Money Management

It’s important to have a strategy for buying stocks. Read on to learn more. 

Investing in stocks is a great way to grow wealth. But it’s important to have a strategy for loading up your portfolio. And if you decide to choose your stock purchases at random, you might end up losing money or stunting your portfolio’s growth.

The problem with randomly picking your stocks

Any stock that gets added to your portfolio should be one that you’ve thoroughly vetted. You’ll want to make sure that any company you’re investing in is in good standing financially — meaning it’s managing its money well, has decent cash flow, and isn’t overloaded with debt.

It’s also a good idea to look at a company’s management team. See what experience they have and what wins they’ve had in the past.

And also, look at growth potential. A company that lacks innovation may not end up seeing its share price rise over time. But a company that’s constantly introducing new ideas may be nicely poised for growth.

Along these lines, you may want to aim for companies that have a clear advantage over their competitors. That could be their ability to leverage technology or simply come up with creative approaches to otherwise tough challenges.

Now, as you might imagine, it can take time to vet a stock thoroughly. But if you don’t take that step, and you instead just choose your stocks at random, you might end up investing in companies that don’t serve you well and don’t make you any money.

Also, it’s important to choose stocks that lend to a nice amount of diversity in your brokerage account. So to that end, you don’t want to randomly choose your stocks, because you might end up too heavily invested in a given market sector. That means you run the risk of excessive losses if that particular segment of the market happens to take a hit.

Make sure you have a plan

Randomly choosing stocks to invest in could mean not meeting your financial goals. So if you’re not willing to put in the time to establish a strategy and vet each stock individually, you may instead want to plan on investing in broad market ETFs. Buying up shares of an S&P 500 ETF, for example, could make it so your portfolio is nicely diversified without you having to do a lot of work.

Of course, this isn’t to say that randomly choosing stocks will never work out well. Years back, an experiment was conducted that pitted seasoned investors against a cat in a stock-picking competition. The investors used their knowledge and expertise to assemble a portfolio, while the cat chose its stocks by throwing its beloved mouse toy at a grid. In the end, the cat’s picks yielded better results. Go figure.

But generally speaking, choosing stocks at random — or having your pet do it for you — isn’t a great bet. So if you’re not able or willing to put in the time to put thought and research into your stocks, you may want to fall back on ETFs instead.

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Owning a car isn’t for everyone. Read on for signs that it’s time to unload yours. 

If you own a vehicle, you’re in pretty good company. In 2021, almost 92% of U.S. households owned at least one car, according to Forbes.

But there may come a point when it no longer makes sense to hang onto your vehicle. Here are a few signs that it’s time to unload your car.

1. You don’t drive very often these days

Some people rely on their cars to get to work on a daily basis. But if you now do your job from home 100% of the time, you may not need a car to hold down a job. And if you live in a relatively walkable neighborhood with access to stores and amenities, you may not even need a car for regular errands.

Even if you do need a car for things like larger grocery hauls, it could make more sense to hail a rideshare a few times a month than pay to have a car of your own. So think about the frequency of your driving, because if your car spends the bulk of the month parked in your garage, it may not be worth keeping.

2. You’re moving to an area where parking is difficult

It’s more than possible to own a car while living in a city — plenty of people do it. But in some cities, parking can be extremely hard to come by. And you may reach a point where parking becomes such a source of stress that it’s not worth having a car in the first place.

Many city dwellers who keep a car pay for a spot in a parking garage so they don’t have to deal with street parking. But if that’s something that’s just not in your budget, you may be better off giving up your car — especially if you technically don’t need it due to having solid public transportation options.

3. You can’t keep up with the costs

AAA says that the average annual cost to own a car is $10,728, or $894 per month. That number accounts for expenses like auto insurance and maintenance, along with a car payment.

The amount you spend to own your car may be more or less than that. But either way, if it’s a number you really can’t afford any longer, then you may want to give up your car if it’s reasonable to function without it.

Even if your vehicle is paid off and you’re no longer grappling with monthly auto loan payments, the cost of insurance and upkeep alone may be beyond your budget. So if there’s a more cost-effective option to get around, like taking the bus to work, it could pay to sell your car and slash your expenses. If you don’t, you might easily end up with credit card debt that upends your finances in many ways.

Owning a car can be a nice convenience. But in some cases, hanging onto a vehicle just doesn’t pay. And if these signs apply to you, you may be better off unloading that car than bearing the cost of keeping it.

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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. Maurie Backman has positions in Citigroup. 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 a good idea to shop for homeowners insurance rates from time to time. Read on to learn more. 

Putting homeowners insurance in place is a prerequisite to signing a mortgage loan. But even if your home is fully paid off or you’re buying a home in cash, it’s a very important thing to have.

Without homeowners insurance, you could end up liable for expensive repair bills if your property sustains damage, whether from a fire or an outside storm. Plus, you need liability coverage in case someone gets injured on your property — such as if a delivery person slips and falls in the course of dropping a package off on your porch.

Unfortunately, the cost of homeowners insurance is never set in stone. And over time, your premium rates could rise.

You may be tempted to get a new homeowners insurance policy if you get word from your insurer that your premiums are going up. But whether a new policy will save you money will depend on your specific circumstances.

Understand why your costs are rising

There are certain changes you might make to your home that cause your homeowners insurance costs to increase. Putting in a pool, for example, is likely to result in higher premiums, because a large area of water in your backyard opens the door to not just flood damage, but injury.

If your homeowners insurance rates have risen due to a change you made to your home, you can try seeing if other insurers will charge you less money for coverage. But you may find that you’re looking at higher rates across the board.

Even if you didn’t make any notable changes to your home, it may just be that the cost of homeowners insurance has gone up in your general area. So in that case, you may find that your current coverage is still the most cost-effective, despite an increase in your premium.

You should also know that the more claims you file against your policy, the more likely it is for your premiums to rise. But even if you don’t file many or any claims against your homeowners insurance, if other insured parties in your area do, that could raise your costs — even though that might seem glaringly unfair.

It makes sense to shop around no matter what

Progressive says the average annual cost of homeowners insurance in its network ranges from $999 to $1,655 for policies effective on or after April 1, 2020. Your costs may be higher or lower, depending on factors like where you live and the size of your property. And your costs might also rise over time, whether you make changes to your home and file a lot of claims against your policy or not.

Regardless of why your homeowners insurance costs have risen, it’s a good idea to do some rate shopping and see if another homeowners insurance company has a better deal to offer you. In fact, it’s a wise idea to compare your choices for homeowners insurance coverage even if your costs haven’t gone up. You never know when there might be a better deal elsewhere.

Along these lines, if you’re not already bundling your homeowners and auto insurance policies, you may want to consider doing so. Going this route could save you money on both sets of premiums, making both homeownership and vehicle ownership less expensive on a whole.

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It’s gotten more expensive to borrow money for home renovations. Read on for ways to save on yours so you can borrow less. 

At its most recent meeting, the Federal Reserve decided to hit pause on its interest rate hikes after 10 consecutive increases since March 2022. And that’s something many consumers are no doubt grateful for, since interest rate hikes have already driven the cost of borrowing up to a notable degree.

These days, you may be looking at a higher interest rate on a personal loan or home equity loan than you would’ve faced in the past. This holds true even if your credit score is great. That means that if you’re looking to finance a home renovation, it might cost you a bundle.

That’s why it pays to keep the cost of your upcoming home improvement project as low as possible. The less you have to spend, the less you have to borrow. Here are a few ways to trim your costs.

1. Do the work yourself if you can

The cost of materials for your home renovation is something you’ll need to bear no matter what. If you’re putting in hardwood floors, for example, you’re going to spend money on those materials.

But a big expense you’ll commonly face when doing home improvements is labor. So if you’re able to eliminate that cost by doing the work yourself, you may not need to take out as large a personal or home equity loan to finance your project.

However, if you’re going to go the DIY route, make sure you’re really equipped to do the job. You don’t want to compromise your home or your personal safety just to save some money.

Besides, think about it this way — if you end up with a $1,000 hospital bill to avoid paying a contractor $500, you won’t even come out ahead financially. And you’ll be injured.

2. Book your contractors off season

Contractors who do outdoor projects, like building decks and fences, tend to be busier during the warm weather months, since that’s when people tend to have these renovations on their minds. If you book a contractor during their off season, you may find that you’re looking at a smaller tab. So rather than hire someone to build you a deck in July, wait until the fall, when the weather is cooling, and have the job done then.

3. Be flexible with your timing

Once your contractor starts a project of yours, you may want it finished as quickly as possible. But if you’re able and willing to be flexible with your project’s completion date, your contractor might offer a discount in exchange. That’s because your flexibility might allow them to take on extra, more lucrative side work while tackling an ongoing job of yours.

So, let’s say you’re having your basement finished and it would normally be an eight-week job. If you agree to give your contractor 16 weeks to complete the work, they might offer up a discount in exchange.

Home renovations can be expensive to finance even when borrowing costs aren’t so high. But given the interest rates borrowers are looking at today, it pays to do what you can to keep the cost of your home improvements down.

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While a wedding is a one-day event, I hope to hand my ring down to my children or grandchildren one day. Find out more about our decision-making process. 

The average cost of a wedding was around $30,000 in 2022, according to The Knot. Although my husband and I got married over a decade ago, the average cost wasn’t much lower at the time, coming in at around $28,400. My husband and I spent nowhere near that amount, though, instead keeping our total costs to about $5,000 out of our bank accounts.

While we did not give our credit cards a workout and splurge on the big day at all, we did spend quite a bit of money on one purchase related to our marriage: my engagement ring. In fact, we actually spent more on the ring than we did on the wedding. Here’s why we made that choice.

An engagement ring was really important to me

It may sound silly to some people, but an engagement ring is something that’s always been important to me. I don’t wear a lot of other jewelry but I fell in love with a specific engagement ring I saw in a magazine ad when I was around 12 years old. I always said that when I got married, that was the ring I wanted my future husband to buy me.

I got married in my late 20s. I still remembered that ring, and the jeweler still sold it, so I told the story to my now-husband who wanted to make it happen for me. It just so happened the ring was expensive, but it was well worth it for something I had loved for more than a decade.

Unlike a wedding, which is a one-time event, I knew every time I looked down at that ring, it would make me smile. And, more than a decade later, it still does.

I wanted something I could hand down to my kids

Unlike a wedding, an engagement ring is something that is tangible — and something I can hand down to my own kids or grandkids someday. This was important to me too, since I had my mother and grandmother’s engagement rings made into a special piece of jewelry I wear on my right hand.

Since both my mom and grandma have passed away, looking at their rings every day helps me remember them and think fondly of them. I wanted a beautiful ring my own son or daughter or grandkids could have in the future that they would want to wear and think of me.

We were able to put together a great wedding on a budget

Finally, the last big reason why we spent more on my ring than on the wedding is because we were able to put together a really fun event with all our friends and family on a limited budget. We didn’t have to sacrifice the things that matter most about a wedding — time with loved ones and the ability to share our commitment in front of others — just because we didn’t spend a fortune.

Our decision to spend more on the ring than the wedding isn’t one that’s going to be made by everyone. But ultimately, the thing to remember is you have to decide what’s most important to you personally. Just because social media may suggest that a big, lavish wedding is what matters, your money should go to what will make you the happiest. That’s true when you get married — and for other areas of your life.

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Browsing million-dollar homes online is certainly fun. But when it comes to buying a home, learn how a more realistic approach can save you a lot of cash. 

House hunting can be an exciting prospect, despite all the stress involved. You get to imagine yourself in new places and picture how your life might be different in that perfect property. This house has a huge garden? You can finally give that green thumb a workout. That condo is in the hippest walkable neighborhood? Buh-bye car, you’re walking everywhere you need to go.

The only issue with the imaginary life you start building is it can lead to you getting carried away and stretching your budget for your dream home. I’ve gone through the home-buying process twice now, in two states, and my experience has taught me it’s much better to set a budget early and commit to staying below it.

Getting pre-approved for a mortgage

One of the first steps you should take when you begin looking for a home is to get a mortgage pre-approval. This is when a mortgage lender takes a look at your finances and approves you for a loan, laying out an upper limit it will lend you for a home purchase as well as the rate at which you’ll borrow. Getting pre-approved is an important step to take early in the process so you know what your price range will be.

However, many experts advise home buyers to avoid borrowing the entire amount they qualify for, and I couldn’t agree more. Doing so means you’re stretching your budget to the limit and can put your finances in danger in the future.

House hunting under budget

I feel lucky to say my husband and I have ended up in two homes we’ve been really happy with. However, I wouldn’t say either has been our dream home. The benefit of that, though, is both houses were priced well below our home-buying budget. The total purchase price of our current home was actually less than the amount we were approved to borrow from our mortgage lender. Once our down payment was accounted for, our mortgage loan fit extremely comfortably in our budget.

How a smaller mortgage saves money

The beauty of taking out a smaller mortgage than we qualified for is it saved us money in a number of areas. These include:

Closing costs: These are the fees associated with buying or selling a home. The average closing costs for buyers is between 2% and 5% of the home purchase price. By buying a more affordable home, you end up paying less at closing.Home insurance: This is another cost that is partially based on the value of your home. The more expensive your property is, the more expensive your home insurance will be.Property taxes: The amount you’ll owe in property taxes will vary based on your location, but it’s generally a percentage of your home’s value, so a pricier home will cost you more in taxes each year.Monthly payment: This one is pretty straightforward; a smaller mortgage means a smaller payment each month.Overall mortgage interest: It feels like people always talk about the purchase price of a home and forget to factor in the cost of borrowing. But the smaller loan amount you borrow, the less interest you’ll have to pay on that loan, no matter the term length.

Here’s an example: Let’s say you’re pre-approved for $350,000. According to the Federal Reserve Bank of St. Louis, the median home price is $436,800. If you put down 20% ($87,360) at today’s average rate of 7.19%, your 30-year loan would be $349,440, just at the top of your range, and your monthly payment would be $2,369. The total interest you’d pay would be $503,443.

If you chose to purchase a less-expensive house, say one costing $375,000, but still paid the same down payment ($87,360) since you already had it saved, your loan amount would be $287,640 and your monthly payment would be $1,950. The total interest you’d pay would be $414,407. That’s a savings of $419 each month and $150,836 over the life of the loan.

Here’s that info in table form for the more visually minded:

And that’s just the savings from the mortgage itself. You’d save even more on closing costs, home insurance, and property taxes by moving into the lower-priced home.

Avoid becoming house poor

My husband and I looked at a lot of homes during our two house hunts, and there were a few we seriously considered stretching for. But no matter how beautiful the house at the tippity-top of our budget seemed, we preferred to go for something more modest and apply that savings to other areas of our lives.

By not overburdening ourselves with a huge house payment, we’ve been comfortable spending more money on travel and vacations. It’s also allowed us to put more money into our emergency fund so that we’re prepared for any unexpected expenses that come up. (The costs of homeownership are no joke.) It’s also allowed us to place more cash in our retirement accounts and investments, which I’m sure our future selves will thank us for.

My advice is to go wild searching real estate listings for fun, but when the time comes to start seriously looking, don’t let a mortgage lender decide how much you can afford. Take a look at your finances, lifestyle, and goals, and make that decision for yourself.

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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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