Money Management

If you’re thinking of buying a property with a tenant living in it, you should be aware of the potential risks and downsides. Here’s what you need to know. 

The house that I’m buying has a separate in-law apartment that is located above the garage. The people who I’m purchasing the property from wanted me to allow the tenant currently living in that in-law apartment to stay for a period of time after closing.

I said a hard no to this and, in fact, delayed closing for several months so they would have time to get the tenant moved out before we moved in. Here’s why I was unwilling to even consider the possibility of allowing a renter to stay on my property after I purchased it.

Being a landlord carries a ton of risks

I got a mortgage and purchased my house to have a place to live with my family — not to buy an investment property. I do not want to have a stranger living so close to me in a garage apartment in my house.

I also don’t want to take on the risks associated with having a tenant. My home insurer told me that my costs would have been higher if I had a tenant on the property, and there was also the chance the tenant wouldn’t take care of the space and would leave me with costly repairs to make. My accountant also warned me that having a tenant could affect my ability to claim a homestead exemption on the entire property, which could affect my property taxes.

Now, some people may want to own rental properties, or buy a multi-family property and live in one unit while having a tenant in another. And this can be a good arrangement if you are prepared and ready for it, since your tenant’s rent can cover some of the cost of your mortgage.

But, this wasn’t something I wanted to sign on for. And if it’s something you are considering, you should be sure to talk with an insurance agent and an accountant about the implications of your decision.

Removing a tenant can be a huge hassle

Another big reason I was unwilling to let the tenant stay after closing, even for a few months, is that I was afraid that ultimately she would not leave.

She wasn’t very happy the owners were selling the house to me (based on communications I had with her when we visited the home) and she did not want to move. And it can be very hard to actually remove a tenant even if their lease is up.

Landlord tenant laws rightly protect people from unfair actions on the part of a landlord. But, the safeguards make life harder in situations where tenants don’t cooperate. Landlords can’t just change the locks or turn off the utilities or remove the tenant’s stuff if they won’t leave, even if they aren’t lawfully occupying the property anymore. Removing a tenant who doesn’t voluntarily depart could mean going to court, getting a court order, and getting a sheriff to enforce it.

I had no interest in trying to figure out how to evict someone or personally being responsible for having someone removed from their home. So, I said I would wait until the current owners could deliver the property vacant.

Be careful when buying a home with a tenant

If you are thinking about buying a house with a tenant living in it, you should be aware that the transfer of ownership to you does not automatically mean the lease will terminate. You’ll have to abide by its terms. And if the tenant doesn’t leave or comply with the lease requirements, you’ll be the one who has to go to court.

If you aren’t willing to take on these responsibilities, consider either passing up on buying a tenant-occupied property, or put off your mortgage closing and make delivery of a vacant property a condition of your sale. That way, the current owners have to deal with any problems associated with removing the tenant and you can move into the home without worry.

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Breaking up is hard to do, and it might even be a strain on your finances. Keep reading to find out whether you need a “breakup budget.” 

We all know the cliches. When you go through a devastating breakup, you might get a drastic haircut (are you sure you want bangs?), sign up for a gym membership, or even splurge and take a series of expensive vacations (a la Eat, Pray, Love).

If you feel out of control of your emotions, taking charge of your money by spending some of it in a reckless way can sometimes make you feel better — this is the crux of retail therapy as a concept. Let’s take a closer look at overspending in the wake of a breakup and explore a few ways you can cope with heartbreak that don’t involve derailing your personal finances.

Does spending money help mend a broken heart?

Anecdotal evidence sure says so. I asked some of my friends about what they spent money on in the wake of a breakup. For some, it was on a new iPhone, tattoos, and having junk food delivered (pre-DoorDash and similar services, and it wasn’t cheap). Others drowned their sorrows in even more expensive ways; one spent 10 days in Scotland, another had a girls’ weekend in Las Vegas, and one even bought a car (at a time when she was making just $5 an hour — her car payments came to $474.88 a month!).

A 2014 study out of the University of Michigan found that shopping reduces residual sadness by giving people a renewed sense of control over their life. If you think about it, this makes a lot of sense. A relationship’s trajectory and outcome are determined by more than one person, but if you’ve just gotten out of one, you’re likely feeling eager to reassert control over all aspects of your life, including your finances.

Unfortunately, a breakup splurge can have negative consequences if your finances can’t support your overspending — notably, you could end up in debt. As the study noted, “Whether the increased control afforded by shopping results in a loss of control later (due to increased debt), and thus counteracts the temporary benefits of retail therapy, remains an important open question.”

How can you prepare your finances for a breakup?

While it might seem negative, it could be worth setting yourself up for a more affordable run of spending if your relationship ends. And you don’t even need to be in a relationship (or one that seems to be failing) to set it up. Just like with so many aspects of managing your money, you can make automation work for you here, too. If you don’t already have a high-yield savings account, you should open one — these are paying a high enough APY right now to beat inflation.

The best ones allow you to set up sub-accounts (which might be called “buckets,” “pockets,” or “vaults”) so you can keep money separated within the account for different goals. Give one of them an apt name (or even just go with “Breakup Budget”) and set up a small automatic transfer every week or month, or on whatever schedule works for you. This way, if you need some of that retail therapy, you’ve got a chunk of money ready and waiting.

What if you already went a little overboard?

If you’re struggling to repair your finances in the wake of a little too much heartbreak spending, here are few tips that can help:

Figure out how much you owe: Step away from the credit card, and instead log into your accounts and see how much you’ve spent. Knowledge is power, and knowing you went overboard by $500 or $1,000 (or more) is key to getting out from under it.Cut your spending: If you’ve got some debt to pay off, it’s time to tighten up your budget so you can temper the damage. If you usually spend $150 a week on entertainment costs, vow to cut that expense until you’re out of debt. Consider cooking for yourself at home, borrowing DVDs from the library, or if you go out with friends often, maybe you can plan some free or lower-cost fun instead.Bring in more money: Adding to your income is often a more effective way to get out of debt, so if you’re owed a raise at work, go in there and ask for it. Alternatively, you might consider signing up for a casual side hustle (maybe driving for Lyft, or delivering food for DoorDash?) to bring in extra money.Think frugal when it comes to dating: You might be eager to get back out there, but dating can also be expensive. So if you’re trying to repair some damage from a breakup splurge, consider meeting a new person for coffee rather than a full dinner. The nice thing about coffee as a first date is that it’s enough time to decide if you actually like someone, and if you don’t, you can leave gracefully before wasting too much of your precious time or money. If you do like them, you can have that dinner more cheaply — my colleague Maurie Backman suggests a Costco food court date as an option.

The best remedy for heartbreak is often time — after all, time heals all wounds. If you want to be prepared for your next relationship, consider giving yourself the gift of pre-planned cash to spend.

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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 positions in and recommends Costco Wholesale and DoorDash. The Motley Fool has a disclosure policy.

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A warehouse club membership could save you money. Read on to see how to choose between Costco and Sam’s Club. 

In July, grocery prices were up 3.6% on an annual basis, according to last month’s Consumer Price Index. But joining a warehouse club could help you save money on the cost of feeding your family. The question is, which one should you join?

You probably don’t need two warehouse club memberships. But since Costco and Sam’s Club each offer plenty of perks, it can be tricky to decide which one to go with. Here are some points of comparison to consider when making your decision.

1. Location

Because the cost of a Costco membership is comparable to that of joining Sam’s Club (more on that in a minute), the main factor to consider in your decision is location. You’re more likely to get good use from your membership if you choose a warehouse club that’s located conveniently to where you live. So if the nearest Costco is eight miles away and the closest Sam’s Club is 15 miles, you may want to favor Costco by virtue of that alone.

Also, consider the cost of getting around town. By choosing the option that’s closest to your home, you can save a bit on gas during the year.

2. The cost of a membership

A basic Sam’s Club membership costs $50 a year, while a Plus membership costs $110. The latter gives you 2% cash back on Sam’s Club purchases, up to $500 a year. It also gives you access to your local store earlier in the day at select locations. It’s also worth noting that Sam’s Club tends to run promotions that offer a discount on your first year of membership.

By contrast, a basic Costco membership costs $60 a year, while an Executive membership costs $120. With an Executive membership, you earn 2% back on Costco purchases, up to $1,000 a year. Costco also doesn’t tend to offer discounts on memberships directly (though sometimes, it’ll throw in perks like a store gift card when you sign up at select times, and you can argue that those perks help offset the cost of a membership).

As you can see, the cost of joining Sam’s Club is fairly comparable to Costco. But if both stores are equally accessible to you, then you might as well go with the option that costs less.

Can you test the waters before committing?

One good way to see whether Costco is a better option for you than Sam’s Club, or vice versa, is to visit the store a few times and see which experience you prefer. Sam’s Club makes that a bit easier than Costco, though. That’s because it offers a free trial, while Costco does not.

However, with Costco, you can sort of do your own free trial in a roundabout way. Costco is committed to customer service, and it will refund your membership if you’re not satisfied with it. So one thing you could do is sign up for a basic membership and visit a few times to see how things go. If you decide that Costco isn’t for you, just ask to cancel your membership and get your money back.

Choosing between Costco and Sam’s Club isn’t always easy. But if you focus primarily on location followed by membership costs, you might land on a decision you’re happy with.

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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 Costco Wholesale. The Motley Fool has a disclosure policy.

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Checking and savings accounts are the cornerstone of a good financial plan. Read on to learn about the benefits of having more than one of each. 

The first type of financial account you ever opened was likely a checking account or a savings account with a bank or credit union. These types of accounts are sort of personal finance 101. A checking account is where you receive the money you’re paid by your employer, and you can turn around and pay bills from it. A savings account is a place to keep money for expenses that you’ll need sooner rather than later, as well as a good home for your emergency fund.

With this in mind, why would you ever need more than one of each? Having multiple bank accounts can be a great way to manage money for different uses and goals. Right now, I have four bank accounts — a linked checking and savings, each set with a different bank. Let’s take a look at why I’ve complicated my finances this way, and why you might want to do the same.

Two checking accounts

My first checking account is one I opened with a big national bank after I moved halfway across the country to start my first job after graduate school. I opted for this bank specifically because it has branches everywhere — and this turned out to be a smart move, as I ended up living in multiple states. Thanks to working for an employer that was a bigger name in the city I opened it in, my checking account came to me without bank fees of any kind, so it’s been worth hanging onto all this time. I have most of my income directly deposited into this account and pay most of my bills out of it.

My other checking account is one I opened so I could have easier access to my money in a high-yield savings account at an online-only bank. That bank doesn’t offer an ATM or debit card for savings accounts, so if I wanted to pull cash directly out at an ATM, I needed a linked checking account. It also comes in handy for making payments with money from my savings, such as for travel bookings I’ve saved up for or my quarterly freelance tax bills.

Two savings accounts

While my checking account with a big traditional bank is excellent, I cannot say the same for the savings account I have linked to it. It earns a measly 0.01% APY, and charges me a maintenance fee if the balance drops below $300. Last year, I lost $50 in fees to that account (which was absolutely my fault, as I was worrying about life and only sort of noticed the loss of $5 a month for 10 months). But I keep it open (and minimally funded) as overdraft protection for the checking account.

My savings account at the online bank, on the other hand, holds my hopes and dreams — and my quarterly tax payments. As of this writing, that account is earning an APY of 4.25%, and I anxiously look forward to getting my monthly interest payment, because hey, free money! I’m actively saving to buy a home next year, and the money for that and smaller goals lives (and grows) there.

How many bank accounts do you need?

My cash management system might sound a little complicated, but at this point, I’ve got it down to a science. If you’ve only got one or two bank accounts, should you open additional ones? Well, consider your own finances to decide.

If you don’t already have a high-yield savings account, I’d argue that you absolutely need one. Even if you can only manage to save a little, taking advantage of the higher APYs available right now can help you grow your money. According to the FDIC, the average APY on a savings account as of July 17 was 0.42%. Meanwhile, my high-yield savings account is paying more than 10 times that. Other online-only banks are paying even more. Savings account APYs are variable, so these high rates won’t last forever — so it’s worth taking advantage while you can.

What about another checking account? I have a friend who actually has two checking accounts at the same bank: one for bills and one for fun spending. This system is working out really well for her, as she’s no longer accidentally spending “car money on cheeseburgers.” You could also opt to open a checking account alongside your new high-yield savings, as it’ll give you easier access to your money — you can transfer from savings to checking, and then withdraw money or make purchases.

Having four bank accounts is working out well for me. Why not think outside the box and consider your own needs? Having an extra checking or savings account (or both!) could make it easier to accomplish your goals and manage your personal finances.

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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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