Money Management

A writer shares some bad advice a friend gave her years ago. Read on to see what it was. 

I’m fortunate to have been the recipient of some great financial advice from my parents.

They encouraged me to save money from a young age, to the point where I managed to amass a few thousand dollars in the bank from babysitting income alone. And when I got older, they taught me how to manage credit cards and avoid debt.

But while my parents were kind enough to impart some excellent financial advice that’s served me well, years ago, a well-meaning friend of mine gave me some advice that was downright awful. And I shudder to think about what might’ve happened had I taken her advice to heart.

“Enjoy your life and don’t worry about money”

That’s the advice my friend gave me when I was in my early 20s. And it was pretty terrible. But first, let me give you some context.

Some of my friends were planning a trip that was way out of my price range at the time. All of my friends were paying for that trip themselves. But, to be fair, we were right out of college, and they’d all had their education paid for in full. I did not.

Meanwhile, one of my friends had parents who were subsidizing her rent so that she was only paying about half of her monthly tab. Her parents also commonly bailed her out when large expenses popped up.

It was this same friend who really pushed me to come on that trip when my other friends backed off and realized I just wasn’t comfortable spending the money. When I explained that I didn’t feel I could afford it, and that I wasn’t going to rack up debt to finance it, her response was something along the lines of, “Enjoy your life and don’t worry about money so much.”

At that point, I couldn’t help but point out that her advice was a little tone deaf given our different financial circumstances. She apologized and I knew she meant well. She wanted me to participate in an experience that she felt lucky to be able to swing. But it just wasn’t in the cards for me.

So my friends went on the trip and I didn’t. And you know what? It’s fine. In fact, had I charged that trip on a credit card and carried the balance forward, for all I know, I’d still be paying it off to this day. Well, okay, probably not, because that was a looong time ago. But I probably would’ve lost a fair amount of money to interest, and that’s not something I was interested in (no pun intended).

When debt just isn’t worth it

I do believe in spending money on experiences and things that bring you joy — when you can afford to. But I don’t believe in racking up expensive debt to treat yourself to things you don’t have the money for and then suffering the consequences afterward.

My friend meant well — I know she did. But it’s advice like hers that might partially explain why U.S. credit card balances totaled $913 billion in the first quarter of 2023, according to TransUnion.

Not so long ago, I saw this same group of friends and I told my friend I’d be writing a story about the bad advice she gave me years ago. And she actually encouraged me to do so.

See, my friend has learned the hard way why her advice wasn’t very good. While her parents helped her out financially her first few years out of college, they pulled that plug many years back, and it was a major wake-up call. These days, this same friend is so saddled with bills, like car and mortgage payments, that she hasn’t taken a big vacation in years. And she knows full well that if anyone were to tell her to enjoy her life and not worry about money, she’d probably have some very choice words in response.

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A new job might seem like a good thing, but it could actually hurt your chances of getting a mortgage. Read on to see why. 

If you’re in the market for a new job this year, you’re not alone. Data from Monster.com shows that 96% of workers are seeking out a new job in 2023. But while a new job might do a lot of good things for your finances and career, it might also cause some problems if you have near-term plans to apply for a mortgage.

Why a new job could be problematic

Mortgage lenders look at different factors to determine whether to write a loan or not. These include:

Your credit score: A strong credit score suggests that you’re likely to repay the money you owe.Your debt-to-income ratio: This is your current debt relative to your income. A lower ratio indicates that you’re not overextended and are therefore more likely to be able to keep up with a mortgage.Your income: You need to earn enough to be able to repay the sum you’re borrowing for a home.Your employment history: Lenders like to see a streak of steady employment from applicants.

It’s that last point that could be a problem if you get a new job right before you apply for a mortgage.

Lenders want reassurance that you’re not just employed, but in a stable job. After all, a mortgage is something you’re likely to be paying off over a long period of time, so lenders really want to see some semblance of steady employment before loaning you money. If you get a new job right before applying for a mortgage, a lender might wonder whether that job is really a keeper.

That’s why it may be a better idea to hold off on applying for a new job until your mortgage loan is finalized. If you know you’ll be applying for a home loan this summer, for example, then you may want to put your job search on hold until the fall.

An exception to this rule

In some cases, getting a new job right before applying for a mortgage could be problematic. But things might shake out very differently if you’ve gotten a new job at the same company you’ve worked at for years. Getting a promotion, for example, is not going to reflect poorly on you from a borrowing standpoint.

Similarly, if you get a new job in the field you’ve worked in for years, that may not be a problem, either. If you have five years of marketing experience and get a similar or better role at a new firm that has you doing the same tasks (and for the same or better pay), your lender might take comfort in the fact that this is what you do for a living and are simply doing it elsewhere. But if you go from five years of accounting to suddenly working in art sales, that’s a different story.

All told, mortgage lenders want reassurance that you’ll be able to repay your loan. If you can show that you’re likely to be able to keep up with your payments, then you’re more likely to get approved, even if you’ve recently started to work in a new role.

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Inflation ticked upward last month, and that could spell trouble for consumers in more ways than one. Read on to learn more. 

What happened

Annual inflation rose 3.2% in July, according to the Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services. It also rose 0.2% on a monthly basis. An uptick in shelter costs was the biggest driver of July’s CPI increase.

So what

Inflation has been cooling steadily since peaking in mid-2022. But July’s CPI reading shows an uptick in annual inflation for the first time in 13 months.

Shelter costs rose 7.7% on a year-over-year basis in July, while grocery prices rose 3.6%. Transportation services were also up 9% annually.

That said, July’s CPI is a vast improvement from June of 2022, when annual inflation was up 9.1%. “Don’t be fooled by the uptick in [year-over-year] inflation,” said Julia Pollak, chief economist with employment site ZipRecruiter. “Inflation is slowing and doing so across a broader range of goods and services.”

Now what

Since early 2022, the Federal Reserve has raised interest rates 11 times in an effort to slow the pace of inflation. The central bank’s goal is to bring inflation back down to the 2% mark. It’s this level, the Fed feels, that best lends to long-term economic stability.

July’s increase in annual inflation, however, might read like a setback in the eyes of the Fed. And that has the potential to lead to further interest rate hikes.

That’s not great news for consumers. The Fed’s rate hikes have driven the cost of borrowing up across the board, making it more expensive to do everything from finance a vehicle to sign a personal loan. Further rate hikes this year might truly put a strain on consumers who need to borrow and are already cash-strapped.

The one silver lining, though, is that July’s increase in annual inflation was small. And while certain costs are up on an annual basis, others, like energy and medical care services, have decreased.

Furthermore, if the Fed reacts to July’s CPI with additional rate hikes, it could lead to higher interest rates for consumers with money in a savings account. CD rates could rise, too, affording those with cash in the bank a chance to earn more on their money.

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The latest Bureau of Labor Statistics data shows car repair costs have ballooned 19.8% over the past year. Here’s how you can plan for vehicle repairs. 

The cost of buying a car has skyrocketed over the past few years, with the average transaction price for a new vehicle climbing to $48,808, up nearly 27% from June 2020 to June 2023, according to Kelley Blue Book.

But it’s not just the sticker price that’s ticked higher; the latest Bureau of Labor Statistics data shows that repair costs have soared 19.8% over the last year alone.

While inflation is partly to blame, it’s not the whole story. Let’s take a quick look at some of the factors driving higher vehicle repair costs and what steps you can take to afford them when they inevitably pop up.

Car repair costs are far outpacing inflation

Thanks to elevated inflation, nearly everything costs more than it did just a few years ago. And while some of the latest data shows that inflation is cooling, the rising cost of vehicle repairs has outpaced inflation.

So why are repair costs rising so quickly? One reason is that people are holding onto their vehicles longer. The average age of a vehicle on the road in 2022 was 12.2 years, up from just over 11 years in 2012, according to S&P Global Mobility. Older vehicles typically need more expensive repairs to keep them running.

Another reason repair costs are rising is because the number of vehicle crashes spiked during the pandemic. The latest data from the National Highway Traffic Safety Administration (NHTSA) shows that crashes increased from 5.2 million in 2020 to 6.1 million in 2021. The 2022 crash data isn’t available yet, but the latest NHTSA vehicle traffic fatality data shows only a marginal decrease between 2021 and 2022, indicating that crashes remain elevated.

When more crashes occur, there are fewer automotive replacement parts to go around, which drives up the cost of repairs. More crashes have caused car insurance prices to spike as well.

If all that weren’t enough, car repair costs have also ticked higher thanks to a shortage of mechanics. According to the National Automobile Dealers Association, the automotive technician industry needs to replace about 76,000 workers every year, but only about 39,000 new service techs graduate from training programs each year.

A few tips to help you afford car repair costs

Just as you might shop around for an auto loan when buying a car, you may also want to consider shopping around when getting your car repaired. Dealerships often charge more than the average repair shop, according to J.D. Power, and finding a local mechanic can be a good way to save on repairs.

Another money-saving option to look into is changing your auto insurance policy. While insurance won’t cover the routine maintenance of your vehicle, finding the right policy that covers major repairs after an accident may be what you need. It’s a delicate balance between having too much coverage or not enough, so look at what your policy covers and compare it to others to see if you have the right coverage for the best price.

And finally, the best thing you can do to help yourself amid rising vehicle repair costs is to build up your emergency fund. According to personal finance expert Suze Orman, 67% of Americans couldn’t cover an unexpected $400 expense, meaning many people would have a hard time covering a major auto repair.

If building up an emergency fund seems overwhelming, just start small. Aim to save $100 at first. You can set up small, automatic deposits into a high-yield savings account until you achieve that goal. And once you have it, push your goal to $500 or $1,000.

The important thing to remember is that you have something in your savings account to help offset a car repair or other emergency expense.

All of the above factors contributing to high car repair costs won’t likely go away soon. Spending a little time evaluating how you’ll pay for an expensive repair will help keep your personal finances on track during a time when nearly everything costs more than it used to.

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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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