Money Management

Homeownership is one of the most common financial goals. Check out the reasons why one writer has stuck to renting instead of buying a home. 

For my entire adult life, I’ve always been a renter. Like almost everyone, I’ve heard the cliche arguments for why buying a home is so much better. I’m supposedly paying the landlord’s mortgage. Why wouldn’t I want to start shopping for mortgage lenders so I can just swap out my rent payment for a mortgage payment?

I’ve read the homeowner horror stories, so I know that it’s a more nuanced decision than people make it out to be. Even though I’ve been able to afford a home for a while, I still prefer renting, for a few important reasons.

1. I haven’t wanted to settle down in one place yet

Renting gives you much more flexibility than buying. Want to move somewhere new? Finish up your lease, and you’re free to go.

It’s much harder to do that when you own a home. You can sell it, but that can be a lengthy process. If your home has dropped in value, you might not want to, because you’ll lose money on the deal.

Flexibility is key for me. I’ve moved to new cities a fair bit (13 times, to be exact) as an adult. If I had bought a house early on because someone else told me it was the smart thing to do, I would’ve been tied down.

2. I don’t want to handle repairs and maintenance

As a renter, if something in your home breaks, you call your landlord. As a homeowner, you basically are the landlord. It’s on you to either fix things yourself or call someone who can. Any repair and maintenance costs also come out of your bank account, and those are costs you don’t deal with as a renter.

I don’t want to spend a Saturday figuring out why the dishwasher is acting up or looking for a contractor on Yelp. And I’d rather not have to figure out how long the roof has until it needs…whatever it is that roofs need. Renting means I have a lot less to worry about as far as my home is concerned.

3. Interest rates are way too high right now

Starting in 2022, the Federal Reserve raised interest rates significantly to fight inflation. That means mortgage rates have also gone up quite a bit. The average rate on a 30-year mortgage went from under 3% in 2021 to over 6.5% now.

To put those numbers into perspective, let’s say you’re buying a $400,000 home, putting $80,000 down, and getting a 30-year mortgage to finance the rest. With a 3% interest rate, you’d pay a total of $485,688. With a 6.5% interest rate, you’d pay $728,445 — nearly $250,000 more!

Mortgage rates may not reach the same historic lows of 2020 and 2021 anytime soon. But I’d still rather wait to see what happens over buying a home right now.

4. I prefer having my money invested

A home is a big financial commitment. There’s a down payment, which normally ranges from 3.5% to 20% of the purchase price, depending on the type of mortgage and how much you want to put down.

Homeownership also comes with other costs that renting doesn’t, including property taxes, homeowners insurance (which is generally much costlier than renters insurance), and the aforementioned repairs and maintenance. And I know if I buy a home, I want something nicer than what I’m renting, so I’d likely spend much more on housing if I decided to buy.

Instead of putting all that money into a home, I’d rather use it to invest in stocks. I know the money that goes into a home isn’t exactly a loss. You do build up home equity, after all. But for the time being, I want to build my investment portfolio as much as possible.

The choice is yours

Those are just my personal reasons for why I haven’t bought a home yet. Homeownership has plenty of advantages, too, and I’m open to it in the future.

Despite the cliche advice that gets tossed around, buying isn’t better than renting. It’s better for some people, and renting is better for others. The best thing to do is compare the costs and carefully consider which one fits your lifestyle better. This is one of the most important decisions most people make, so don’t let anyone else make it for you.

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Retirement is hardly an inexpensive prospect. Read on to see if you’re building a strong enough nest egg. 

It can be really hard to estimate the cost of retirement when that milestone is very far away. After all, if you’re in your 20s or 30s, how on earth are you supposed to be able to put a number on your annual living costs in your 60s and 70s?

But it may help you to know that the average cost of retirement today is close to $1 million — $987,000, to be exact, according to data from Edward Jones. Of course, this doesn’t mean that your retirement will cost that amount. And also, if you’re years away from retirement, inflation is apt to drive up its cost, because inflation commonly makes just about everything get more expensive over time.

Still, many people aim for a $1 million retirement nest egg because they figure that amount of long-term savings will allow for a nice degree of financial security during their senior years. And if you’re looking to amass $1 million for retirement, you should know that a few key decisions on your part could make that goal far more attainable.

Start saving from a young age, and invest your savings wisely

Accumulating $1 million in your IRA might seem completely impossible unless you happen to earn an above-average wage. But while that’s certainly a daunting amount of money to try to save up, if you give yourself plenty of time to build that savings and you invest your money in a savvy manner, you might not only end up with $1 million to your name, but a lot more.

Let’s say you begin saving for retirement at age 22, which is when many people graduate from college and begin working full-time. Let’s also assume that you don’t end up retiring until age 67 which, if you’re 22 now, is when you’re entitled to your full monthly benefits from Social Security. And, let’s figure that you’re able to put $250 a month into your IRA during your career, which is $3,000 a year.

Let’s also make another important assumption — that you’re investing your IRA in stocks, whether by buying shares of different companies individually or falling back on ETFs that allow you to own numerous stocks with a single investment. Over the past 50 years, the stock market has delivered an average annual 10% return before inflation, as measured by the S&P 500 index. So chances are, your investments will give you a similar return.

When we package up all of these assumptions — $250 monthly contributions over 45 years and a 10% average annual return in your IRA — you’re left with a total savings balance of over $2.1 million. That’s more than twice the average cost of retirement today.

It can be done

Many people are quick to assume that they’ll never manage to retire with $1 million, or anything close. But as you can see, it doesn’t take a ton of money to retire a millionaire. It simply takes the commitment to start saving from a young age, consistent contributions, and the right set of investments.

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While credit cards have gotten a lot safer over the years, credit card theft is still a problem. Find out what to expect if it happens to you. 

Having anything stolen really bites. But it can bite twice as hard when that “thing” happens to be your credit card. A stolen credit card can be a hassle in a lot of different ways, not the least of which is that you now need another way to make important purchases.

But what should you really do if your card is stolen? Here’s what happens.

Report it to the issuer immediately

Before you do anything else, you need to freeze the card account and let the issuer know it’s missing. This should prevent any transactions from being made with the stolen card.

Luckily, most issuers make this super easy. You can do it in a few minutes through your online account or the issuer’s mobile app. (Alternatively, you can call the issuer. If you didn’t write down the number on the back of the card, it should be easy enough to find online.)

Some issuers will have a “Freeze your card” button right on the main screen, or at least on the card page. If not, it should be easy to find in your account or card management tools. Don’t forget to report the card as lost and/or stolen while you’re in your account.

You’ll get a new card with a new number

When you report your credit card as stolen, the issuer will send you a new card. Most of the time, that new card should also have a brand new number, expiration date, and CVV (card verification value — the three digit number on the back of most cards).

While this is great because it means the thief can’t use your old card to make purchases, it does mean you’ll need to update your card information anywhere it’s stored. This could mean utilities, subscription services, or just online shopping sites you use frequently.

There may be fraudulent transactions

In the best-case scenario, you notice the theft right away and freeze the card before anyone can use it. However, in many cases you may not realize the card is gone before some fraudster uses it for some unauthorized spending.

Dispute any unauthorized charges as soon as you notice them. Again, this is something you can easily do online or through the mobile app. You’ll need to dispute each transaction individually.

On the bright side, your personal liability for fraudulent transactions on your credit cards is actually limited by law. If you report the card as stolen before someone else uses it, you have $0 liability. If you don’t report the theft until after someone uses it, you’re (legally) on the hook for up to $50. That said, most issuers offer a blanket $0 fraud liability policy on their cards regardless of when you make your report.

Watch out for other signs of identity theft

If your credit card was the only thing stolen, you might be in the clear on identity theft problems once you report the card. However, if the thieves got more than your card, you might be in deeper trouble.

Fraudsters can do a lot of damage with just your ID, let alone what else might be in your wallet. If you’re at all concerned that your identity has been compromised, you can report it to the Federal Trade Commission (FTC). You may also need to place fraud alerts and credit freezes on your credit reports through the three bureaus.

A stolen credit card can be a headache, but it isn’t necessarily the end of the world — or your finances. Report the theft promptly, stay alert, and make sure to update your accounts when you get your new card.

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Your chances of getting approved for a mortgage without an income are pretty low. But you don’t necessarily need a job to get a home loan. Read on to see why. 

There are different factors that mortgage lenders look at when deciding whether to approve or deny home loan applications. One factor is your credit score, because it speaks to how risky (or not) a borrower you are.

Experian says that a credit score under 580 is considered poor. A score that low sends the message that you’re not necessarily the most trustworthy borrower, and that doesn’t bode well. As such, it generally takes a minimum credit score of 620 to qualify for a conventional mortgage, though there are certain types of loans, like FHA loans, that allow you to borrow for a home with a lower score.

Another big factor that goes into mortgage approval is your income. Your lender is most likely loaning you a large sum of money to finance a home purchase, so it wants reassurance that you’ll be financially capable of paying it back.

If you don’t have a job when you apply for a mortgage, you may have a hard time getting approved. But that’s not always the case.

It’s a matter of income, not employment

It’s a big myth that you absolutely need a job in order to qualify for a mortgage. Rather, what you need is income.

Specifically, you need to be able to prove to a mortgage lender that you have a steady income, and that your income is high enough to cover the monthly home loan payments you’ll be on the hook for if your application is approved. But you don’t necessarily need to be holding down a job.

Let’s say you’re retired and are collecting $2,000 a month from Social Security and another $2,000 a month from a pension your former employer set you up with. That’s an annual income of $48,000, which may be high enough to support the mortgage you’re looking to take out. Since both of those are reliable sources of income, a lender may have no problem giving you a mortgage.

Similarly, if you can prove that you have a steady stream of investment income, that alone may be enough to qualify for a mortgage. Let’s say you own a rental property that has been consistently generating $3,000 a month in income. That might be enough to satisfy your lender’s requirement.

You probably need a job if you don’t have other income

If you’re temporarily unemployed and you don’t have other income coming your way, then there’s a good chance you’ll struggle to get approved for a mortgage until you’re gainfully employed again. But all told, having a job is not a prerequisite for getting a mortgage. So don’t assume you can’t borrow for a home just because you aren’t working.

Also, if you’re applying for a mortgage jointly with someone else, you might get approved if you don’t have a job or income yourself, but your joint applicant has enough income to qualify. At the end of the day, lenders want to be repaid when they loan out money. Prove you’re capable of doing that one way or another, and you’re likely to get approved.

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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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Funding an IRA at a young age could work to your benefit in a big way. Read on to see why. 

When you’re in your mid-20s, retirement is probably the furthest thing from your mind. At that stage of life, your financial priorities may be to pay off nagging credit card debt and start socking money away for a down payment on a home.

But if you’re able to carve out a chunk of money for your IRA at 25, it could go a long way toward building a solid retirement nest egg. In fact, you may be surprised at what a difference a $5,000 IRA contribution at age 25 might make.

When you give your money many years to grow

The money you have in your IRA isn’t supposed to just sit in cash. If you go that route, it won’t grow very much. Rather, it’s a good idea to invest your IRA so your money gets to grow at a more rapid pace.

One great thing about saving for retirement in an IRA is that you can load up on a diverse mix of stocks. With a 401(k) plan, you’re generally not able to hand-pick stocks for your retirement savings. Rather, you’re limited to investing in different funds that may or may not align with your investment strategy.

Meanwhile, let’s say you load your IRA with 30 or so stocks across a range of market segments. Or, let’s say you keep things even simpler and invest in an S&P 500 ETF, which will effectively give you exposure to the broad stock market without having to invest in 500 different companies individually.

Over the past 50 years, the stock market, as measured by the S&P 500’s performance, has rewarded investors with an average annual 10% return before inflation. That number accounts for both good years and, well, not so great ones.

If you were to put $5,000 into your IRA at age 25 and leave that money alone until age 65 (which is a common age to retire at), over that 40-year period, your balance would grow to about $226,000, assuming a 10% average annual return.

Now you may want to save more than that for retirement. But even so, a single and relatively modest investment at age 25 could leave you with an astounding amount of money in time for your senior years. And that’s why it pays to do what you can to fund your IRA when you’re young, even if it means having to cut your spending in fun categories, like entertainment and travel.

A sacrifice worth making

Carving out $5,000 to put in an IRA at age 25 isn’t easy. Heck, it may not even be an easy thing to do at age 35, when you might, at least ideally, be earning more money than in your mid-20s.

But even so, a single investment in stocks could leave you very wealthy in time for retirement if you give your money a solid four decades to grow. So it’s worth making that sacrifice if you can.

You may need to live with a roommate, drive a clunker of a car, and spend some of your evenings working a side hustle to come up with $5,000 for your IRA at age 25. But your 65-year-old self might thank you profusely for making that effort.

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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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