Money Management

There are several common banking mistakes that can cost you money. Check out the things you should never do with your bank account to know what to avoid. 

Bank accounts are some of the most important and widely used financial products. They give you a safe place to deposit, store, and manage your money, including your savings and the money you use to pay your monthly bills.

While bank accounts are fairly easy to use, there are some common mistakes people make with them that can prove costly. And they’re mistakes that can be made by anyone, from banking beginners to those who have had an account for decades. To avoid any expensive issues, here are the things to never do with your bank account.

1. Overdrafting it

If you spend more money than you have in your bank account, your bank can charge you an overdraft fee. Not all banks charge overdraft fees, but many do, and fee amounts can be $30 or more. Research by the Consumer Financial Protection Bureau has found that the average American pays $250 per year in overdraft fees.

Keep track of your bank account balance, and leave yourself a financial cushion, so that you never overdraft it. Banking apps are a good way to stay on top of your balance.

2. Keeping all your money in a checking account

Checking accounts are the perfect place for depositing paychecks and keeping your monthly spending money. You can use your checking account to pay bills and get cash at ATMs when you need it using your debit card.

It’s not where you should keep all your money, though. Savings accounts are a better place for your savings, because they tend to have much higher interest rates than checking accounts. Make sure to stick to high-yield savings accounts, as these are the savings accounts with the best rates.

3. Paying a monthly fee

Many bank accounts charge a monthly fee, but they’ll generally waive the fee if you meet certain conditions. For example, your bank may waive the monthly fee on your account if you do any of the following:

Receive a minimum number of direct deposits, such as $500Maintain a minimum daily balance, such as $1,000Maintain a minimum average balance, such as $5,000

There’s really no good reason to pay a monthly fee for your bank account. Only use an account if you’ll have no problem meeting the conditions to have the monthly fee waived. Or, pick an account that doesn’t charge a monthly fee.

4. Letting someone else use your debit card

I’ve known a surprising number of people who didn’t mind letting friends, family, and significant others use their debit cards. Even if you think the other person is trustworthy, this isn’t a great idea, and it could even break the terms of your account.

Some banks state in their cardholder agreements that only the account holder is authorized to use the debit card for the account. While your bank probably isn’t going to catch you if you lend out your debit card, you’re essentially giving someone else access to the money in your account. If they decide to take out cash, it’s doubtful your bank would reimburse you, since you allowed another person to use your debit card.

If you want your spouse to be able to use your account, the best option is to add them as an authorized user. If you want to give anyone else money, cash or payment apps like Venmo are a better option.

5. Logging in through a link from an email or text message

Identity theft and financial fraud are a frequent issue, and they’ve been on the rise. In the United States, there were nearly 1.7 million identity theft reports in 2021 — over one million more than there were just two years prior. One of the more common ways that criminals steal sensitive information is through phishing scams.

A phishing scam is a ploy where scammers contact you and impersonate another person or company, such as your bank. It’s often done by email or text message. The scammers pretend to be messaging you as your bank, and the message includes a link to a fake version of the bank’s website.

If you click the link and enter your account information, those scammers now have it and can hack your account. That’s why you should never click any links unless you’re absolutely sure of the source. WIth your banking and other financial accounts, always enter the real URL for the site yourself to play it safe.

Your bank account should be a place where you can safeguard your money and earn interest on it. That’s why it’s important to avoid anything that will lead to fees or put your account’s security at risk.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

Selling a home shortly after buying it may not work to your financial benefit. Read on to see why. 

Many people buy a home with the intention of keeping it for many years. After all, moving is a hassle. And a lot of people would much rather not have to go through it frequently.

But what if you end up having to sell your home only a year after buying it? You may have to do so if you get a new job or your circumstances change in a way that you can no longer afford your mortgage.

You’re allowed to sell your home a year after you buy it. But doing so may not benefit you financially. In fact, you might get hurt financially if you sell your home after only a year.

You may not snag a profit

It can take time for home values to appreciate. If you sell your home a year after buying it, it may not be worth much more than what you paid for it. In fact, it may even end up being worth less.

But let’s say you’re looking at selling a home you bought for $500,000 for $515,000 in a year. There could be some profit there, particularly if you sell your home yourself and avoid having to pay commission to a real estate agent.

But remember, it costs money to put a mortgage in place. So your modest profit in this case may not be enough to fully recoup the closing costs on your mortgage.

You might end up liable for capital gains taxes

Capital gains taxes apply when you sell an asset at a profit. This holds true whether that asset is a stock or a home.

The good news is that the IRS offers a capital gains exclusion for homeowners worth up to $250,000 for singles and $500,000 for married couples filing a joint return. But there are rules you’ll need to follow to enjoy that exemption.

The IRS says that you need to have owned your home for at least two years in the five-year period before you sell it to enjoy a capital gains tax exclusion. So if you sell after only owning your home for a year, you clearly don’t meet this requirement. This means that if you do end up making a profit on the sale of your home, it becomes a taxable event for you.

Be careful when selling your home

You may have no choice but to sell your home shortly after buying it. But if you do have the option to hold off on your sale, you may want to consider it. Waiting a bit of time could help you enjoy more of a profit and, just as importantly, avoid a huge tax bill on your profit.

Remember, you may have options that allow you to keep your home longer. If money has gotten tight and you’re looking to sell due to affordability issues, you can look at renting out a portion of your home to help cover your mortgage payments. This won’t work for everyone and in every situation, but in some cases, it could be a solution.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Some brokerage account mistakes can have a huge impact on your financial future. Learn what to avoid doing with your brokerage account and investments. 

Your brokerage account is one of your best wealth-building tools. You can use it to grow your money by investing in stocks, bonds, and other assets. If you do so consistently, this can potentially lead to hundreds of thousands in returns — or more.

If you don’t manage your brokerage account well, it can cut into your returns. Or, even worse, you could end up losing money. That’s why it’s important to know about the most common places where investors go wrong with their brokerage accounts, so you can avoid doing the same.

1. Day trading

The easiest and most effective way to invest is long-term investing, but some people don’t like doing it the slow, steady way. So, they try day trading to make money more quickly. Day trading is when you buy and sell investments on the same day, although it’s also often used to refer to any type of short-term trading.

The problem is that trying to make money more quickly usually leads to not making any money at all. Several studies have looked at what happens when you day trade, and the vast majority of investors lose money this way.

2. Making impulsive investment decisions

Investors often get into trouble by making rash, emotional decisions with their portfolios. For example, you see that the stock market has dropped, so you rush to sell your stocks right away. You then end up selling low and missing out when the market rebounds.

Always take a big picture perspective with your investments. Don’t let short-term issues like sensationalist headlines in the news or a price drop cause you to make decisions you’ll regret. Invest in companies that you expect to have long-term success, and don’t get rattled during periods of volatility.

3. Checking it every day

It’s good to stay on top of your finances, but you don’t need to check your brokerage account as often as you may expect. Once a month is more than enough, and some investors opt for once every quarter or even every six months.

When you have investments that you’re planning to hold onto for years, there’s no need to monitor every daily price change. In fact, this can be problematic. Seeing prices go up and down can be unnecessarily stressful and lead to those impulsive investing decisions.

4. Only investing in a small number of stocks

Diversification is the name of the game with investing. Even if you think you’ve found a few great picks, it’s far too risky to hitch your portfolio to a small number of stocks. If just one or two of them fail, it could lead to heavy losses.

A properly diversified portfolio should have at least 25 stocks across a variety of industries. While you could pick these yourself, another option is an investment fund that contains a large basket of stocks. Exchange-traded funds (ETFs) are a popular choice. These tend to have low fees, and you can have a diversified portfolio by investing in as few as one ETF.

5. Overpaying in fees

Fees are one of those seemingly small details that have a massive impact on how much money you make. If you’re paying a hefty fee to a financial advisor or for an investment fund, that can take a huge chunk out of your profits.

Let’s say that you have $1,000 per month to invest. You could put it in an ETF that tracks the whole stock market for a 0.1% fee. Or, you could invest with a financial advisor for a 1% fee. Even the experts typically don’t outperform the market, so we’ll say you can get an 8% annual return either way. Here’s how much more that higher fee costs you over 30 years of investing:

Although it can seem difficult, learning how to invest really isn’t. It’s all about finding good long-term investments and putting more money in them on a regular basis. If you’re not sure what to invest in, funds that invest in a large number of stocks for you are a relatively safe choice. After that, just make sure you avoid any of those expensive mistakes.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

Having no emergency fund is bad news. Read on for tips on replenishing yours. 

It’s estimated that 67% of Americans do not have enough money in emergency savings to cover an unplanned $400 expense, according to a recent SecureSave survey. But it’s unclear as to whether those 67% of people simply depleted their savings account or never had an emergency fund to begin with.

If you’re in the latter boat, it’s important to prioritize building an emergency fund so you have cash reserves to tap in a pinch. But what if you had an emergency fund, only it’s been whittled down to $0 due to a series of unavoidable withdrawals? Your best bet in that situation is to try to replenish your funds as soon as possible. If you don’t, you’ll risk landing in costly debt.

When you don’t have any emergency cash reserves left

When you don’t have money in an emergency fund, you risk racking up some form of debt the next time an unplanned bill arises that your regular paycheck can’t cover. And often, that debt will be of the credit card variety, which could leave you vulnerable to accruing scores of interest on the sum you’re forced to borrow.

Clearly, that’s not a good thing at all. And that’s why it’s so important to not get to the point where you have no emergency savings left. In fact, a good bet is to try to put back emergency fund withdrawals each time you take one so you don’t land in the position of having no cash to fall back on.

How to replenish your emergency fund

The whole purpose of having an emergency fund is to be able to tap that account when an unexpected expense arises. But you should also try to replenish your emergency fund after each withdrawal — not when your balance is down to $0.

So, let’s say you’re forced to withdraw $1,000 from your savings to cover a car repair that can’t wait. Once you’ve covered that expense, it’s time to get into stealth savings mode. Cut back on spending in the coming weeks or months to carve out more money to put back into the bank. And also, consider taking on a side hustle to drum up more income.

Remember, these aren’t moves you need to commit to on a permanent basis. That could be difficult.

But if you know you’re looking to replenish a $1,000 withdrawal, you’ll basically want to limit your spending and push yourself to earn more income until that money is back in your bank account. From there, you can resume your usual spending and let go of that side job — unless, of course, you decide to keep it so you can earn more money for fun spending.

Let’s be clear: It’s better to have an emergency fund to deplete than to not have emergency savings at all. And you might have to raid your emergency savings in full if a large expense pops up and you can’t put it off.

But having no emergency fund leaves you extremely vulnerable to debt. So if yours is whittled down completely, try to make it a priority to get that money back into your account one way or another, whether by cutting spending, working a second job temporarily, or doing both at the same time.

These savings accounts are FDIC insured and could earn you 11x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

When answering this question, your timeline is important. Read on to learn how to choose where your money goes. 

When you have extra money, you have to decide what to do with it. This is a good problem to have, but it can still be a complicated question. Specifically, you will want to make an informed choice about whether to save it — which could mean putting it into a high-yield savings account — or invest it.

Before you opt to move your money into savings or transfer it to your brokerage firm to invest, there’s one key question you must ask yourself. Here’s what it is, along with some details about why the answer to this query will determine where your cash should go.

You must ask this to decide what to do with your cash

The one key question you must ask yourself when deciding whether to save or invest is what your timeline is for needing the money.

See, investing can provide you with the chance to earn better returns. The S&P 500 index fund, which is widely viewed as a barometer for the stock market as a whole, has reliably produced 10% average annual returns over the long term (before inflation).

That’s a much better rate than you could get by investing even in high-yield savings accounts. While you could perhaps get around 4% right now when interest rates are high, savings account yields have been much lower in recent years. And, even if you did manage to consistently earn 4%, that’s a lot less than 10%. In fact, $5,000 invested at 4% over a decade would net you $7,401.22, while you’d have $12,968.71 if you invested the same $5,000 at 10%.

However, investing also carries risk. While the S&P 500 can be expected to earn about a 10% average ROI over time, it could go down dramatically over the course of a single year, sometimes declining by as much as 20% or 30% or more. While this could balance out since in some years it will go up well over 10%, you need to be able to leave your money alone for a long time when you invest in order to reduce the risk that you’ll buy high and sell low.

If you cannot leave your money invested for around five years or so, you are better off putting money into savings. Yes, you’ll have to accept lower returns, but you will be confident that the money will be ready for you when you need to withdraw it — and you won’t be looking at a lower account balance than you started with.

Making the right choice about where to put your funds is important to minimize risk and maximize returns

Ultimately, by considering your timeline for when you will need the money, you can decide if you can afford to take a calculated risk for better returns or not. Don’t make the mistake of investing funds you need for the short term or saving funds you’ll need in the long term or you could end up regretting it.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

We’re less than six months away from 2024 — but it’s not too late to make progress in your financial journey. Here are some money moves you can make now. 

Believe it or not, we’re more than halfway through 2023. But that doesn’t mean that you can’t continue to make progress in reaching your personal finance goals. There are many months left to improve your finances. If you want to set yourself up for success by the time the clock strikes midnight on Jan. 1, there are some steps that you may want to take throughout the remaining months of 2023. In this article, I’ll share some things you can do with your money before 2024.

1. Perform a financial wellness checkup

It can be challenging to know what’s working for you or what you may need to do differently if you don’t review your finances every so often. But by reviewing your recent bank and credit card statements for the year so far, you can figure out what changes you may want to make before 2024 begins. If you’ve been overspending, you may want to start using budgeting apps to monitor your spending and stay on track to avoid falling into debt.

2. Increase your retirement contributions

Even if you’re in your 20s or 30s, now is the time to plan for retirement. If you’re already investing money via a retirement account, that’s excellent. However, it doesn’t hurt to increase your contributions. If possible, it can be beneficial to max out your contributions for the year. But even if you can’t do that, increasing your contributions even by a little bit is a wise move.

If you have a retirement account that can be used to reduce your taxable income, like a traditional IRA account, boosting your contributions can help you save on your yearly tax bill, too.

Compound interest allows you to earn interest on the initial balance and any interest earned, so investing more money during your earlier working years can be advantageous.

3. Prioritize eliminating high-interest debt

If you have high-interest debt like credit card debt, paying it off as soon as possible is best. Otherwise, it will continue to accumulate quickly. If you can afford to put more money towards your debt, you can eliminate it sooner and save money by paying less interest in the long run.

You can use our credit card interest calculator to determine how much extra you should put toward your debt to reach your debt payoff goal before year’s end. If you have a significant amount of credit card debt and it feels overwhelming, you may want to open a balance transfer credit card to save on interest charges as you work hard to tackle your debt.

4. Stash your extra cash in a savings account

There’s little advantage to keeping your extra cash in your checking account. Now is an excellent time to move your savings to a high-yield savings account because you can take advantage of the competitive interest rates on offer right now. Getting paid to keep your cash in an interest-earning bank account can allow you to reach your savings goals sooner. I’ve kept my savings in Ally Online Savings and have earned more than $500 this year so far.

5. Review your savings goals and boost your contributions

Many of us are working hard to reach savings goals before 2023 ends. You may want to review the savings goals you set for yourself at the start of the year to check in on your progress. If you can afford it, increasing your savings contributions can be helpful. Even a slight increase — like saving an extra $50 per month — can make a big difference. Building a solid emergency fund and saving for upcoming purchases can financially prepare you for the future.

Don’t give up on your financial goals

We may be less than six months away from the final day of 2023, but you still have plenty of time to continue to make progress in improving your finances. You’re not alone if you’ve reached some roadblocks in your personal finance journey. But remember that it’s never too late to make positive changes to set yourself up for a successful 2024. I’ll be rooting for you!

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More