Money Management

An eviction could negatively impact your credit score. Read on to see what sort of damage you might be looking at. 

During the pandemic, when unemployment levels skyrocketed, lawmakers took steps to help prevent a widespread eviction crisis. Specifically, they put a moratorium on evictions in place so that landlords could not remove tenants from their homes on the basis of being unable to pay their rent.

But those protections have long since expired, so if you fall behind on your rent today, you could risk having your landlord pursue an eviction. Not only might that wreak havoc on your general well-being, but it could also be hugely problematic from a credit score perspective.

The damage could be extensive

An eviction is a legal process that your landlord needs court approval to pursue. A record of your eviction itself generally will not show up on your credit report, according to Equifax.

However, what might happen is that in conjunction with an eviction, your landlord might turn your unpaid rent over as a debt to a collections agency. And if you don’t make good on that debt, it could end up being listed as delinquent on your credit report.

That’s a problem, because a delinquent debt has the potential to drag your credit score down quite a bit. The extent of the damage will depend on factors that include how high your credit score was to begin with. But you should know that just as a delinquent loan or credit card bill will generally remain on your credit report for seven years, so too could unpaid rent that’s related to an eviction.

What to do if you’re facing eviction

Not paying rent isn’t the only reason a landlord might opt to evict a tenant. You also risk eviction if there’s a rule in your lease that you’re repeatedly violating.

For example, it may be that your lease prohibits animals in the building. If you did a stealth adoption and have been harboring a cat for the past few months, and your landlord has warned you to get rid of your pet but you haven’t, that could be grounds for eviction.

But let’s assume you’re at risk of eviction due to a failure to pay rent. If that’s the case, your best bet is to reach out to your landlord and discuss your situation.

It may be that you’ve lost your job and need time to get back on your feet. If you can provide proof of your job loss, your landlord might agree to let you pause your rent payments until you’re employed again. Or your landlord might agree to a reduced payment while you’re in the middle of a hardship.

It especially pays to talk things through with your landlord if you’ve been a tenant in good standing for quite some time and your negative financial situation is only temporary — for example, you’re in between jobs, but you can generally command a high enough wage to cover your rent in full.

The eviction process can be harrowing for tenants, but it’s not exactly fun for landlords, either. And it can be costly for them. So you may be surprised at how willing your landlord is to work with you if you come clean about your situation rather than simply ignore those past-due rent notices.

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You and a friend might have a great business idea, but are you ready to get it off the ground? Read on to see what you should answer first. 

Starting a small business with a friend can be a wonderful way to improve your working life. You can become your own boss while working with someone you like and sharing the risks and responsibilities. You can also grow your bank account balance if your company is a success.

Unfortunately, around 20% of new businesses fail during their first two years, so success is not guaranteed. And you don’t want to ruin your friendship while you’re undertaking this major move that will affect your finances and your lifestyle going forward.

To help ensure you’re making the right choice, be sure to ask these questions before starting a business with a friend.

What are your goals for the company?

You and your friend need to be on the same page about what you hope to achieve when you start a business together. Otherwise, you could find yourself facing ongoing conflict as you make decisions about the company’s future.

Take the time to discuss why you’re starting the business, what the company’s mission statement will be, and where you see the business in a year, three years, five years, and 20 years. This will help you get clarity on whether you want to follow the same path to success.

How will you share responsibilities?

There’s a lot involved with running a successful business. You need to make sure you have clarity on who is going to take on which tasks. Otherwise, you could find you’re both planning to fill the same role, which could lead to conflict and leave many other important jobs undone.

Be sure to know how involved you will each be with the day-to-day operations, and who will be in charge of different aspects of business and project management.

What is your financial situation?

Starting a business can be hard on your financial life. It takes money to get a company off the ground, and the business may not be profitable right away. You’ll want to be sure that together you can bring in enough money to get the business off on the right foot. You’ll also want to be confident that you and your friend both have a plan for supporting yourself until the business starts earning enough to fund both of your lifestyles.

How will profits and losses be distributed?

Once your business starts making money, you will need to know how profits will be distributed between you. And until then, you’ll need to know who gets to declare losses from the business on their tax returns.

Some partners agree on a 50/50 split, but you may have another arrangement in mind — such as if one of you plans to put in more money and the other plans to put in more time. Since money can be a major source of conflict, it’s better to iron out these issues before opening your doors.

What will you do if a dispute arises?

Finally, have a plan for what you’ll do if you can’t agree on something relating to the company. You should make a dispute settlement plan in advance of any conflicts actually arising so you don’t get stuck in a stalemate when a disagreement eventually happens.

By asking these questions early on, you can make sure you’re making a good financial and professional move by starting a company with a friend.

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What does the real estate market look like for August? Read on to find out. 

At this point, it’s pretty fair to say that 2023 is shaping up to be a tough year to buy a home. Between expensive mortgages and limited inventory, buyers might continue to struggle as they have been for the past several months.

Now sometimes, housing market conditions improve in the spring and summer. But so far, we haven’t seen much movement there. And based on existing conditions and recent data, here’s what we can likely expect from the housing market in August.

1. Mortgage rates will remain high

As of late July, the average 30-year mortgage rate was 6.78%, according to Freddie Mac. It’s unlikely that mortgage loans will get less expensive to sign in August, and we could even see the average rate creep upward into the low 7% range.

Of course, there are some steps that prospective buyers can take to try to snag as competitive a mortgage rate as possible. These include boosting their credit scores and keeping their non-mortgage debt as low as possible. But for the most part, anyone looking to buy a home in August should not expect a bargain from a mortgage rate perspective.

2. Homes will remain expensive to buy

There’s not a lot of real estate inventory to choose from these days, so despite higher mortgage rates, sellers are still able to command higher prices for their properties. The National Association of Realtors (NAR) reports that in June, the median existing-home sale price was $410,200. That’s the second-highest figure on record since January 1999.

It’s also worth noting that home prices remain high even though sales are dropping. In June, existing-home sales fell almost 19% from a year prior, says the NAR. But a decline in buyer demand clearly didn’t do a whole lot to bring home prices down.

3. Housing inventory will remain stagnant

At the end of June, there were an estimated 1.08 million unsold housing units on the real estate market, according to the NAR. But that only represents a 3.1-month supply of homes.

It normally takes a minimum of a four-month supply of homes to meet buyer demand in full. And it can commonly take up to a six-month supply.

As long as housing inventory remains stagnant, sellers can get away with charging higher prices. But at this point, there’s a bit of a chicken-and-egg situation happening with mortgage rates that’s likely to result in ongoing inventory challenges.

Because it’s gotten so expensive to sign a mortgage, many sellers are hesitant to do so. As such, they’re staying put. And if people aren’t willing to sell their homes, inventory won’t increase.

Should you aim to buy or sell a home in August?

It’s easy to make the case that August won’t be a good time to buy or sell a home. For buyers, it’s easy to see why — there’s not much inventory to choose from, and both homes and mortgages are expensive.

For sellers, what makes August a bad time to list a home is the struggle to find a new house to buy at a time when the market lacks inventory. And anyone who sells this summer and needs a new mortgage is apt to find that the cost of signing one is high.

That said, August could be a good time to sell a home for those who won’t need a mortgage to find a replacement home. That’s because sellers can capitalize on low inventory and the higher prices that situation tends to lead to.

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Banks draw a lot of revenue from people who struggle with their finances. Keep reading to learn how they extract fees from people who can least afford them. 

Opening a bank account is an important part of managing your financial life. After all, you’ll need an account to put your paychecks into. You can also pay bills out of your checking account, such as your mortgage and credit card bills.

Unfortunately, sometimes opening a bank account can end up being costly. That’s because financial institutions sometimes charge a lot of fees — and many of these expenses are more likely to be borne by people who already have too little money.

In fact, here are three big ways that banks make money off of people who can least afford to lose it.

1. Many banks charge monthly fees if you can’t maintain a minimum balance

Many banks charge a fee for people who keep too little money in their account. These banks impose minimum balance requirements, usually based on your average daily balance. For example, you may be charged $10, $12, or $15 if you fail to maintain an average daily balance of $1,000 or $1,500 or some other amount that’s hard for broke people to meet.

While it is common for banks to waive this fee if you have a certain amount saved or a certain number of direct deposits made into your account monthly, many people without steady income or a traditional job also can’t meet that requirement.

The result is that the people who can least afford it have to choose between paying a fee or going without a banking relationship and dealing with all the hassle and expenses associated with not having a checking account.

2. You could get hit with overdraft fees, bounced check fees, or insufficient funds fees

Overdraft fees and fees for bounced checks are another big way that banks make money off of broke people.

Overdraft fees average around $30 and are charged if you spend more than you have in your checking account. If you try to write a check for an amount you don’t have money to cover, your bank may charge you a non-sufficient funds fee, which averages $34.

People who have the money to keep a financial cushion in their account don’t have to worry about this. But those who have very little money or who live paycheck to paycheck may have no extra cash in their account. If they forget about a charge or if a check is cashed at the wrong time, the fees could start to pile up quickly.

3. You may be charged a higher interest rate when you borrow

If you have a lot of money, it will likely be easier for you to borrow at an affordable rate. You’ll have sufficient proof of income to satisfy lenders, as well as cash reserves. And it may also be easier for you to build good credit since you won’t be making late payments due to insufficient funds.

For people who are broke, though, missed payments or maxed out credit cards could make them an unattractive customer for lenders and could damage their credit. Low credit and minimal assets or a limited income can lead to higher interest rate charges when borrowing. That means that people with little money will pay more for loans.

Unfortunately, there’s not a whole lot people can do about these issues. Those who don’t have a ton of money to spare will need to shop around carefully to find a bank that won’t hit them with added fees or higher rates when they need to take a loan. It can take effort, but it’s worth it not to let a bank take more money from you when you already may feel like you don’t have enough.

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If you’re considering moving to a costly U.S. city, you may need to boost your earnings. Find out in which cities Americans need to earn $300,000 or more. 

No matter where you live, you likely feel the sting of rising living costs. But in some parts of the country, you need to make much more money to live a comfortable life than in years past. A SmartAsset study found that residents in three major U.S. cities now need much more than a $100,000 salary to get by due to inflation. Is your city one of them?

A $100,000 salary won’t go far in expensive U.S. cities

While residents in most towns and cities nationwide deal with rising living costs, some regions feel a greater impact. In cities with high living costs, residents feel they need to make much more money to afford their daily expenses in today’s expensive landscape.

For many Americans, $100,000 used to be a realistic salary goal to live a comfortable life in many parts of the country — but that’s no longer the case in many areas thanks to inflation. While $100,000 may sound like a lot, it no longer affords you the same lifestyle as it did in years past due to higher taxes and living costs. That’s especially true if you live in a high-cost-of-living area.

During the third quarter of 2022, SmartAsset conducted a study to determine the salary needed to feel like you’re earning $100,000 in the U.S. Salaries in 76 cities were analyzed and adjusted for taxes and living costs to find the “new $100,000.” The study found that a salary of $300,000 or more is needed in the following three cities to bring home the new $100,000.

HonoluluNew York CitySan Francisco

Residents in these cities are taxed roughly 40.5% or higher and have a cost of living over 82% above the national average. Even if you have a solid savings account balance, a higher salary is necessary to live comfortably in these areas. Below, we’ll break down the pre-tax income workers need to make in these cities to feel like they’re earning at least $100,000.

Residents in Honolulu need to earn $312,400

The study found that those living in The Big Pineapple need to earn at least $312,400 pre-tax. This salary works out to be around $186K in take-home pay. Since many everyday goods are imported to the Hawaiian islands, residents of Honolulu pay much higher living costs than Americans who live in other parts of the country. Living expenses in this beautiful city are 86% above the national average.

New Yorkers need to make $312,000

New Yorkers need to earn similar money to afford life. The study found that residents must earn at least $312,000 pre-tax to achieve that six-figure feel. Workers who want to earn $100,000 in take-home pay can expect to pay around 41% in federal, state, and local taxes. The cost of living in New York City is 83.6% higher than the national average.

San Francisco workers need to earn more than $300,000

You’ll need to earn triple a $100,000 salary to live well in San Francisco. This tech-focused California city has a median household income nearly double the national average. Living expenses cost 82.8% more than the national average, making it a pricey place to live. To earn $100,000 of purchasing power, San Francisco residents need to make just over $300,000 in pre-tax income. Having a higher checking account balance is useful if you live and work here.

Where you live can impact your finances significantly

While it would be nice to have the ability to live anywhere in the world without having to worry about living expenses, that’s not a reality for most people. Where you choose to live can impact your finances significantly. If you’re considering moving to a new-to-you part of the country, research living costs, housing expenses, and taxes before you make a big move.

The good news is that salaries tend to be higher in many high-cost-of-living parts of the country to account for living costs. But if you work a remote job or are self-employed, it’s essential to consider whether your current salary will continue to meet your needs if you hope to move to a more expensive part of the U.S.

If you’re open to living somewhere beyond the costly cities mentioned above, check out the most affordable cities with high salaries and low costs of living for inspiration. Even though life is more expensive in many parts of the country, it’s possible to continue to make progress on your financial goals. For additional money tips, check out our personal finances resources.

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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. Natasha Gabrielle 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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It’s important to make retirement savings a priority, even during tricky economic times. Read on to see why. 

Saving for retirement is really important, namely because living on Social Security benefits alone has the potential to leave you cash-strapped later in life. But it can be hard to prioritize retirement savings when other bills arise, or during periods when economic conditions are just plain not cooperative.

Such is the boat many people are in today. Inflation remains problematic even though living costs have come down in a number of spending categories. And since many people are worried about a near-term recession, it’s easy to see why they might prefer to pump extra money into their savings accounts instead of funding an IRA or 401(k) plan.

A good 46% of Americans say they’ve been forced to put their retirement savings efforts on pause due to current economic conditions and concerns, according to data from Allianz Life. But if you’ve gone a similar route, it’s important to try to get back on track as quickly as possible.

The problem with taking a break from retirement savings

Let’s be clear. If you don’t have a fully loaded emergency fund, then pumping money into regular savings should take precedence over retirement plan contributions.

Your emergency fund might bail you out next month, next quarter, or next year if a recession strikes, or if you encounter a surprise bill your regular paycheck can’t cover. So you should, in fact, hit pause on retirement plan contributions if your emergency fund isn’t complete.

But if you have what you consider to be a full emergency fund, then you should know that pausing retirement plan contributions could be a financially detrimental move. For one thing, contributions to a traditional IRA or 401(k) plan get to be made tax-free. So funding one of these accounts is a great way to shield some of your income from the IRS’s reach.

Also, believe it or not, missing out on just one year of retirement plan contributions could have a major impact on your long-term wealth. That’s because for each year you don’t add money to an IRA or 401(k) and invest it, your money doesn’t get a chance to grow.

Let’s assume you’d normally fund your IRA to the tune of $5,000 a year, only you opt not to do so this year due to recession fears or other reasons. The stock market has, over the past 50 years, delivered a 10% average annual return (before inflation), as measured by the performance of the S&P 500. If you’re 25 years away from retirement, that missing $5,000 in your IRA could translate to $54,000 less savings all in.

How to get back on track with retirement savings

You may have paused your retirement plan contributions to cope with inflation or shore up your emergency fund in case a recession strikes. If, at this point, you’re set with emergency savings but you’re still grappling with higher bills, try taking a deep dive into your spending to see where your money is going. You may be able to identify a few discretionary expenses you can shed or cut back on to free up money for your IRA or 401(k).

And to be clear, it doesn’t have to be a ton of money if you can’t swing much. You’re better off contributing $300 this year to retirement savings than nothing at all.

At the same time, we’re not in a recession, and the gig economy is still nice and active. And that means you may have a prime opportunity to pick up a side hustle that boosts your income modestly. That could be your ticket to making retirement plan contributions while not having to cut your spending too drastically.

Saving for retirement is something you should really aim to do on a steady basis when possible. So if your IRA or 401(k) has been forced to take a back seat this year, it pays to do what you can to start making contributions once again.

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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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