Money Management

Owe money on your car? Read on for some ways to manage your loan payments. 

Owning a car is hardly an inexpensive prospect. You have to insure it, maintain it, and pay off the loan you take out to buy it in the first place.

During the second quarter of 2023, the average monthly car payment rose to $733, according to Edmunds. But if you’re buying a used car, you might be able to get away with a monthly auto loan payment as low as $250.

But while $250 is a lot less than $733, it’s still a significant amount of money in its own right. And if it’s the first car payment you’re dealing with in a long time (or ever), it might wreak havoc on your finances if you’re not careful. Here are a few tips for managing a $250 monthly car payment.

1. Stick to a strict budget

Any time you take on a new expense, it’s important to be mindful of your spending so you don’t end up falling behind on any bills. If you’re now on the hook for a $250 monthly car loan payment, do yourself a favor and set up a budget that maps out your monthly expenses.

You may need to cut back in other areas to swing that $250 a month, and putting a budget in place will help you identify the expenses you can slash most easily. Following that budget could also spell the difference between keeping up with your auto loan payments or getting behind and putting yourself at risk of losing your vehicle.

Now, if the idea of sticking to a budget makes you want to groan, you may want to play around with some different apps that make the process seamless. Many will sync up to your bank and credit card accounts so your spending is categorized for you. It’s an easy way to stay on track at a time when you might need to be more careful.

Otherwise, make the process as simple as possible. List your expenses in a spreadsheet and record your spending in each category as you make purchases during the month. If you don’t go over the amount you have allocated to each category, you’re in good shape. So for example, if you’re limiting yourself to $200 a month on leisure expenses to keep up with your auto loan payments and you find that you’re at $190 toward the end of the month, you’ll know to be very careful with your spending those last few days.

2. Get a side job

If your regular paycheck really can’t handle an extra $250 a month in expenses, you may need to resign yourself to a side job to come up with the cash. The good news, though, is that if you have a vehicle, you may be able to use it to earn money.

Many people have success driving for ride-hailing services. In addition to the money you earn by shuttling people around town, all it takes is a string of generous tippers to boost your income nicely.

3. Consolidate your debt if you’re juggling too many loan payments

It may be that your new $250 a month auto loan is just one of several debts you have. If you’re worried about keeping track of those various payments, you may want to consider consolidating your debt via a personal loan.

Personal loans are unsecured and allow you to borrow money for any purpose. And if you have great credit, you might qualify for one with ease — and at a favorable rate.

That said, it’s best to compare interest rates when you’re talking about rolling an auto loan into a personal loan. Specifically, you’ll want to make sure the rate on your personal loan is more favorable than your auto loan rate — which may not be the case.

Given what the typical driver is spending to own a vehicle today, a $250 monthly car payment really isn’t so bad. But if it’s a new payment for you, then it’s important to take these steps to help ensure you’re able to keep up.

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Law-abiding citizens can become nervous at tax time, afraid they will be audited or worse. Here are the statistical odds of such a thing happening. 

Let’s get the scary stuff out of the way first. In fiscal year 2022, IRS Criminal Investigation initiated over 2,550 criminal investigations and obtained a 90.6% conviction rate of those cases accepted for prosecution. However, that was out of more than 134 million tax returns filed for tax year 2022.

Why would the IRS go to so much trouble only to investigate 2,550 or so parties? According to the tax agency, it identified over $31 billion in tax and financial crimes. That’s a whole lot of money that could go back into government coffers.

But what about you? Have you ever worried about being audited or, worse yet, accused of tax evasion? If so, this article is for you. We dug into what it takes for the average taxpayer to show up on the IRS’s radar, and here’s what we found.

The reality

Very few taxpayers go to jail for evading their taxes. That said, it pays to be honest. Most tax evasion cases begin with a taxpayer who:

Doesn’t file required tax returnsFails to report or misreports incomeLies about credits or deductions on their returnSays they are unable to pay back taxes, even though they have the means to do soMakes false statements to the IRS or purposely hides records, such as bank accounts

‘Badges of fraud’

The IRS calls dodgy behavior “badges of fraud,” and those badges attract audits and, sometimes, prosecution. Here are three samples of situations that trigger a fraud investigation.

Margaret

Let’s say Margaret works as a teacher, but she runs a tutoring business on the side. Margaret’s primary source of income is teaching, but over the years, her tutoring business has grown and now generates a fair amount of cash. As the money comes in, Margaret deposits it in her personal checking account and never reports it to the IRS. Between 2018 and 2022, Margaret’s tutoring gig cleared $40,000.

Several of the children Margaret tutors have special needs. As the parents of special needs students, their families can claim tutoring expenses as a federal tax deduction. While doing so, they provide the IRS with Margaret’s identifying information.

After receiving an audit letter from the IRS and interviewing with an auditor, Margaret insists her only income is from her job as a school teacher. For the auditor, this represents a badge of fraud. Thinking there’s something “off” with her story, the auditor orders Margaret’s bank statements for the past five years and finds regular deposits in the same amount each week.

Because Margaret won’t cooperate, the case is referred to the IRS Criminal Investigation Division for probable tax fraud.

John

John is transient and hasn’t held down a regular job in years. Still, he files income tax returns like clockwork. The trick for John is to steal an identity, falsify information regarding the person he’s pretending to be, and file for a tax refund before that person has time to file their legitimate return. Typically, John files “his” tax return on the first day of tax season. Unless the person whose identity John stole also files that day, John manages to get away with it.

Once the IRS receives a complaint from the victim, an investigation begins. However, because John has no permanent address and no place of employment, he’s difficult to locate.

Laurie

Laurie owns a landscaping business and, at any given time, employs at least a dozen people. Laurie uses payroll software to carefully deduct payroll taxes, including Social Security, federal unemployment, and withholding taxes. However, she never turns those taxes over to the IRS as required. In addition, Laurie takes on extra workers during the busy season and pays them under the table.

She’s a prime candidate for an audit and charges of tax evasion.

When no charges are filed

Once a taxpayer has been caught blurring the truth, they are unlikely to be charged with tax evasion. However, they can count on paying a harsh financial penalty. If they refuse to pay the fine, they may face up to five years in jail.

For the vast majority of Americans

The IRS knows that people make innocent mistakes. A letter from the IRS pointing out a potential error does not signal that a person is in trouble. It’s simply an attempt to get on the same page with the taxpayer. After all, it may be the IRS that made the mistake. If so, the taxpayer has an opportunity to provide evidence.

The IRS can be surprisingly understanding as long as a taxpayer makes a good-faith effort to pay their taxes accurately — even if that means setting up a payment plan.

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A major discount retailer is introducing a new cash back program. Read on to learn more about it. 

What happened

Dollar General is introducing a new DG Cash Back Program. Customers of the store will be eligible for cash back in a DG Wallet through the Company’s partnership with the Ibotta Performance Network. Cash back earned can be used to cover the cost of future purchases.

Dollar General already has programs in place that aim to help consumers financially, such as its spendwell™ bank account that comes with no monthly fees and that allows customers to earn unlimited 1% cash back that’s redeemable for Dollar General purchases. Dollar General also offers its FIS’ Premium Payback™ program, a real-time rewards program that allows customers to redeem points for $5 toward purchases of $5.01 or more.

So what

Inflation has been wreaking havoc on consumers’ finances for more than two years at this point, and many people are stretched to the limit as they attempt to cover their basic needs. It’s common to turn to a store like Dollar General to stretch a smaller paycheck as far as possible. And now, customers will get even more relief by racking up cash back to redeem for future purchases.

“As customers continue to seek new ways to stretch their budgets, we’re excited to introduce DG Cash Back on hundreds of Dollar General items to help them achieve that goal,” said Chad Fox, Dollar General’s chief marketing officer. “This is a strong addition to our financial offerings and services as we continue to expand incremental benefits for our customers.”

Now what

Shopping at stores like Dollar General can be a great way to secure household essentials for less. And at a time when money may be tight, that’s important.

But don’t assume that Dollar General, or your local dollar store, automatically has the best price for what you’re looking for. It may be that another retailer is offering a special that results in an even lower credit card tab. So if you’re trying to conserve cash, always make a point to shop around.

For example, in the coming weeks, parents will no doubt begin their back-to-school shopping. Buying supplies at Dollar General may seem like a good bet, but first, see if other retailers like Target, Walmart, or Amazon are running specials that result in a lower cost.

And also, if you’re buying a given item in bulk quantities, you may be better off going with a retailer like Amazon. Costco or Sam’s Club might be another good store to try if you have a membership.

The fact that you can now earn cash back on Dollar General purchases is a good thing. But remember, there may be ways to score cash back on purchases made at other retailers. Target’s RedCard gives you 5% off the items you buy, which is effectively like getting money back in your pocket, and Costco’s executive membership gives you 2% back on all in-store and online purchases.

And don’t forget, any time you use a cash back credit card, you get rewarded for the purchases you make. So while it definitely pays to sign up for Dollar General’s new program if you shop there, you have options for saving money and scoring bonus cash at other stores as well.

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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 and Target. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.

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Having no down payment doesn’t automatically mean you can’t get a mortgage. Read on to learn more. 

To take out a conventional mortgage loan, you generally need to make some sort of down payment. Usually, the minimum down payment conventional mortgage lenders will accept is 3%, and some lenders might ask for more, depending on the circumstances at hand. And if you don’t put 20% down on a conventional mortgage, you’ll have to pay private mortgage insurance.

But what if you don’t have any money to put down on a mortgage? You might think that buying a home is off the table. But actually, there are certain mortgage programs that allow you to purchase a home with no money down. Whether that’s a good idea, however, is a different story.

Mortgages that allow for a $0 down payment

Certain mortgage types allow you to buy a home with no money down. First, there are VA loans that give you this option, but you should know that they come with other costs, like an upfront funding fee.

And also, as the name implies, VA loans are geared toward members of the military or military veterans and their spouses. So if you never served in the U.S. military and aren’t or weren’t married to someone who did, then this isn’t an option for you.

There are also USDA loans you can look at if you don’t have any money for a down payment. But like VA loans, these loans have requirements you’ll need to meet. You generally need to be a low-income buyer, and you need to be buying a home in a designated rural area. You’ll also generally need a credit score of 640 or higher to qualify for a USDA loan.

Should you buy a home with a $0 down payment?

The idea of being able to purchase a home with no money down at closing might seem appealing. But remember, when you make a $0 down payment, it means you start off with no equity in your home. And that could become problematic if you wind up needing to sell your home shortly after purchasing it.

Home equity is defined as the value of your home minus your mortgage balance. If you buy a home for $300,000 and take out a $300,000 mortgage to finance it, you have $0 in equity. On the other hand, someone making a 10% down payment on that home would have $30,000 worth of equity.

A lack of equity can become an issue if you need to sell your home for less than what you paid for it. Say you have to sell after two years, but by then, you’ve only paid off $10,000 of your mortgage and your home’s value has dropped to $280,000. You would owe $290,000 on a home that can only sell for $280,000. Starting off with more equity could help you avoid that problem.

But if you know your finances are such that you’re able to keep up with ongoing mortgage payments, and you plan to stay in your home for a good number of years, then a VA or USDA loan could be a good option for you, provided you can qualify for one of these loans. And if not, then you may want to put off homeownership for a bit and save up a down payment. Even if you can’t qualify for a conventional loan once you’ve saved some money, you can always look into an FHA loan, which could mean putting down as little as 3.5% at closing.

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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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