Money Management

You’re allowed to have more than one brokerage account. But should you? Read on to find out. 

The benefit of putting money into a brokerage account, as opposed to just leaving it in a savings account, is getting a chance to invest your money in stocks and other assets that have the potential to generate strong returns over time. That could be your ticket to meeting your various goals.

Over the past 50 years, the stock market has averaged an annual 10% return before inflation, as measured by the performance of the S&P 500. Compare that to even the generous 4% interest rate high-yield savings accounts are paying these days (a rate that may not last), and it’s clear that investing is a more effective means of growing wealth.

You may be inclined to open a single brokerage account and keep all of your investments there. But could opening more than one brokerage account work to your benefit?

When you’re working toward different goals

If you’re saving for a single goal, then sticking to one brokerage account could be your best bet. That way, you’ll have a handle on all of your money and it will be easy to keep tabs on your investment portfolio. When you have multiple brokerage accounts, you need to go back and forth comparing your holdings to decide which stocks or assets to buy.

But having more than one brokerage account could be a good thing if you’re trying to save for different goals and want to keep your money separate. Let’s say you’re trying to save for retirement as well as your kids’ college education. You may decide to open an IRA for retirement savings purposes and reap some tax benefits along the way. And you might then decide to keep your kids’ college fund in a taxable brokerage account.

Having these assets separated could work to your benefit. Let’s say the time to pay college tuition arrives and you’re a little short of meeting your goal. You may be tempted to pull from your retirement savings, but that’s a risky move that could leave you short on money later in life. If your retirement savings are being housed in a completely separate brokerage account, you may be more inclined to just leave that money alone and figure out a back-up plan for paying for college.

Make sure to stay organized

The main drawback of having two separate brokerage accounts is having to keep track of those different accounts. But if you’re someone who’s organized, that shouldn’t be a problem.

That said, one thing you may want to do is check all of your brokerage accounts before adding investments to one. It may be that you own shares of a given company in one brokerage account, and you’ve forgotten that. But you may not want to add those shares when it’s a company you’re already invested in.

All told, you absolutely can have more than one brokerage account, and it could even be a good idea. But make sure to keep track of your money no matter what.

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Start saving money when you’re young. If you wait, it’ll get hard to build wealth over your lifetime. Keep reading to learn why. 

Over the course of your life, you are likely to get a ton of financial advice. People will have opinions on everything from what kind of car you should buy to what credit card to use to how much you should spend on a house.

A lot of this advice will be good, and you can take whatever tips make sense for your lifestyle and incorporate them while disregarding other rules of thumb that may not apply to your situation. But, if there is one single piece of financial advice that you absolutely, always should follow, this is what it should be.

Everyone should follow this advice without question

The single most important piece of financial advice that everyone should follow is to start investing at a young age. And the reason for that is, when you begin investing early, it becomes tremendously easier for you to build wealth through investing.

See, here’s what happens. You put some money into the stock market, and ideally that money will grow. Say you make a 10% annual return and you invested $1,000. At the end of the year, you would have $1,100. Even if you didn’t put in an extra time, you’d be investing $1,100 in year two. So, now you’d earn a 10% return on $1,100 and would make $110 in year two instead of $100. This is called compound growth.

If you have many years for this to happen, you can easily see how quickly the numbers will start growing. Your returns can be reinvested again and again, turning into an effortless money-making machine, even with no additional contributions from you. The power of this can be tremendous, especially if you start saving when you are as young as possible.

When you put your money to work for you over many, many years, you simply do not need to work nearly as hard. And that can make all the difference in terms of whether you accomplish financial goals without a lot of stress.

Just how big of a difference can starting early make?

To understand how profound an impact an early head start can have, consider what would happen if you wanted to have $1 million at the age of 65 and you expected to earn 10% average annual returns.

If you began investing at the age of 25 and had 40 years for your money to grow, you would only need to put a small amount of money into your brokerage account — about $188 a month. But if you instead put off investing until the age of 40 and had 25 years for your money to grow, you would need to invest $847.33 per month. That is likely a lot less doable for many people.

You may already be older than age 25. But, you are not ever going to get younger than you are right now. So don’t wait. Start investing today and get compound interest working for you. You owe it to yourself to have your money start making money so you can have the financial security you deserve.

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A bidding war could leave you paying more for a home. Read on to learn more. 

During periods when there are plenty of homes for sale (also known as a buyer’s market), bidding wars don’t tend to come into play as often. But during periods when housing inventory is low (a seller’s market), bidding wars have a stronger tendency to arise.

Such is the housing market we’re in right now. As of the end of April, there was only a 2.9-month supply of homes on the real estate market, as per the National Association of Realtors. For context, it commonly takes a four- to six-month supply of homes to meet buyer demand in full.

In 2021, when mortgage rates plunged to record lows, bidding wars were a mainstay of the housing market. Now that it’s gotten more expensive to sign a mortgage loan, bidding wars aren’t quite as common, but they’re still happening.

Entering a bidding war may be necessary if there’s at least one other buyer interested in a home you’re looking to purchase. But you may want to think twice before subjecting yourself to a bidding war.

The problem with bidding wars

During a bidding war, two or more buyers duke it out for the same property. What’ll generally happen is that the competing buyers will keep raising their offer amounts until all but one buyer backs out, leaving the seller to enjoy a higher sale price.

Clearly, bidding wars are a great thing for sellers, as they commonly result in offers that are way over a given asking price. But bidding wars are not a great thing for buyers, so you may want to try to avoid one.

First of all, entering a bidding war can be very stressful. You might have to sweat it out for a number of days as you go back and forth with other buyers.

Secondly, if you engage in a bidding war, you might end up paying more for the home you’re bidding on than you really wanted to. That could not only lead to an affordability crunch, but also cause you to regret your decision.

Let’s say a home is listed at $500,000. If you and another buyer both want it, you might offer $510,000 initially, and they might counter with $520,000.

At that point, you could back out or keep up with the bidding war. If you opt for the latter, you’ll then make a higher offer to stay in the game.

At some point, in this scenario, the offer price might rise to $570,000. If that’s your latest offer and the other buyer backs out, you win. Only you don’t win financially, because now you’re paying $70,000 more than what the seller asked for in the first place.

Furthermore, let’s assume the home in question is really only worth $500,000. If you buy it for $570,000 and need to sell it a few years later, you could end up taking a pretty big loss if you’re only able to get $500,000 for it.

Try to avoid a bidding war

In 2021, it was pretty difficult to steer clear of bidding wars. But that’s not the case today. Buyer demand isn’t what it was two years ago, so it’s more than possible to avoid a bidding war in the course of buying a home. And doing so could really work to your advantage.

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Before completing an online purchase, you can take a few extra moments to save more money and boost your rewards potential. Keep reading to learn how. 

I’m a big fan of getting a good deal and earning rewards. Before making an expensive online purchase, I go through a routine to ensure I save as much money as possible and maximize my rewards potential. Doing this means I keep more money in my bank account and reach my cash back and credit card rewards goals sooner. Here’s what you need to do to get the biggest discount possible and boost your rewards when shopping online.

Do this to get the best deal and earn more rewards

Life is expensive, so any money saved can be a win for your personal finances. When making more costly purchases, paying attention to sales and discount opportunities to keep more money in your checking account can be especially worthwhile.

If you use cash back apps or cash back credit cards, taking steps to maximize your rewards potential can also be beneficial. Who doesn’t like free money? I know I do. Here’s what I recommend doing before you complete the checkout process for an expensive purchase.

1. Compare prices to find the best deal

The first step is to do some price comparison research. Making a purchase when an item is on sale is an excellent way to keep more money in your pocket. Sometimes, multiple retailers have the same products on sale, so comparing prices is worthwhile. Otherwise, you could end up paying more than you need to for your purchase.

2. Use coupon code apps to score a bigger discount

Many retailers have coupons or promotional codes to help you get a more significant discount. You can use cash back apps and websites to find active codes. If an eligible code is available, you can enter it at checkout to save more money on your purchase. I usually spend a few moments comparing codes before I check out. Some websites will send you a coupon code in exchange for joining their email newsletter list.

3. Check to see if you can use a cash back app to earn more rewards

The next step I take is to see if the retailer partners with cash back apps like Rakuten. By using cash back apps and browser extensions, you can earn cash back rewards on purchases you already planned to make. These websites are easy to use, and the earnings can add up quickly if you’re a frequent shopper, so don’t forget to use these money-saving tools.

4. Review your credit card offers to boost your rewards potential

Some credit card companies offer additional ways for cardholders to boost their rewards with credit card offers. Amex Offers and Chase Offers are examples of such programs. Through these programs, you can activate offers with popular retailers and earn cash back rewards for eligible purchases. Most offers pay eligible cardholders as a statement credit to their credit card account. Don’t miss this step to maximize your cash back earning potential.

5. Pay with the credit card that offers the most rewards

The final step I take is to consider what credit card to use during the checkout process. I have several credit cards in my wallet, but some earn more rewards than others. If you want to maximize the cash back, points, or miles that you earn, consider which credit card will offer the highest reward potential for the purchase category you plan to make and use it as your payment method.

Being strategic when you shop can be a win for your wallet

Once you get used to this routine, it only takes a few extra moments to get a better discount and earn more rewards. The next time you shop online, consider whether you can save more money or boost your cash back earnings by utilizing resources like coupon apps, cash back apps, and rewards credit cards. These valuable tools continue to help me save and earn more on my purchases.

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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.JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. American Express is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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I sold my home and I’m waiting to find a new property to purchase. Read on to learn where I put the money to keep it secure and accessible. 

I sold my home a few months ago.

I’m planning to get a mortgage and buy a new one soon, but I have not yet been able to find a property that I want to buy. As a result, I have a substantial amount of money from the proceeds of the sale of my house that I needed to find a safe place for until I’m ready to put the money down on my new place.

Here’s what I decided to do with all that money.

This is where my home sale proceeds are now

Once I had received the money from the sale of my home, I decided that I was going to put the money into a high-yield savings account.

Because I didn’t have a mortgage on this house, the proceeds from the sale were above the $250,000 limit for FDIC insurance. FDIC insurance protects my deposits in case of a bank failure, but it only covers $250,000 per person per account.

I didn’t have a joint savings account with my husband at the time that I could put all of this money into without exceeding the insured limits. So I split the money into several different savings accounts in each of our names so that the money in each account would be below the $250,000 cap and would be fully insured.

I made this decision because protecting the money was, and is, my number one priority. I will need the funds soon to make a down payment to buy my new place and I can’t afford to lose any of it or have it tied up.

Since I need the funds accessible, I didn’t want to invest the money in the stock market where I’d be at risk of losing it or having to sell at a bad time. And I didn’t want to buy a CD because I might need to withdraw the funds before the CD term ends if the right house comes along — and I don’t want to pay a penalty if that happens.

While I could have earned better returns by investing or buying a CD, my goal isn’t to make money with my home down payment. It’s to keep it accessible and ready to go when the perfect property finally shows up. A high-yield savings account is perfect because I do earn a little bit of interest (which adds up on a large balance) but I’m taking no risk and can access the money as soon as I need it.

Be sure to keep money safe if you’ll need it in the short term

Whether you have money from the proceeds of a home sale that you’re hanging onto for a short time, or you have funds for some other reason that you’ll need soon, it’s important to make a smart decision about the best place for that cash.

While trying to maximize your returns may seem tempting, especially if it’s a large sum of money, keeping the cash safe and accessible is a better bet when your timeline is short and losses would have dire consequences. For me, a savings account was the best idea, and it’s likely the right place for anyone else to put money if their situation is similar to mine as well.

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It’s best to assume that things in your home will break — regularly. Read on to see why. 

When you buy a home, you don’t just commit to a monthly mortgage payment. You also have to take on the peripheral costs of homeownership. Those include property taxes, homeowners insurance, upkeep, and repairs.

The latter, however, tends to catch homeowners off guard. Not only can home repairs be expensive on a case-by-case basis, but they can also be necessary more often than expected. So it’s important to allocate plenty of money in your budget for home repairs. If you don’t, you could end up with serious debt.

Make sure you’re prepared

Budgeting for home repairs can be tricky, namely because without a crystal ball, it’s impossible to predict when things will break or go wrong, and how much it will cost to fix them. But one thing you should know is that if you don’t budget enough money for home repairs, you could end up loaded with credit card debt.

Many home repairs, by nature, are things you can’t put off once they become obvious. If your roof is leaking, for example, you can’t just sit back, save up some money, and address the issue a few months down the line. If you don’t act quickly, your home could sustain serious water damage.

Similarly, let’s say your air conditioning system blows the first week of July. If you don’t replace it immediately, you could be in for a very miserable summer.

That’s why it’s important to allocate plenty of money in your budget for home repairs. And the amount you land on should hinge on the age of your home. If your property is older, you may want to pad your budget to account for the fact that things may be more likely to break.

Now many housing experts recommend allocating 1% to 4% of your home’s value each year for upkeep. But it’s a good idea to double that figure so you also have money set aside for repairs. And the older your home is, the more it pays to veer toward the top end of that range.

So, let’s say you live in a 70-year-old home that’s worth $300,000. Allocating 4% of its value for maintenance means setting aside $12,000 a year for that purpose. You may, to be safe, want to also allocate an additional $12,000 for repairs, which are separate from anticipated upkeep.

That means setting aside $2,000 a month in your budget for maintenance and repairs combined, which may not be doable for everyone. But if that’s the case, do the best you can.

You don’t want to take on extra debt

Racking up credit card debt can be both costly and stressful, so it pays to err on the side of allocating extra money in your budget for home repairs. And if there’s a month or two when you have no repairs, the money you have allocated for them shouldn’t be spent. Instead, you should stick that money into your savings account so you have funds available in case larger fixes become necessary.

In addition to making room in your budget for home repairs, you should aim to have money in savings for that purpose. 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. That’s a situation you really do not want to land in if you can help it.

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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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