Money Management

One writer has watched the value of her home climb to more than double since she bought it. Read on to learn why she won’t sell, despite the potential profits. 

I purchased my modest, ranch-style home back in 2016 when I was in my late 20s. I paid $168,000 for the home, which consists of just over 1,600 square feet with two bedrooms (and an office that could easily be converted to a third bedroom), two full baths, a small fenced-in yard, and an unfinished basement. Zillow estimates that if I sold today, I would stand to earn $332,300 — just under double what I paid seven years ago!

A lot of homeowners in my position might be eager to sell their home and lock in the profits generated by appreciation of their home’s price, but not me. In fact, there are four very good reasons why I have zero intention of selling anytime soon.

1. My house still suits my needs perfectly

While it might not sound like much, this little house is perfect for myself, my fiancé, and our dog. We have no children at home and have no plans to grow our family, so we don’t need a ton of extra space to stretch out in (and pay bills on). We’re in a great location that’s only miles from the metropolis of Columbus, but also only miles in the other direction from my hometown and where my family lives. We’ve got a selection of grocery stores, restaurants, gas stations, and other businesses just minutes away. In short, we have everything we need right where we’re currently located.

2. There’s still a lot of competition among buyers in the market

The National Association of Realtors’ June data shows a 3.1-month supply of homes for sale. While up slightly year over year from June 2022’s 2.9-month supply of homes, the current supply is not enough to satisfy the number of buyers clamoring to purchase homes. Generally it takes between a four- and six-month supply of homes to balance the market. Right now, sellers have the upper hand, while buyers are left picking over the scraps and paying a premium to purchase whatever home they settle on.

3. Higher home prices are a problem

If I were to sell now, getting almost double what I paid for my home would be a huge win. What’s not such a win, however, is the fact that I would then have to turn around and find a new home to purchase at those inflated prices. Say, for example, I sell my home for Zillow’s estimation of $332,300 and come away with a profit of $200,000 after paying off what’s left of my current mortgage and accounting for agent fees. Even if I take that full amount and put it toward the down payment on a new home, my new mortgage is still going to be significantly larger than my last one.

Let’s assume I find a new home at the St. Louis Fed’s Q1 2023 median sales price of $436,800. After putting $200,000 down, I still owe $236,800 on the home. That’s almost 71% more than the total sales price I paid in 2016 of $168,000.

4. Yep, that’s right, mortgage rates are higher too

In sticking with the “everything is more expensive” theme, mortgage rates are also up significantly right now. The most recent data from Freddie Mac as of July 13 shows the average rate for a 30-year fixed-rate mortgage at 6.96%. When I bought my home in 2016, I locked in a rate of just 3.5%. So that’s another figure that’s almost doubled that I would have to face if I sold my home and bought again in today’s market. Let’s use our mortgage calculator and look at a simple illustration to see how much today’s higher rates would cost me using our example above of having to finance $236,800 with rates of 3.5% compared to 6.96% with a 30-year mortgage:

Today’s rates would have me paying more than $500 per month extra in principal and interest compared to financing again at my current rate for the same home. Not only that, but with today’s rates I’d end up paying $328,069 in total interest versus just $146,191 in total interest at a 3.5% rate. When looking at the numbers, the idea of giving up my low interest rate in favor of a much higher one is just not an attractive prospect.

It’s not all bad

If you’re in a situation where you have no choice but to move — say, your family is growing or you’ve accepted a new job in another city — then unfortunately you may have no choice than to enter the fray of the current housing market. But keep in mind, things could always be worse. Rates could be even higher or housing inventory could be even lower, and hey – at least you’ll be getting a premium on your sale. So all things considered, what we’re facing right now isn’t really all that bad.

Be sure to do your due diligence when starting your home search. Find a good real estate agent that can help you with both selling your home and purchasing a new one. Compare mortgage lenders to be sure you get the best rate available. And come armed with a pre-approval letter to give yourself the best chance at standing out as a qualified buyer in a sea of prospective homeowners.

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Putting off retirement savings makes it a lot harder for you to invest enough for your future. Read on for three consequences of delaying. 

You should be saving for retirement as soon as you start working. Ideally, money will go right from your paycheck into a 401(k) or you’ll set up automatic transfers to a tax-advantaged account with a brokerage firm if you don’t have a plan at work.

But, most people don’t live in an ideal world, and it’s easy to put off saving for the future when you have pressing expenses today. Unfortunately, delaying retirement savings can have some pretty severe consequences for your bank account balance both now and in the future.

Here’s what happens if you make this choice.

1. You will have to save much more money later on

Let’s say your goal is to end up with $1 million by age 65. If you earn a 10% average annual return and start saving at age 30, you would need to make monthly contributions of $307.47. But if you delay and start saving at 45, the required amount you are going to need monthly jumps to $1,454.96.

The longer you wait to save, the more money you have to invest each month. That’s true because you have less time to hit your goal and with fewer deposits to make, each must be larger. It’s also true because you’ll miss out on compound growth, which happens when your returns are reinvested and earn money for you without any extra effort on your part.

A delay can sometimes push your savings goal entirely out of reach, so don’t put off saving if you can avoid it.

2. You’ll miss out on tax breaks you can’t get back

There are multiple tax-advantaged retirement accounts available, including workplace 401(k) accounts and IRA accounts. Each allows you to score a tax break for retirement savings, but there are annual limits on how much you can contribute.

If you don’t contribute anything in 2023, you will lose out on the 2023 tax breaks available to you. And you can’t necessarily just contribute more in 2024 or 2025 because of the contribution limits set for these accounts.

There’s little reason to forgo the help these tax breaks provide in securing your future.

3. You could end up with too little money in retirement

If your retirement nest egg isn’t very large, you may not have enough to live on as a senior. See, you need to withdraw only a small amount of money from retirement savings each year in order to make certain you are leaving enough invested to continue earning returns that help you maintain your balance. Typically, you should only withdraw about 4% (or less) of your account balance.

This means in order for your retirement account to produce around $40,000 in income for you, you would need $1 million invested. That comes as a shock to many people, as $40,000 isn’t a super high retirement income — but you need to be a millionaire to get it.

To make sure you don’t find yourself with too little money, don’t delay saving for retirement. Start taking advantage of tax breaks and compound growth today, so your nest egg is big enough that you can count on it to last throughout your later years and provide a generous income that enables you to cover the necessities — and more.

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Running a business with your spouse comes with a lot of potential pitfalls. Keep reading to learn how to ensure it doesn’t impact your relationship. 

Working together with your spouse in your own small business venture can be a great option for some people. You’ll be able to create something together for your family that will hopefully leave you with plenty of money in your bank account. And you’ll be able to spend time and collaborate with someone you love as you try to make your dreams come true.

However, opening a business together can be stressful as well. You’ll have to work closely to make the company a success and may have some financial struggles in the start. With financial problems contributing to between 20% and 40% of all divorces, it can be risky to jump into an endeavor that will require you to pool your skills in order to support your family.

To help ensure that you don’t ruin your marriage in the process of getting your company off the ground, here are five tips to be sure to follow.

1. Have a financial plan to support yourself as your company gets underway

If you and your spouse are both going to be working for the business, you need to make sure you have a plan to support your family until the company becomes profitable.

It can take months or even years until a business starts turning a consistent-enough profit that two people can earn a living from it (especially without draining the company of its assets and leaving it short of the capital it needs to grow).

You need to make sure you have a substantial amount of savings or some other plan to see you through until you can comfortably afford to live on what the company is earning. This may mean one or both of you need to work at least part time at other jobs while you’re getting the company off the ground.

2. Be sure you clearly outline each person’s roles and responsibilities

You don’t want to fall into a situation where one person is taking on all of the tasks and the other person feels resentful. You also don’t want to fight over who does what, or both try to take control of the same issues.

To avoid any of these undesirable outcomes, have a clear plan for who will take on what responsibilities. In fact, you should create job descriptions for both parties if you can, so there’s no confusion and you are on the same page about who is responsible for which tasks.

3. Get on the same page about your short-term and long-term goals for the business

There are lots of different outcomes when you start a successful company. You could stay small and avoid hiring employees, working in the company yourself for years to come. You could try to sell out and walk away with a big pot of cash or you could try to grow a huge business that has hundreds of employees.

If you and your spouse are not on the same page, that’s likely to lead to lots of problems both with making decisions about the company and making decisions about your future. So, outline your goals clearly and make sure you’re working towards the same final plan.

4. Carve out separate time

Starting a new company can be all consuming. If you are both spending endless hours on the business, it’s natural that tempers will start to fray. That’s especially true if you are also together all the time at home. Be sure you have the space for separate lives, so you can maintain a little separation and keep your own interests alive.

5. Discuss how you’ll handle business disputes

Finally, it is inevitable that conflicts are going to arise when you’re running a company and have different ideas. Have a plan for how you’ll discuss conflicts and who will make the final decision on specific issues if no consensus can be reached.

Following these tips can help you to build both a strong business and a stronger marriage, so be sure to keep them in mind as you move forward with starting a company together as a team.

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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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