Money Management

You might need to kick certain habits if you want to retire with $1 million or more. Read on to learn more. 

If your goal is to retire with $1 million or more to your name, you’re in good company. A recent survey by Northwestern Mutual found that Americans think it will take $1.27 million on average to be able to retire comfortably.

That might seem like a massive amount of money — a sum you’re not capable of ever amassing. But you may be surprised at how feasible it is to become a millionaire provided you manage to break free from these costly habits.

1. Spending money on interest

Any time you carry a balance forward on a credit card, you lose money to interest. And the same holds true when you let a loan drag out.

In some cases, paying interest is unavoidable. Most people can’t buy a home outright and therefore need a mortgage to finance one.

But if you want to retire a millionaire, you should make a point to steer clear of debt as much as possible, and also, to do your best to pay off existing debt quickly. If you’re giving your credit card company $500 a year in interest, for example, that’s $500 you’re not investing.

2. Giving up tax breaks

When it comes to saving for retirement, you have choices. You could stick to a taxable brokerage account so your money isn’t restricted. But a better bet may be to save for retirement in an IRA or 401(k). These accounts give you a tax break on your money in one shape or form.

With a traditional IRA or 401(k), your contributions are tax-free. With a Roth IRA or 401(k), investment gains in your plan are tax-free, and so are withdrawals. Sticking to a regular brokerage account could mean losing lots of money to taxes needlessly through the years, making it harder to meet your goal.

3. Steering clear of stocks

Some people are afraid to invest their money in stocks because they know the market is very volatile. But if you don’t invest in stocks, you run another risk — growing your money at too slow a pace to reach millionaire status in your lifetime.

One thing you should remember about the stock market is that it’s proven its ability to reward investors who have stuck with it for a long time. In fact, over the past 50 years, the stock market has delivered an average return of 10% before inflation, as measured by the performance of the S&P 500.

But to be clear, there were plenty of down years during that time. In fact, 2022 was hardly a good year for stocks, but many people have already seen their portfolios recover since taking a hit last year.

Now, let’s say you manage to invest $250 a month in an IRA over a 40-year period. If your portfolio generates an average annual 10% return, you’ll be looking at a total balance of about $1.33 million. That’s totally in line with the aforementioned $1.27 target (though to be clear, it’s actually best not to fixate on a single number like that, but rather, figure out how much money you’ll need to pull off your dream retirement).

Retiring a millionaire is something that can be done even if you don’t earn a six-figure income. But if it’s a goal of yours, do your best to steer clear of debt, choose the right home for your long-term savings, and push yourself to invest in stocks, even if that’s outside your comfort zone.

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The typical home is selling for 40% more than before the pandemic. Read on to find out what cities have the most housing inventory. 

If you’re on the hunt for a house right now, you likely already know how difficult it is to find what you’re looking for. But now there’s some concrete data to back up the current frustration of home buyers looking for houses.

Redfin released data this month showing that there are 28% fewer homes for sale in the first half of this year than there were over the same period in 2019. That’s a massive decline in such a short amount of time.

If you’re on the hunt for a new home, there are a few places across the country that may have slightly more housing options.

Cities with the most housing options

These are the places with the most options for home buyers, according to Redfin’s analysis of the 50 most-populous cities across the U.S.:

Newark, New JerseyAustin, TexasNashville, Tennessee

Only 14 of every 1,000 homes changed hands in the first half of this year. The cities listed above had slightly higher turnover rates, making it potentially easier to find a home compared to other cities.

For example, Newark had the most turnover with 24 homes changing hands for every 1,000. Nashville was close behind with 23 and Austin followed with 22.

The report laid out a few reasons why a couple of these cities have better-than-average inventory. Austin and Nashville experienced a boom in housing buildings before the pandemic, which has helped to provide more housing options now, Redfin’s report said.

While these cities may have slightly better inventory than the rest of the country, it’s worth mentioning that there are still far fewer homes to choose from in these locations than in 2019.

Blame interest rates and not enough home building

Redfin noted that the supply of homes is at a record low. Just 1% of all of the houses in the country changed hands in the first half of 2023 — and mortgage interest rates are partially to blame.

Homeowners who took advantage of record-lower interest rates in 2020 and 2021 aren’t keen to give up their low mortgage payments. They’re staying put, or renting them out, which is keeping sales inventory low.

That problem has been made worse by the fact that the U.S. already had far fewer homes than needed even before remote work and low interest rates caused a housing boom. Redfin noted that Freddie Mac said back in 2018 that 2.5 million homes needed to be built to keep up with housing demand.

All of those houses weren’t built before the housing boom, though, adding to the housing inventory crunch.

What to do if you’re looking for house

If all of this is a bit of a bummer, I’m right there with you. The rapid rise in interest rates, coupled with a lack of inventory, have helped sideline me in my housing hunt right now.

But if you’re determined to buy a house no matter the market, then there are a few things you can do to make the process a little better. Building up your savings, lowering your monthly debt obligations, and improving your credit score will all help you get ready for the big purchase.

Additionally, shopping around to find the best mortgage lender could be more important than ever. Not all lenders will charge you the same interest rate, some have different fees, and others may even offer a free refinancing option, which could come in handy when interest rates drop.

All of this means that while you’re taking the time to find the best house, also take the time to find the best lender. While you can’t do much to change the housing market, getting your personal finances in order and searching for a lender that meets your needs are well within your control.

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Target is a popular retailer with a wide selection of products. Find out some tactics Target employs so you overspend while shopping at your local store. 

With more than 1,950 stores nationwide, it’s no surprise that Target is a popular retailer. Many Americans shop there because they have a location nearby and can do most of their shopping in one trip. But if you’re not careful, it can be easy to overspend on your next Target run. Below, I’ll outline a few ways Target gets you to spend more money than you planned.

1. End-caps that draw you in

Target, like many retailers, is strategic about its aisle end caps. As you push your cart through the store, you may feel inspired to add an affordable fluffy pillow or a package of the latest flavor of Oreo cookies because it stands out on an end-cap shelf.

Target uses these displays to trick you into spending more money by buying items not on your shopping list.

2. Target Circle offers with spending requirements

Through the Target Circle rewards program, shoppers can earn discounts or gift cards when they meet the requirements for Target Circle offers. While these offers can be excellent if you already planned to spend money, you may feel tempted to overspend to meet the offer requirements. That could be bad news for your personal finances.

For example, I have a current Target Circle Offer for a $5 gift card in my account. I need to spend at least $25 on qualifying health purchases to earn the gift card. This could be a great offer if it’s time for me to restock my vitamins and other health essentials. But if not, I’d be wasting money to earn a gift card. It’s important to consider whether a Target Circle Offer is worth earning before shopping because you don’t want to rack up credit card debt.

3. Affordable finds at the Dollar Spot

Have you ever noticed the section at the front of your local Target store filled with cute knick-knacks? This area of the store is known as the Dollar Spot. The shelves are stocked with fun items that typically cost $1 to $5 each.

You might find kitchen essentials, toys, storage solutions, holiday decor, and more in this section — all at an affordable price. But because everything here is so exciting and cheap, you may be tempted to send more than you planned when it comes time to check out. (Trust me, I know from experience.)

4. You can get a caffeine boost while you shop

Many Target locations have a Starbucks inside. What is one way to make shopping more enjoyable? How about sipping on your favorite sweet caffeinated treat?

By selling Starbucks drinks and food items in store, Target encourages shoppers to spend more time cruising the aisles. If you stop at Starbucks first, you’ll have more pep in your step while you shop.

5. The more you spend, the more rewards you earn

Through the Target Circle program, shoppers can earn rewards. The loyalty program is free to join, and you’ll earn 1% cash back on future purchases every time you shop. That means the more you spend, the more rewards you earn.

The program encourages you to spend money to get a discount on future orders. To avoid overspending the next time you shop at Target, consider your budget and make a shopping list so you don’t drain your checking account.

Don’t ignore your finances

No matter where you shop, keeping your finances in mind is essential. While most of us must make regular shopping trips to get everyday essentials and groceries, not every purchase we make is necessary. It’s okay to spend some of your money on fun purchases — life is for enjoying! But if you’re not careful and go overboard, you may disrupt your budget. Keep this in mind the next time you shop at Target so you don’t end up with a big credit card balance.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks and Target. The Motley Fool has a disclosure policy.

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Never having cash on you could be problematic. Read on to see why. 

Some people have a tendency to pay for purchases with a mix of credit cards, debit cards, and cash. I’m not one of those people; I tend to swipe my credit card just about everywhere, whether it’s to fill my car up with $40 worth of gas or buy a $1.50 bottle of water at a local convenience store.

In fact, I used to make it a point to hardly ever carry any cash on me. But then I ran into an issue that’s since made me change my tune.

The problem with never carrying cash

A recent survey from Finder.com found that 45% of Americans would not shop at a cash-only business. But the reality is that there are some businesses that only accept cash, and you never know when you might come across one. So it’s a good idea to carry some cash for a situation like that.

But that’s not the only reason to keep cash in your wallet. You never know when a business that normally accepts credit or debit cards might suddenly be unable to do so.

A while back, I was at my local supermarket doing my family’s food shopping for the week. I had loaded up a cart and was headed to the checkout aisle when an announcement came through that the store’s processing systems had gone down, and they couldn’t accept credit cards or debit cards until things got fixed. At that point, my only choices were paying in cash or writing a check.

Seeing as how I write maybe two checks a year, not shockingly, I didn’t have one on me. But I also didn’t have nearly enough cash to cover the week’s worth of groceries I was buying.

Thankfully, I happened to run into a friend at the store who had recently hit the ATM and only had a couple of items she was buying herself. She paid for my groceries and I sent her a Venmo transfer to cover my haul. But had she not been there, I would’ve been forced to abandon my shopping cart at the store — and explain to my kids why dinner that night was plain noodles.

Aim to have some cash on hand

One of the reasons I don’t like carrying cash is that I tend to spend it less mindfully. On the other hand, I check my credit card balances frequently, so I’m more aware of what my spending looks like when I use my cards.

But that incident taught me that it’s a good idea to have some cash on hand. And since then, I’ve also made a point to keep a little extra money in my checking account so that I’m able to hit the ATM and replenish my supply of cash as I need to.

Of course, the incident that happened at my supermarket was pretty rare. I’ve shopped at that store countless times without ever having an issue using my credit card. But you just never know when you might end up needing cash, so for the most part, I try to carry anywhere from $50 to $100 with me at all times.

The reality is that based on grocery prices today, $50 wouldn’t go very far in helping me cover a week’s worth for my family. But $100 might get me closer. Think about a level of cash that you’re comfortable carrying around, and keep it on hand for those one-off times when a credit or debit card can’t be used.

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At a time when interest rates are high, a jumbo loan is something you may want to avoid. Read on to learn why. 

As of the end of June, the median existing home sale price was $410,200, according to the National Association of Realtors (NAR). So if you’re looking to buy a home in that price range, you’re probably looking at signing a conforming mortgage.

Conforming loan limits for mortgages commonly change from one year to the next. But right now, you’ll be in conforming loan territory if you manage to keep your mortgage to $726,200 or less. For context, last year, that limit was $647,200. You should also know that the limit for conforming mortgages is considerably higher in Alaska and Hawaii — $1,089,300 — due to the higher cost of homes there.

To be clear, this doesn’t mean you can’t take out a home loan that exceeds these thresholds. If you’re buying a more expensive property and you have the income to support a larger loan, a mortgage lender might be more than willing to give you one. But you should know that now in particular is not a great time to sign a jumbo loan, which is a mortgage that exceeds the limits for a conforming loan.

You may be looking at a huge amount of interest

If you’re looking to buy a home today, you’re probably aware that mortgage rates are far from inexpensive. In fact, as of late July, the average mortgage rate on a 30-year conforming loan was 6.81%, according to Freddie Mac.

But if you’re signing a jumbo loan, you can expect the interest rate on your mortgage to be even higher. And at a time like this, that might prove to be prohibitively expensive.

Of course, there are different factors that will determine what mortgage rate you’re looking at on a jumbo loan. In addition to the size of your loan, your income and credit score will help dictate what borrowing rate you’re eligible for.

But all told, a jumbo loan is apt to be a lot more expensive than a conforming loan not just by virtue of the larger amount you’re borrowing, but due to the fact that you’re likely looking at a significantly higher interest rate. So you may want to do what you can to stick to a conforming mortgage.

You may want to wait or rethink your budget

In some parts of the country, a conforming loan limit of $726,200 gives you plenty of options. But in certain housing markets — particularly major metro areas — $726,200 is not going to go very far.

That said, it could work to your benefit to only borrow within conforming loan limits. So you may want to consider buying a less expensive home even if you can afford a pricier one. Or, you may want to hold off on buying for another year or two so you’re able to save up more of a down payment. The more money you put down on a home, the less you have to borrow.

That said, one thing you shouldn’t assume is that conforming loan limits will be higher in 2024 than in 2023. That $410,200 median home sale price for June actually represents a 0.9% decline from a year ago, says the NAR. And since conforming loan limits tend to correlate to home values, if prices come down in 2023, those limits could drop for 2024.

Taking out a jumbo mortgage might seem like a reasonable thing to do if you’re buying in an expensive market and you earn enough to keep up with a series of larger loan payments. Just consider the drawbacks of signing a jumbo loan before moving forward, and see if there’s a reasonable way to avoid that situation.

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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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