Money Management

Investing consistently over time could yield impressive results. Read on to learn more. 

When I first opened my brokerage account, my goal was to make some money to enjoy on a near-term basis. I figured I was steadily funding a retirement plan, so I could use my brokerage account to meet shorter-term objectives. And I wasn’t really putting a ton of money into my brokerage account because I was focused on maxing out my retirement plan contributions instead.

But as my income increased, I was able to pump more money into my brokerage account. And at that point, I decided that account would not just be for near-term fulfillment.

Rather, I decided I wanted to invest for the long haul in my brokerage account to build more wealth for retirement. I also wanted (and still want) my brokerage account to serve as a back-up retirement plan of sorts.

At this point, I have an IRA and 401(k) for retirement. But I can’t touch either without penalty until age 59 1/2.

I have no idea if I’ll want to retire sooner than that. But it would be a shame to have enough money to retire at 57 and not be able to do so simply because my funds are restricted. A brokerage account eliminates that worry.

If you’ve begun investing in a brokerage account, you might initially assume it’s just to make a little money here and there. After all, that was the attitude I took at first. But you may be surprised at how much wealth you’re able to accrue through the years.

When you have time and strong returns on your side

If you invest $200 a year in your brokerage account, it’s probably not going to make you a millionaire. But investing $200 a month over time is a different story.

Over the past 50 years, the stock market has averaged an annual 10% return before inflation, as measured by the performance of the S&P 500. If you load up your brokerage account with stocks, you might enjoy a similar return if you invest over a long period of time.

In fact, investing $200 a month over 40 years will leave you with $1.06 million if you’re getting 10% on your money. At that point, your brokerage account balance isn’t just “fun money” to play around with as you choose. It’s a lot of money, and a sum that could really be a life-changer down the line.

Don’t just take the investment gains and run

When I first opened my brokerage account, I really thought it would be a way to drum up extra cash I could use as I pleased. I knew there would be taxes on gains, but I figured hey, I’ll deal with them, the same way I dealt with taxes on my side hustle income at the time.

But I quickly realized that leaving my brokerage account to grow would serve me much better over time. So if you want to become a millionaire, resist the urge to cash out investments at a profit year after year.

You might want the money for a vacation or to upgrade electronics in your home — I know I did. But if you leave your brokerage account alone and let it work for you through the years, you’re apt to reap a much bigger reward that does a lot more for you.

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Not paying a personal loan could have serious consequences. Read on to learn more. 

Many consumers turn to personal loans when they need to borrow money. Personal loans can be a far more affordable way to borrow than charging expenses on a credit card and carrying a balance forward. And if you have a good credit score, you might qualify for a fairly competitive interest rate on a personal loan.

But when you sign a personal loan, you commit to making payments on a predetermined basis. And if you don’t repay your personal loan on schedule, the consequences could be quite unfortunate.

You could face costly fees

Some lenders impose fees for failing to repay a personal loan on time. And those fees might apply even if you’re just a day late, warns Experian. Not only that, but late payment fees on a personal loan can range from as little as $25 to as much as 5% of your loan balance. Ouch. Make sure to set reminders for yourself so you’re not late.

Your credit score could take a massive hit

Your lender generally won’t report a late or missed payment on a personal loan until you’re behind by 30 days or more. But once you reach that point, your lender might be quick to report your lateness to the credit bureaus. And a single late payment on your credit report could drag your score down quite a lot.

The exact extent of that damage will hinge on how high your credit score was to begin with. Believe it or not, a single late payment has the potential to cause more damage to a strong credit score than a weaker one.

But Experian warns that a late payment could stay on your credit report for up to seven years. During that time, you might have a harder time getting to borrow money when you need to.

And even if you are approved to take out another loan while that late payment is still on your credit report, you could get stuck with a higher interest rate. That could, in turn, make you more likely to fall behind on future loan payments, too.

You could have your wages garnished

If you fail to make payments on an auto loan, you risk having your vehicle repossessed. Personal loans are unsecured, so usually, a lender can’t go after a specific asset of yours to get repaid. However, your lender could either sue you in court to get repaid, or turn your delinquent debt over to a collection agency that sues you in court.

Either way, if a judgment is entered against you, your creditor may have the right to garnish some of your wages to get repaid. That could make it difficult to keep up with your expenses.

Be careful when signing a personal loan

It’s pretty clear that failing to repay a personal loan could have very serious consequences. So before you sign one of these loans, run the numbers to make absolutely sure you can afford your monthly payments. You don’t want to end up in a situation where you’re faced with costly fees, credit score damage, or a chunk of your paycheck being taken away.

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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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An IRA is a great home for your retirement savings. But read on to see why it could pay to also invest outside of one. 

IRAs have long been a popular retirement savings tool. And as of the first quarter of 2023, the average IRA balance was $109,000, according to Fidelity.

There are many benefits to funding an IRA. For one thing, traditional IRA contributions go in tax-free, so they shield a portion of your income from the IRS. Plus, investment gains in an IRA are tax-deferred, so you don’t have to deal with taxes until you’re ready to take withdrawals.

There are benefits to keeping all of your investments in an IRA. But here’s why you might also want to open a regular brokerage account, too.

When you want more options with your money

A big advantage of keeping all of your investments in an IRA is getting to enjoy tax-advantaged growth. But more so than that, having that money earmarked for retirement could make it less likely that you’ll take a withdrawal prematurely.

After all, you know that an IRA stands for “individual retirement account.” And that fact alone might help you stick to your long-term plan and avoid cashing out investments along the way.

But keeping all of your investments in an IRA also has some drawbacks. Because IRAs give you tax breaks, you’re required to leave your money alone until age 59 1/2. If you withdraw funds before that age, you risk a 10% penalty.

Now, there are a few exceptions to this rule. You’re allowed to take a penalty-free IRA withdrawal prior to age 59 1/2 to buy a first-time home. And you can also withdraw funds penalty-free to pay for college.

But otherwise, that money needs to stay in your IRA until 59 1/2 if you don’t want to face a penalty. And while that may not be problematic if you’re aiming to retire in your 60s, you may decide that you want to retire earlier.

In fact, what if you do a great job of saving and investing so that by age 55, you have $2 million? You may decide that’s enough money to live on and wrap up your career ahead of schedule. Only if all of your investments are in an IRA, you won’t be able to touch that money without a penalty for another four years and change.

It also might be the case that you don’t want to retire early, but rather, are forced to. Your industry might suffer a setback that makes it impossible for you to find work at age 57. At that point, do you really want to force yourself to work any job you can get for two years or more simply because you can’t access your retirement savings yet?

That’s why it could pay to keep some investments in a taxable brokerage account on top of an IRA. Doing so gives you more leeway with that portion of your assets.

Don’t back yourself into a corner with your retirement assets

Keeping all of your investments in an IRA could mean running into issues when you need access to money sooner than what these accounts allow for. So while it certainly pays to max out an IRA every year if you can, it’s also smart to put at least a small sum of money into a regular brokerage account.

It could be as little as $300 or $400 a year. But that way, you’ll have some assets you can cash out at any point without having to worry about penalties.

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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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Have you been wanting to move but are worried about high rents? Find out why now may be the perfect time as rents decrease for the first time since COVID-19. 

Renters can breathe a sigh of relief, as competition for apartments is about to ease. For the first time since the pandemic began, rents are dropping — a glimmer of good news for those trying to make ends meet.

Rental prices fell 0.5% year over year in May 2021 to a median of $1,739 a month in the 50 largest metropolitan areas, according to a recent report by Realtor.com®,. While this may seem like a small decrease, it’s a significant change from the price spikes seen in 2020. So, as a tenant, what does this mean for you? Let’s take a closer look.

More options for renters

The competition for apartments is about to become less intense. Rather than face the daunting costs of moving, more people are opting to stay put. Additionally, the rental market is about to get a major boost, with new units becoming available in the next couple of years.

This means more options for renters. If supply outpaces demand, landlords will most likely have to lower rents to attract tenants. Overall, the decrease in rental prices is a positive sign that the rental market is becoming more balanced and affordable.

The downtrend is expected to continue

What can renters expect in the coming months? Realtor.com® predicts that rents will continue to decrease by 0.9% this year compared to 2022. While it may not be a substantial decrease, it is certainly a step in the right direction.

This trend is a welcome change for many tenants who struggled to afford skyrocketing rental prices in the midst of the pandemic. With home prices and mortgages also on the rise, many were left with no choice but to continue renting. However, the current drop in rental prices provides a glimmer of hope for those looking to save money and potentially transition to homeownership. Tenants can take advantage of this opportunity to find a more affordable place to live while also considering their long-term housing goals.

Rents are still rising in certain cities

While rents may be decreasing on a national scale, certain regions are experiencing unwelcome increases for tenants.

In more affordable parts of the country, such as the Midwest and Northeast, landlords are still raising rents. Conversely, the Western and Southern regions, where rents had surged during the pandemic, are now seeing a decline in prices.

The city with the most significant increase in rents is Columbus, OH, with a staggering 9.3% year-over-year growth in May. Following closely behind are St. Louis, MO, at 7.7%, Cincinnati, OH, at 7.5%, Indianapolis, IN, at 7.3%, and Louisville, KY, at 7.2%.

On the other hand, Las Vegas, NV, experienced the largest rent drop at a rate of -6% year over year. Close behind are Riverside, CA, at -5.9%, Phoenix, AZ, at -5.7%, Austin, TX, at -5.6%, and both Tampa, FL, and San Francisco, CA, at -4%.

What this means for you

When searching for a rental property, it’s crucial to find the best place that fits your needs and budget. You may begin your search by researching online or seeking recommendations from friends and family members.

Once you have a list of potential places, arrange a visit to each property and take note of its condition and amenities. Ask questions about the lease agreement, security deposits, and policies concerning pets and visitors.

Also, consider the location of the property and its proximity to public transportation, grocery stores, and restaurants. By being thorough in your search, you will find the best place to rent that meets your standards and provides the perfect home for you.

The recent drop in rental prices is a sign of the shifting rental market and excellent news for tenants struggling with their personal finances. Despite the drop in rental prices, renting still comes at a high cost for many tenants. It’s important to do your research and find the best options for your housing needs.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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A Costco membership may or may not be worth paying for if you shop there infrequently. Take a look at how you can decide for yourself. 

For some people, getting a Costco membership is an easy call. If you live near a warehouse club store and have a lot of people in your family to feed, your savings on groceries might more than cover the cost of your annual membership fee.

But what if you don’t have a Costco nearby, and therefore don’t expect to shop there very often? Or what if you do have a nearby Costco, but due to other constraints, like not having your own car, you don’t expect to get there more than three times a year?

In many cases, it won’t be worth it to join Costco if you’re only going to hit the store once every four months. But if you do a lot of shopping on each trip, then a membership may, in fact, be worth it.

It’s a matter of your personal savings

A basic Costco membership costs $60 a year, while an Executive membership costs $120. The Executive membership gives you 2% cash back on all Costco purchases, which is why it costs double.

To see if a Costco membership is worth paying for, you’ll need to figure out how much money you stand to save on the items you buy — even if you don’t shop there very often. It may be that it doesn’t pay to join Costco to only visit a few times a year. But if you leave with a carload of goods each time you visit, then the savings may be sufficient enough to cover the cost of your membership fee.

So, let’s say you opt for a basic Costco membership (which probably makes the most sense if you’re only going there three times a year). It may be that each time you shop there, you’re able to save $30 compared to what you’d spend at a regular supermarket or big-box store. So if you’re saving $30 three times, that’s $90 in total. Subtract the $60 membership fee you’re paying, and you’re ahead $30.

But if you’re only going to visit Costco three times a year, and you’re only going to purchase a few items each time you hit the store, then you may not make up your membership fee. Saving only $15 per visit, for example, will leave your personal finances $15 in the hole with a basic membership.

There may be a better option

A Costco membership could be worth it even if you only go three times a year if you spend (and save) enough to at least pay for your membership. But before you decide to join, ask yourself why it is that you think you’ll only get there once every four months.

If it’s a matter of distance, you may want to see if there’s a Sam’s Club closer to where you live. And if it’s a matter of not having a car, then you may want to consider an Amazon Prime or Walmart+ membership so you can have groceries and other goods delivered to your door when you need them.

Finally, if you don’t have a very large living space and your home sorely lacks storage, that alone is reason enough not to join Costco — regardless of how many times a year you think you might get there.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, and Walmart. The Motley Fool has a disclosure policy.

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