discounts can be an amazing way to score big savings. Check the small print and the store’s rules as you can’t always use, say, a coupon and a cash back bonus for the same product. But when you can, it means more money in your bank account for other things.

Dollar Tree: More stores selling fresh produce

Dollar stores don’t have a great reputation when it comes to selling fresh produce, but that is starting to change. Being able to buy fresh produce in a dollar store is a big deal if that’s the only store you’re able to get to easily. As such, it’s great to see both Dollar Tree and Dollar General expanding their fruit and vegetable options.

Dollar General introduced its DG Fresh program in 2019 and has continued to expand its fruit and vegetable offerings since then. Dollar Tree piloted fresh produce a few years later, and has been aggressively growing its frozen and refrigerated options in recent years. In its most recent earnings call, Dollar Tree said its frozen and refrigerated product ranges — which include fresh produce — are now available in nearly 5,600 stores, which is about a third of the total number of Dollar Tree and Family Dollar stores combined.

Dollar General currently sells fresh produce in about 20% of its stores and its website says it has plans to significantly increase this number. Right now, about 3,900 Dollar General stores sell produce such as lettuce, tomatoes, onions, apples, and potatoes. In the next few years it plans to make produce available in as many as 10,000 stores.

Dollar General: Excellent online experience

When it comes to shopping online, Dollar General is far superior to Dollar Tree. It has a broad range of products, digital coupons, and the site is super easy to use. In contrast, when you shop with Dollar Tree online, you often have to buy a whole box or case. That might mean buying 12 jars of peanut butter or 24 tins of ground black pepper. It’s possible to buy some items in smaller quantities, but on the whole you’re stuck with boxes.

Ultimately, bulk-buying does not make sense at Dollar Tree. If we go back to the example of 8 fluid ounce bottles of Tide laundry detergent, a case of 12 would set you back $15. You’d get 96 fluid ounces in total. For $15.95, you could get one big 115 fluid ounce bottle at Dollar General, which would be better for the environment and your wallet.

Bottom line: Dollar General is better than Dollar Tree

A lot depends on your shopping habits and, in some cases, which store is closest. But, for me, Dollar General’s wider range of products combined with a much stronger online store put it ahead of Dollar Tree. Whichever one you shop at, be sure to carefully compare prices and use coupons and apps for extra savings. Having “dollar” in the store name doesn’t always make it the lowest-cost option.

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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.Emma Newbery has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

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The maximum monthly SNAP benefit for a family of four will increase from $939 to $973 for the 2024 fiscal year. Find out why that’s not enough to stop people from going hungry. 

The USDA recently announced its cost-of-living increase to SNAP food benefits for the 2024 fiscal year. Starting this October, the maximum monthly benefit for a household of four will increase to $973 in most U.S. states. That’s a 3.6% increase from the $939 monthly maximum a four-person household can currently receive.

On the face of it, a 3.6% increase in food benefits beats the overall change in living costs, and it’s certainly better than nothing. But when you dig deeper, it isn’t enough to cover the higher food prices we’ve all been grappling with. Moreover, many families will struggle to feed their families on that amount. Ultimately, low-income households have been hammered financially on all sides in recent years, and an extra $34 a month for a family of four won’t go very far at all.

Here are three reasons why the increase is not high enough.

1. It isn’t really in line with inflation

Every June, the USDA re-evaluates SNAP benefits based on changes to living costs that year. According to the Bureau of Labor Statistics — the gurus when it comes to tracking these things — overall living costs in June 2023 were 3% higher than the year before. The trouble is that inflation has not affected all things equally. And food prices have increased much more than 3%.

The cost of buying food to eat at home increased 5.7% from June 2022 to 2023. That would be a much more realistic figure to use to calculate food benefit increases. A 5.7% increase in SNAP benefits for a family of four would take the maximum monthly amount to $993 instead of $973. When you’re budgeting for a bit more than $2.50 per person per meal, that extra $20 a month could make a big difference to your bank account balance.

Here’s how the maximum SNAP benefits for a family of four break down in different scenarios:

2. Current SNAP benefits don’t cover the cost of a meal in most U.S. states

If you’re wondering how far that $2.67 per person per meal might go, the answer is not far enough. Indeed, a recent Urban Institute report said, “SNAP benefits did not cover the cost of a meal in 99% of counties in 2022.” It found that on average, a modestly priced meal cost $3.14. Even at 2022 prices, average food costs are higher than the 2023 and 2024 SNAP benefits.

The Urban Institute calculated the average meal cost by using data from the U.S. Census Bureau on weekly food expenditures. Researchers looked at what SNAP eligible households actually spent on food. This is a very different methodology from the USDA’s approach which estimates the cost of its thrifty food basket for a family of four. One is based on real people’s lives and the other uses a hypothetical shopping trip.

3. Food costs more in certain areas and SNAP benefits don’t fully address this

Food prices can vary dramatically depending on where you live. In fairness, SNAP benefits are already different in states like Hawaii and Alaska where living costs are considerably higher. But those aren’t the only places where food costs more than average. If you live in a food desert — an area where it’s difficult to access healthy, affordable food — your SNAP benefits won’t go as far.

The Urban Institute research showed that in some parts of the country, meals cost more than 50% more than SNAP benefits in 2022. For example, in Wyoming’s Lincoln and Teton Counties, a modestly priced meal cost $4.30 — 58% more than the average SNAP benefit. A paper by Johns Hopkins university pointed to evidence of “racially segregated food environments” and called for more targeted cost of living benefits.

Bottom line

Hunger in the U.S. is not going away. According to the USDA, over 10% of households experienced food insecurity at some point in 2021. This agrees with Feeding America data that says that more than 53 million people visited a food bank in the same year.

SNAP benefits do a huge amount to ensure people have enough to eat. And there are ways to stretch your benefits — for example, by using cash back apps or finding a local Double Up Food Bucks program. But if benefits don’t increase in line with the actual cost of food, Americans will continue to go hungry. Particularly if the benefit amount was already too low.

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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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