Money Management

Homeownership isn’t for everyone. Read on to learn why one homeowner opted to become a renter. 

When my friend Sam opted to buy a home alone, a lot of people thought she was getting in over her head financially. Even though she has a good job, she’s single, and it’s hard to manage a mortgage loan on one income.

But Sam lived with her parents for many years after college, and that allowed her to build up a nice amount of cash in her savings account for a down payment. While she couldn’t afford to buy a home outright, she borrowed minimally to finance one, and also bought a smaller house that she thought would require little maintenance.

But after owning her home for a few years, Sam had had enough. And so she decided to take advantage of the red-hot housing market a couple of years ago and sell her home when she could get a great price for it. Here’s what primarily drove her to sell.

1. She was tired of paying for maintenance and repairs

Sam bought a small home on a pretty small lot. In spite of that, she found that she was constantly having to dip into her savings to cover the cost of upkeep and repairs.

Bob Villa says to budget 1% to 4% of your home’s value for annual upkeep. So if you own a $300,000 home, it would mean budgeting $4,000 to $12,000 annually for maintenance. But it’s hard to find similar guidance for repairs, and that’s something Sam struggled with financially.

2. She was tired of having to spend the time on maintenance and repairs

Sam is pretty handy, so she did a lot of home maintenance and repairs herself to save money because, well, she could. But even so, she grew tired of having to spend her weekends on things like yard cleanouts and painting her deck. She works a demanding job (which is partly how she was able to afford a home on her own, without a partner) and didn’t want to spend her limited downtime focusing on home projects.

Going back to renting was a smart move

Although Sam was convinced that she wanted to be a homeowner, after a few years of doing it, she realized that it just wasn’t for her. And now that she’s renting, she’s much happier.

Not only does she not have to deal with maintenance and repairs, but she also has an easier time managing her finances. The rent check she gives her landlord monthly covers all of her housing costs. She no longer has to raid her savings or stress every time a repair pops up.

Owning a home can be a smart move financially, and it can be a rewarding thing. But it’s not right for everyone. And if it’s not the best idea for you, know that there’s absolutely no shame in being a renter. While you won’t get a chance to build equity in a place of your own, you’ll get to enjoy the benefit of predictable monthly housing costs. And that alone is a reason to live in a home that somebody else owns.

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Millennials’ net worth has doubled since the pandemic. Find out where most of their assets are. 

Millennials, the generation born between 1981 and 1996, have been the subject of many headlines over the years. The media in the past dubbed them “the avocado toast generation” for their spending habits, but how much is the average millennial actually worth? With the oldest of millennials now past the age of 40, things have changed since the 2008 financial crisis and COVID-19.

Millennials’ net worth doubles

The U.S. economy has been fundamentally transformed by the COVID-19 pandemic in recent years. By providing significant government relief and lowering interest rates, households have been able to accumulate wealth despite the impact of inflation. In fact, the net worth of U.S. households rose by 40% from $103.99 trillion in Q1 2020 to $141.10 trillion in Q1 2022.

Millennials have also experienced significant financial benefits as a result of the pandemic, with their net worth more than doubling. According to MagnifyMoney’s latest study, the average net worth of millennials surged to $127,793 in the first quarter of 2022. Compared to the pre-COVID figure of $62,758, it has increased by a staggering 103.2%.

Much of this growth is from real estate, government initiatives such as extended unemployment benefits and loan forbearance, as well as higher income.

However, despite this growth, their net worth still trails behind that of older generations. The average net worth of a millennial surpasses only that of Gen Z. On average, millennials under 35 years old have a net worth of $76,000, while those over 35 have over $400,000.

Gen X has an average net worth ranging from $400,000 to $833,000, whereas the older generations, comprised of baby boomers and the Silent Generation, boast an average net worth of more than $1 million.

Over half of millennials now own a home

In 2022, a significant event occurred for the millennial generation, as more than half of them (about 51.5%) became homeowners. This milestone reflects the trend of millennials increasingly investing in real estate.

According to RentCafe, out of the 10.8 million new millennial homeowners gained over the past decade, 7 million of them acquired their homes in the last five years. This surge in home buying has been driven by the availability of low mortgage rates.

While there was a prime opportunity for millennials to purchase homes at the start of the pandemic, the Federal Reserve has since increased rates in response to rising inflation. As a result, those who did not participate in the home-buying trend may have missed out.

Millennials’ average salary also increased

According to the Bureau of Labor Statistics, those aged 25-34 earn a median salary of $1,003 per week or $52,156 annually, which is considerably higher than those aged 20-24. This increase is expected as young professionals begin to rise through the ranks.

Moreover, this demographic includes many who have completed graduate programs, leading to higher salaries. Meanwhile, those aged 35-44 have a median salary of $1,197 per week or $62,244 per year — providing a glimpse of the financial growth to come.

How to increase your net worth

There’s no denying that increasing your net worth can improve your financial stability and provide greater peace of mind. The good news is that there are steps you can take to make this a reality. One way to increase your net worth is to prioritize saving and investing.

By cutting back on unnecessary expenses and consistently investing a portion of your income, you can steadily grow your wealth over time. Another approach is to focus on boosting your income through furthering your education, pursuing new job opportunities, or starting a side hustle.

Regardless of your individual circumstances, the key is to remain disciplined in your financial habits and make a conscious effort to prioritize long-term financial growth. By taking consistent action towards increasing your net worth, you can achieve your goals and improve your overall personal finances.

It’s remarkable to see how much millennials have achieved in such a short period of time. It’s clear that the average net worth of millennials is on the rise and is expected to keep rising in the next few years. Overall, this tells us one thing: It’s never too late for people to take their financial destiny into their own hands and strive towards success. With clever budgeting, proper planning, and the support of friends and family, any generation will be able to further their financial wellbeing and build a strong foundation for their future.

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Nonbinary drivers in many states can buy car insurance without choosing the traditional male and female gender options. Read here to learn how it works. 

Nonbinary car insurance is a policy that doesn’t restrict drivers to choosing traditional gender choices of male and female. Instead, it gives the option of choosing “X” or “nonbinary” when generating a quote or having a policy underwritten. While the car insurance industry has been slow to adopt nonbinary options equally across all states, more and more companies are adding this option to include drivers whose gender isn’t strictly male or female. Let’s take a closer look at nonbinary car insurance and see how it might work in your state.

Where can you buy nonbinary car insurance?

Many major car insurance companies, like Geico, have added a nonbinary option when asking for your gender. Whether or not your car insurance company offers this choice, however, is something you’ll have to investigate for yourself, as industry-wide adoption has been slow and inconsistent from state to state.

In theory, if you live in a state that lets drivers mark “X” instead of “M” or “F” on their drivers licenses, then it should follow that your car insurance company should provide a nonbinary option for its policyholders in that state. According to the Movement Advance Project, the following 22 states (plus the District of Columbia) currently let residents identify as nonbinary on their drivers licenses:

ArkansasCaliforniaColoradoConnecticutHawaiiMaineMarylandMassachusettsMichiganMinnesotaNevadaNew HampshireNew JerseyNew MexicoNew YorkOregonPennsylvaniaRhode IslandUtahVermontVirginiaWashington

Even if your state isn’t on this list, you might find nonbinary car insurance policies regardless. For instance, I recently tested Geico’s quote system and found that a nonbinary option was available for addresses in Georgia, Florida, and Mississippi (but not for those in Alabama or Tennessee). Of course, because I didn’t buy an auto insurance policy, I can’t be sure the underwriter wouldn’t have ultimately changed my gender designation to match my drivers license or birth certificate.

That said, I would check other car insurance companies if you can’t find a nonbinary option through yours. Some insurers might be more progressive than others, and you could find that one company will underwrite for nonbinary folx while others in the same state still don’t.

Will identifying as nonbinary change your car insurance rate?

There is a chance changing your gender on your car insurance policy will impact your premium. That said, the practice of charging more or less based on gender has less consensus now than in previous years and is banned in the following six states:

CaliforniaHawaiiMassachusettsMichiganNorth CarolinaPennsylvania

Montana used to be part of this list, but as of 2021 has reinstated gender-based pricing for car insurance. Delaware’s Senate has also passed a bill that would ban the use of gender in setting insurance premiums, though it has not yet passed the state’s House.

If you think you’re being charged more simply because you identify as nonbinary, it’s best to shop around with other insurance companies to find a better rate. Because insurance companies don’t have sufficient data on nonbinary drivers, they’ll often average the rates of a male and female driver with your criteria to determine your rate. Simply comparing quotes from different companies could help you find a cheaper rate without sacrificing on coverage.

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Changing jobs could compromise your mortgage, but not always. Read on to learn more. 

Most people who want to buy a home can’t afford to do so outright. That’s what mortgages are for.

In 2022, U.S. mortgage debt rose to over $11 trillion, according to Experian. So if you’re borrowing money to buy a home, you’re clearly in good company.

Now there are different factors that mortgage lenders look at when deciding whether to approve home loan applications. One factor is your credit score, which speaks to how risky a borrower you are based on your payment history, among other things. Another factor is your debt-to-income ratio, which measures your outstanding debt relative to your earnings.

A third important factor that mortgage lenders look at when approving home loan candidates is income. Your lender will need to make sure your earnings are high enough to support the loan amount you’re looking to get.

Not only will your mortgage lender check to make sure you earn a high enough income, but it will generally want proof of a steady income. To that end, you may need to provide a letter from your employer confirming that you’re a full-time worker (if you’re self-employed, you may need to provide copies of contracts showing that you expect to have ongoing income coming in).

But what if you’re offered a new job during the process of closing on your mortgage? If it’s a good opportunity, you may want to take it.

But you should know that in some cases, switching jobs could put your mortgage at risk. So it’s often better to wait until your mortgage is finalized to make a job change.

Why a job switch could compromise your mortgage

It’s important to mortgage lenders that they get repaid, since they’re in the business of loaning out large sums of money. If you switch jobs before your mortgage closes, your lender might worry that your new role won’t work out, and that you’ll end up not being able to pay your mortgage. And if your lender is worried enough, they might pull your loan offer.

That said, a job switch may not be problematic under these circumstances:

You’re earning the same amount at your new job as you did at the job you had when you applied for your mortgage, or moreYou’re taking a new job within the same field, or the same role at a different company

Mortgage lenders aren’t really interested in your career. But they are interested in getting paid. If your income doesn’t drop in the course of a job change, your lender may be okay with the fact that your role has changed.

Similarly, if you’re going from being an accountant at one firm to doing the same exact type of work at another, your lender may be inclined to feel that your new job is a stable one for you. But if you’re going from being an accountant to working in advertising, they might worry that you’re jumping into a completely new field and that your staying power there is questionable.

You may want to talk to your lender before making a move

While you’re not obligated to ask your mortgage lender’s permission before accepting a new job, you should know that in some cases, a job switch could make it so your lender withdraws their offer. To prevent that scenario, call your lender and talk things out if you’re thinking of changing jobs. Explain the details of the switch, including those related to salary, and see what your lender says.

If you are going to change jobs, expect to have to provide a letter from your new employer mapping out your salary and projected term of employment. Your new employer may need to attest to the fact that it intends to keep you on board as a permanent employee, for example.

All told, it’s usually best to not make any major financial changes when you’re in the process of trying to finalize a mortgage — and that includes a job switch. But if your job change can’t wait, know that your mortgage isn’t automatically doomed, and that talking things out with your lender is a good idea either way.

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Retirement planning can be overwhelming, but it’s never too late to start saving for your golden years. Learn how. 

As we grow older, retirement starts to loom large, and the importance of financial planning becomes ever more essential. If you’re 30 years old today, you may think it’s too early to worry about how much to save for retirement. But, as the saying goes, time flies! Before you know it, you could be approaching 40 and still have no concrete plans for retirement. So, if you are 40, it’s time to take things more seriously, and consider how much you need to save in order to retire comfortably.

How much do you need in retirement?

First things first, you need to figure out how much money you will need for a comfortable retirement if you plan to retire at age 65. There are several rules of thumb you can use to help you get started:

The final multiple: You should save roughly 10-12 times your current annual income. For example, if you’re earning $80,000 annually, you should aim to save $800,000 to $960,000 by the time you retire.The pacing angle: You should save a multiple of your annual income at your current age. If you are 40, you should have accumulated three times your current income for retirement. By retirement age, this amount will be 10-12 times your income.The seamless transition: You should save enough to replace 60% to 100% of your pre-retirement annual income. This rule takes into account the reduced expenses associated with employment and housing, as well as the potential increase in healthcare costs.The 4% rule: The 4% rule was meant to tell you how much you could withdraw from your retirement portfolio, but we can use it to determine how much you need at retirement. Here is the altered equation: Desired retirement income ÷ 4% = how much you need saved by desired retirement age. If you want to have $50,000 per year in retirement, you would need $1,250,000 by the time you are 65 and ready to retire.

How much should you save?

Once you have an estimated figure in mind, it’s time to crunch some numbers. Let’s assume that our hypothetical 40-year-old has $100,000 (average savings for 35 to 44 year olds) saved in their retirement account and wants to retire with $1,250,000.

If the person plans to retire at 65, they have 25 years to save up that extra $1,150,000. To be precise, they need to save $142 per month, assuming they are earning 10% annually on their investments.

If you don’t have any savings yet, you’ll need to start off by saving more each month than someone who already has an existing nest egg. In this case, you need to save $1,060 per month.

If you started earlier, you wouldn’t need to save as much. But if you are 40 and still have 25 years before retirement, you still have plenty of time to invest and take advantage of compound interest.

How should you save?

If a typical 40-year-old plans to put aside money every month, they’ll need to have a solid plan in place, such as investing in index funds through a 401(k). Many employers offer 401(k) matching, which means that they also contribute to your retirement account up to a certain percentage of your salary.

The most common employer match is $0.50 on the dollar of up to 6% of your salary. For example, if you have an annual salary of $50,000 and contribute 6%, your contribution will be $3,000 and your employer’s 50% match will be $1,500 ($3,000 x 50%), for a total of $4,500.

At a 10% annual return, the employer’s contribution over 25 years will amount to $150,000 alone! It is essential to take advantage of this opportunity and maximize the amount that your employer will match. If you don’t, you’re essentially throwing away free money.

If your work doesn’t offer a 401(k), you can open up a Roth IRA or traditional IRA. The benefit of investing through a 401(k) or traditional IRA is that you get certain upfront tax benefits.

What should you invest in?

Index funds and ETFs are popular options for retirement investing. Index funds are a type of mutual fund that follows the performance of a particular index, such as the S&P 500 or the Dow Jones Industrial Average.

These funds offer an opportunity to invest in a wide range of stocks, without the need for extensive research or individual stock selection. Additionally, index funds and ETFs typically have lower fees compared to actively managed funds, allowing you to keep more of your hard-earned money.

Bear in mind that stock market returns are not guaranteed. However, historical data tells us that stocks have fetched an average annual return of 10% before inflation. In the past, some years have yielded higher returns, while others had negative returns. It’s important to keep yourself informed and have a backup plan for the worst-case scenario.

Saving for retirement is an essential aspect of your financial planning and should be a high priority. It is important to understand how much money you need to save and invest each month to achieve your retirement goals. With a little time, patience, and planning, you can make your retirement vision a reality and ensure a happy, financially secure retirement. Remember, age is just a number, and it’s never too late to start investing in your future.

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There’s no perfect answer, but read on to learn what made one writer switch from leasing a car to buying one. 

Are you better off buying your next car or is leasing the way to go? Unfortunately, there’s no one-size-fits-all answer, and there are some advantages and drawbacks of each option.

In fact, buying and leasing can make sense for the same person at different times of their life. I’m a perfect example of this. I leased my previous few cars, with the most recent lease running from 2016 to 2019, and decided to finally buy a car in 2019, which I still own and drive today. And I have no regrets about either situation, as they were the right moves for me at the time.

With that in mind, here’s why I decided to buy a new car after years of leasing, and some general guidelines to keep in mind to help you make the best decision for yourself and your family.

Why leasing was right for me

The short answer was that up until a few years ago, my life was rapidly evolving. I simply didn’t know what my vehicular needs would be beyond the next couple of years.

For starters, in late 2013, I was recently married with no children and was a few years into my career and financially stable. The car I had been driving since college was starting to give me more problems, so I decided to get the car I had always wanted — a brand new Chevrolet Camaro SS. However, I didn’t know if or when my wife and I would start having children, nor did I know if I’d enjoy actually owning and driving the car everyday as much as I thought I would. So, leasing a car seemed like the better option.

It turned out to be a good call. I loved my Camaro, but in late 2015, my oldest child was born. To put it mildly, a Camaro’s back seat isn’t the biggest, nor is it the easiest to access. Even so, I struggled getting the baby seat in and out of the back of that Camaro (which had excellent crash test ratings) for about six months.

Then, my lease was up. My wife had an SUV at the time, so I decided to lease a 2016 Nissan Maxima. It was a great car, and Nissan sedans tend to hold their value well, but just like three years prior, I had no idea what my needs would be beyond a few years. We knew we wanted more children, so there was a possibility that a sedan wouldn’t meet our needs for long.

Stability gave me a reason to buy

Fast forward to 2019. The lease on my Maxima was about to expire. We had our second child the year prior and decided that our family was complete. And my wife had recently downsized to a compact SUV. Plus, we decided that when we no longer had babies, we wanted to start traveling often, as we had done prior to becoming parents.

So, with a stable family situation and the desire to be able to drive more than 12,000 miles per year, it finally made good sense to buy a vehicle. Because my wife now had a smaller car and I wanted to be able to get my kids, two dogs, and all of our stuff wherever we wanted to go, I settled on a 2018 Ford Expedition that was new but was a leftover from the previous model year.

What’s the best move for you?

As I know firsthand, there is no perfect answer. But there are a few things that you should consider:

Stability: This is one of the most overlooked considerations when deciding whether to lease or buy. Ask yourself the question, “Will my vehicular needs be the same three years from now?” If you say no, or can’t answer yes with a fair amount of certainty, leasing might be worth considering.

Mileage: The standard lease allows you to drive 12,000 miles per year. You can choose to pay extra for a 15,000-mile limit in many cases, or even more, but there is a limit in all cases. If you want the freedom to drive as much as you want, leasing is probably not for you.

Preferences: Some people just like driving around in a new car. If it truly makes you happy to have a newer model, that’s something to consider. I personally don’t really need a brand new car, but I love the peace of mind of having a vehicle under warranty. In fact, right now is the first time I don’t have an active warranty on a car in over a decade.

Budget: If your goal is to try to keep your monthly expenses low, leasing generally results in the smaller monthly payment, all other factors being equal. Of course, there is the downside that when your lease is up, you have zero equity in your vehicle, and when you are done paying a car loan, you are free to sell it for the current market value (or trade it in towards another car).

The bottom line is that you should consider all of the pros and cons of each option, as well as your personal preference and changing life situations, before deciding if leasing or buying is right for you.

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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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