Money Management

A writer explains why homeownership isn’t all it’s cracked up to be. Read on to learn some of the downsides. 

There’s a reason I made the decision to buy a home years ago rather than rent one. I knew I wanted to have kids, and I knew that in that scenario, I’d be most comfortable in a detached home with multiple bedrooms and bathrooms and a yard.

It’s hard to find an affordable rental in my area that meets that set of criteria. Sure, you can rent an apartment or townhouse in my neck of the woods without a problem. But there just aren’t all that many standalone, detached homes available for rent, so buying one of my own seemed inevitable.

Now I will say that there are benefits to owning a home, such as getting a tax break on my mortgage loan interest and not having to follow a landlord’s rules. And as the proud owner of a 75-pound dog, I’m really happy I didn’t have to ask anyone’s permission before welcoming him into my home.

But still, there are times when I just plain hate being a homeowner. Here are the top three things that bug me the most.

1. Unexpected repairs, even when you’ve done the maintenance

My husband and I are generally pretty good about doing maintenance on our home, and our house isn’t all that old. Despite that, we frequently find ourselves dipping into our savings account to cover unexpected home repairs.

Now thankfully, we have emergency savings to raid for home repairs, and we also factor several thousand dollars a year into our budget for home repair purposes. Recent data from All Star Home found that nearly 25% of homeowners don’t have the ability to cover a $1,000 home repair emergency, so thankfully, we’re in a different boat. But it still stinks having to pull money out of our savings when things break for no good reason.

2. Rising property taxes

Property taxes are a known expense of homeownership. But what’s annoying is that they have the potential to rise — a lot — over time.

First of all, as the value of your home rises naturally with time, your property tax bill can follow suit. But also, improving your home has the potential to raise your property taxes so that you’re not just paying for renovations, but also, a higher property tax bill.

Now maybe it’s me, but I don’t think it’s fair to charge me extra in property tax form for spending my hard-earned money to make my home more comfortable or usable. But clearly, my local tax assessor feels very differently.

3. The fact that you can never shake housing costs, even once your mortgage is paid off

Many people look forward to the day when they can own their homes outright. But I don’t think I’ll ever feel that way, even if my mortgage is paid off.

That’s because there will always be the expense of property taxes hanging over my head. So even if I’m not sending money to a loan servicer month after month, I’ll still owe my township thousands of dollars a year.

There are certainly perks to being a homeowner. But there are also times when I wish I could just rent a home instead. Granted, in that situation, I wouldn’t be able to build equity in a place of my own. But the savings I’d reap on home repairs alone would potentially be worth it.

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The term “X-date” may sound like it has something to do with a talent show or a superhero movie, but the reality is far more sobering. Learn more about it. 

With so much financial jargon floating around these days, it’s easy to become confused about what it all means. One of the terms that has been in the news lately is the X-date, which has nothing to do with Simon Cowell’s hit show, X-Factor. If you’re an investor or just someone who wants to stay informed, it’s important to understand what the X-date is all about and what it means for you.

What is the X-date?

The X-date is the date that the Treasury Department is projected to run out of money to pay its bills. This happens when the government reaches its debt ceiling and can no longer borrow money to keep up with the payments.

The Treasury Department has been using creative accounting measures to try to extend its cash on hand, but eventually, it will run out. Goldman Sachs analysts had previously forecasted the X-date to be between June 8 and 9. Treasury Secretary Janet Yellen said X-date would be June 5.

Why did we approach the X-date?

The first debt limit was set by Congress in 1917. Similar in function to a credit limit for a credit card, the debt limit ensures that the federal government operates within its means and does not spend beyond its allotted resources.

The government has hit the debt ceiling 78 times, and since 2009 the U.S. debt has tripled to $32.17 trillion dollars. It has surpassed the country’s GDP ($26.5T Q1 2023) for the past seven years.

In December 2021, legislators increased the debt ceiling by $2.5 trillion to $31.4 trillion. However, on Jan. 19, 2023, the U.S. hit the debt ceiling. The Treasury was able to take “extraordinary measures” to prevent the United States from defaulting on its obligations, pushing the X-date out to the first week of June 2023.

What were these extraordinary measures?

Congress has authorized the Treasury to take necessary measures in case of a deadlock on the debt limit. Starting in January, the Treasury declared a “debt issuance suspension period” to borrow more funds without violating the debt ceiling.

The Treasury also can suspend new investments in retirement funds for postal workers and civil servants.

It also planned on issuing $170 billion in T-bills right before the X-date in case Congress was unable to raise the debt ceiling. On May 30, the Treasury’s cash balance hit a six-year low of $37.4 billion, down from $140 billion in mid-May.

X-date suspended temporarily

Fortunately, on June 1, a week before the anticipated X-date, Congress suspended the debt limit until Jan. 1, 2025.

This means that the United States government can now continue borrowing money to fund its programs without worrying about hitting the debt ceiling until the stated date.

Treasury expected to borrow $1 trillion

Despite narrowly avoiding a default, the Treasury Department was still low on cash. So for the first time since 2007, the Treasury auctioned $15 billion worth of one-day cash management bills.

The one-day bill was issued on June 5, with a 5.145% investment rate. It matured on June 6. The Treasury received $61.6 billion in bids. In addition, the Treasury Department announced on June 7 that its goal is to increase its cash account to $425 billion by the end of June.

Experts predict that this amount will not be enough to cover its anticipated expenses. Wall Street predicts that it could exceed $1 trillion by Q3, starting with the Treasury-bill auctions worth over $170 billion.

What it means for investors

Investors don’t need to worry about the potential fallout of a default until 2025, but should expect another set of negotiations that will go down to the wire.

Investors can protect themselves from the impact of a possible default by diversifying their portfolio. This means investing in a range of assets such as stocks, bonds, and commodities, rather than putting all of their money in one type of investment. Diversification can help you to spread risk and reduce the impact of any potential losses.

Another way investors can prepare for future X-dates is by staying informed about the latest economic and political developments. This means keeping up to date with news articles and expert analysis, as well as monitoring the performance of their investments on a regular basis.

The potential X-date was a sobering reminder of the importance of political stability and fiscal responsibility. While the debt limit crisis has been postponed for a couple of years, it’s important for investors to be prepared and take practical steps to protect themselves. Diversifying your portfolio and keeping on top of future debt limit issues are strategies that can help investors protect themselves. Ultimately, the key is to stay informed, stay calm, and stay focused on your long-term investment goals.

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Business-class seats cost much more, but they also offer lots of benefits. Learn about those perks and check out a cheaper way to book business class. 

On international flights, business class is the option above economy class, and there’s quite a difference. Since there are far fewer passengers in business class, you get much more attentive service and more perks. You also pay quite a bit more, with business-class airfare often costing $3,000 to $5,000 per flight.

Some people believe that’s a waste of money. They often make the argument that you don’t get there any faster flying in business class. I’m not one of those people. For me, it’s almost a must for long-haul flights.

There are several reasons why I feel business class is well worth it. After covering those reasons, I’ll explain how I’m able to book it at a fraction of the regular cost.

1. Lie-flat seats

The biggest advantage of flying in business class is the seating. Many airlines offer lie-flat seats in their business-class cabins, and the difference between that and a regular seat is like night and day.

I’m not one of those people who can fall asleep easily on planes. And honestly, trying to sleep in a standard airline seat is rough. Lie-flat seats are much more comfortable, so they’re better for sleeping or just stretching out during your flight.

This is one reason why I think the argument that you don’t get there any faster in business class misses the big picture. There’s a huge difference between arriving well-rested and arriving sleep deprived with an aching neck.

2. Premium meals and free drinks

Long flights typically include one or two meals in each cabin. But the food quality tends to be much better in business class than in economy. You get premium meal options which have had much more thought put into them, and they’re served with real cutlery, not plastic utensils.

It’s still not going to measure up to a good restaurant. You’re 30,000 feet in the air, after all. That being said, you can have a nice meal flying business class. That’s another part of how it makes your travel experience more comfortable. Free drinks, including alcoholic beverages, are also standard in business class.

3. Lounge access at the airport

A business-class ticket normally gets you access to a lounge at the airport. Lounge quality can be hit or miss, and lounges sometimes get crowded, but it certainly beats the boarding area.

Lounges usually have plenty of seating options, so you can relax before your flight. There’s free food and drinks, and some lounges also have showers, which are a nice way to freshen up before a long flight.

Note that there are also many credit cards with airport lounge access. These are another good way to get into lounges before you fly.

4. Priority check-in and boarding

With most airlines, business-class passengers can use a priority boarding lane at check-in and get to board the plane earlier. This might not sound like a big deal, but it can be.

During busy travel times, check-in lines can get very long. While you can avoid this by checking in online, you might still need to wait in line if you’re checking a bag. I’ve been able to avoid an hour-long wait in line multiple times thanks to the priority check-in lane, so there are situations where it comes in handy.

5. Complimentary amenity kits

Business-class seats usually have a small amenity kit for each passenger. The contents and the quality vary depending on the airline, but they often include:

A sleep maskA small toothbrush and toothpasteEar plugsSoft socksMoisturizerLip balm

It’s nothing you couldn’t pack yourself, but it’s nice not having to worry about it. You can brush your teeth, take care of your skin, and get to sleep, without any extra packing or digging around in your suitcase.

How to afford business-class airfare

Flying in business class sounds great, until you get to the prices. Fortunately, there’s a way to get a much better deal.

The best option is to book airfare using miles, not cash. A business-class ticket that costs $3,000 may be available for 70,000 or 80,000 miles, plus taxes and fees. And while that’s a lot of miles, you can earn miles quickly using travel rewards credit cards.

Some of the top travel credit cards earn points that you can transfer to various airlines. When you transfer your points, you essentially turn them into airline miles with your airline of choice. For example, I recently saved over $4,000 on airfare by transferring points to Air France and booking business-class airfare.

Another recommendation is to set up a savings account as your travel fund and transfer money there every month. You can then use that money for any travel expenses you want.

If you set some money and some credit card points aside, you’ll be able to fly business class more often. Even if it’s not something you do on every flight, it’s great to have that option on long-haul flights where you want to be as comfortable as possible.

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Ready to tap your IRA? Read on to see if that’s a good idea. 

There’s a reason savers get a tax break in the course of funding an IRA. The IRS wants to encourage workers to set money aside for retirement, so traditional IRA contributions go in tax free.

In exchange, though, there’s a pretty steep penalty for tapping an IRA early. And so if you take a withdrawal prior to age 59 ½, the IRS will slap you with a 10% penalty on the sum you remove.

There are exceptions that allow you to access your IRA funds prior to age 59 ½ without a penalty. You can take an IRA withdrawal to pay for higher education or buy a home for the first time without losing 10% of your distribution amount. But otherwise, you need to be really careful about taking an early IRA withdrawal.

But what if you’ve already reached the age of 59 ½? At that point, you’re able to access the money in your IRA whenever you want, and without a penalty to worry about. But that doesn’t mean you should rush to withdraw funds without giving it thought.

It pays to keep your money in your IRA as long as possible

If you have a pressing reason to take an IRA withdrawal and you’re old enough to do so penalty free, then you’re better off doing that than, say, racking up credit card debt to access the money you need. But be careful when taking an IRA withdrawal for a less important reason.

First of all, if you remove funds from a traditional IRA, you’ll pay taxes on them. This is not a penalty — it’s the same sort of tax that applies to the income you collect in paycheck form, but it’s an expense you’ll have to account for nonetheless.

Also, when you take money out of an IRA, it means you’re no longer investing that money and letting it grow. So, let’s say you’re around 60 years old and you’re investing your IRA somewhat conservatively due to being closer to retirement age. The stock market has, over the past 50 years, delivered an average annual 10% return before inflation, as measured by the S&P 500. But if you’re only partially invested in stocks, your IRA may only be delivering, say, a 6% yearly return.

Even so, let’s say you remove $10,000 from your IRA at age 60 and don’t retire until age 70. Your $10,000 withdrawal will actually cost you about $18,000 in lost retirement income when you factor in lost growth.

Think carefully before you take a withdrawal

It may be that you’re looking to tap your IRA because you’ve encountered an emergency home repair, or because you’re retiring early after having spent years saving a bundle. That’s your right, and once you’re 59 ½, you don’t have to worry about penalties.

But before you take an IRA withdrawal, you may want to ask yourself:

Do I really need this money right away?Do I have money in my regular savings account to use instead?Am I behind on saving for retirement, and will this withdrawal put me at risk of struggling financially once I stop working for good?

These are all important points to consider before you take an IRA withdrawal at any age — even an age when there’s no penalty involved.

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Leasing a car can be expensive. Read on to learn about some of the lesser-known costs involved. 

If you rely on a car to work and just plain function, you’re in good company. Recent research from The Ascent on vehicle ownership found that 91.5% of U.S. households had at least one car in 2020.

But just because you need a car doesn’t mean you have to buy one. You could look at leasing a car instead. But if you’re going to go this route, be mindful of these little-known costs you might encounter in the process.

1. Fees for going over your mileage

When you lease a car, you’re limited to a certain number of miles. That limit may be 10,000 miles a year, 12,000 miles a year, or more. But if you go over your mileage limit, you’ll pay up big time.

Consumer Reports says you should expect to pay up to $0.50 per mile for each mile that exceeds the limit your lease calls for. So if you end up driving 500 miles above your lease, it’ll cost you $250 if you’re charged $0.50 per extra mile.

2. Fees for excessive wear and tear

It’s common for a vehicle to show signs of wear and tear after it’s been driven for several years. But if your leased car shows signs of what’s deemed to be excessive wear and tear, you’ll be charged accordingly. And unfortunately, excessive wear and tear can be somewhat subjective, so that something you’d consider standard may not be what your dealership considers standard.

3. Fees for breaking your lease early

One benefit to leasing a car rather than owning one is not being stuck with the same vehicle forever. If you try out a given car and don’t love it, you can replace it once your lease comes to an end.

If you can’t manage to stick out the entire term of your lease, you’ll likely face a penalty for terminating it early. And the specifics here will depend on your contract.

But let’s say you lease a smaller car for three years, and then one year into that lease, oops — you’re having another baby you weren’t planning for. It may be that your leased vehicle isn’t large enough to fit your family once that new addition arrives. Unfortunately, that’s your problem, whereas you can always sell a car you own that no longer meets your needs.

Should you lease a car or buy one?

There are certain benefits to leasing a car you might end up appreciating. For one thing, you may be looking at a lower down payment on a lease than a car purchase (though not always). And also, you may not have to worry about raiding your savings account for major repairs, since those are usually covered by a three-year, 36,000-mile warranty that covers the full term of your lease.

But if you’re going to lease a car rather than purchase one, make sure to read up on the costs involved. And also, read your lease agreement carefully so there are no unpleasant financial surprises. In fact, it’s a good idea to stick some extra money into your savings after signing your lease so that you have funds to tap if needed to cover the above-mentioned expenses.

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There’s a good chance your bank will merge with another. Find out how your personal banking experience could change in the process. 

Three banks failed this year: First Republic Bank in San Francisco, Signature Bank in New York, and Silicon Valley Bank in Santa Clara. All three have been merged with competitors. But these dead banks probably won’t be the last to consolidate.

Why? Two reasons, according to U.S. Treasury Secretary Janet Yellen:

Fed ratesRemote work

Fed rates have been rising rapidly. For banks, some lending practices that were money-makers are now money-drainers. Times are changing, and banks are hurting.

Remote work has thrown another wrench into the equation. More people work from home, so there’s less demand for commercial office buildings. Banks that engage with commercial real estate may be bleeding money on these investments.

If Janet Yellen’s concerns play out, then banks could consolidate for one of two reasons: to avoid bankruptcy, or to buy bankruptcy assets for cheap. This could happen in a couple of ways:

A bank purchases the assets of a bankrupt competitor.A bank with stable finances buys a smaller, oft-struggling bank.

Regardless, consolidation matters. If your bank merges with another, the fees, services, and interest rates your bank offers could change.

Interest rate changes

The interest rates on your accounts may change — think savings accounts or certificates of deposit. Loan rates could change, making future borrowing more or less expensive. But don’t worry — interest rates on fixed-rate loans you’ve already taken should remain stable.

New products and services

Your bank may offer new products or services like checking or savings accounts. Your bank may offer new credit cards or mobile apps. The interface of your banking product may change — you may discover a new web layout, buttons, and so on. Plus, old services may be retired.

Fee changes

Your bank may change which fees it charges, and how much. If you currently pay $50 for overdraft fees, you may now pay $100 or even $0. You might pay more to withdraw money from ATMs, and so on. Banks typically alert customers to these sorts of changes.

Branch closures

Should it be acquired, your bank may close physical locations. On the other hand, the acquiring bank may open new branches to service new customers. These days, many folks can manage their money online, but if you prefer face-to-face contact, this could alter your routine.

Regardless, your savings are insured by the FDIC, if your bank is under its purview. If you have less than $250,000 deposited per insured bank account, you’re golden — the federal government has your back. But you could lose savings beyond that initial $250,000 during a consolidation.

The FDIC also ensures that when banks merge, the transition is smooth. It did so for Signature Bank and Silicon Valley Bank.

You might not even notice that ownership of your bank has changed hands, or that your bank has swallowed up a smaller one. If you notice discrepancies, you can confirm them by taking the following steps:

Head to the nearest bank branch or your bank’s website.Contact a representative in person, over the phone, or via email.Ask whether a merger has occurred, and if so, how it has affected your account.

Be sure to bring specific questions to the table so all your concerns are addressed.

Janet Yellen’s banking concerns seem limited to anti-competitiveness, not a weakness in the overall banking system. She doesn’t expect banks to collapse, domino-style. Consolidation could lead to more fees in general, but banks are still some of the safest places to store money.

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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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