Money Management

Although I recently sold my home for a notable gain, I had to pay a real estate commission and other costs. Find out more. 

Not too long ago, I sold my house. The property sold quickly, and I was offered a price of 8% more than I had paid for it. I owned my home only for a short time — about 18 months — prior to finding a buyer but I had to sell because the traffic in the area turned out to be terrible. The house also ended up being too small for our family.

Although making an 8% profit may seem attractive, the reality is, I walked away with very little money and I was lucky I didn’t lose any. Here’s why.

There are a lot of costs associated with a home sale

Homes are expensive, so an offer of 8% more than I had paid for mine meant I was offered tens of thousands of dollars more than I spent on it. But in the end, I walked away with just under a 1% profit, making only a few thousand dollars that I could put in my bank account.

The reason for this is simple: The rest of the “extra” money above what I had paid for the home ended up going to cover the costs of the transaction. Specifically:

I had to pay a 3% commission to the buyer’s agent. I was lucky enough to be able to sell my home myself without a seller’s agent, or I would have had to pay another 3% commission to my own agent and would have ended up losing money on the sale.I had to pay for title insurance. Title insurance is insurance that protects a buyer in case there are defects in the title (which establishes proof of ownership). In my state, it’s customary for sellers to pay for this, and it costs several thousand dollars.I had to pay for a flat-fee MLS service. Because I listed the house myself, I had to pay a real estate professional to put my home listing into the database most commonly used by buyers to find properties.I had to pay transfer taxes and fees. These fees went to the local government for things like recording the deed and paying transfer taxes.

By the time I had incurred all of these expenses, my profits were all but wiped away. I was lucky I did not have a mortgage that I had to pay back since I hadn’t borrowed for this home. And I was fortunate to have the knowledge, time, and ability to sell my house without having to pay additional fees for an agent. That would have meant walking away with less money than I’d paid.

Even a big gain doesn’t necessarily mean you’ll walk away with a ton of money

An 8% gain in value in 18 months is a reasonably decent return for a real estate investment. But even with a generous offer for my home, I nearly lost money.

This goes to show you why it’s typically important not to buy a house with a short timeline since you may not have time to earn enough of a profit to walk away with a reasonable amount of gains after accounting for costs. While things turned out OK for me, this isn’t the norm, and even a big “profit” on paper is no guarantee you’ll walk away with more than you spent.

If you won’t be in a house for at least two to five years, you should be prepared for the idea that you may not break even when you go to sell the house down the line.

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Some types of mortgages present a really big risk. Read on to learn two mortgage types in particular you should avoid at all costs. 

If you’re buying a home, chances are you aren’t going to be able to pay cash for it. You will probably need a mortgage to help you afford it. And there’s nothing wrong with that as most home buyers get loans because the costs of purchasing are so high.

While mortgages can be a type of “good” debt since you end up with a valuable asset (a house), there are some mortgages that are really risky and should be avoided at all costs. Here are two types of home loans you will definitely want to steer clear of.

1. Interest-only mortgages

Interest-only mortgages are home loans that allow you to pay only interest for a limited period of time, such as five years or seven years. These loans are often set to be paid off in full over 30 years, just like a traditional mortgage would be. But the big difference is, since you’re only paying interest for the first few years, your payment will have to jump up later so you can pay your balance off in full.

Here’s what this could look like.

Say you borrow $300,000 at 5% for 30 years and the first seven years are interest-only. Initially, your payments on the interest-only loan would be $1,250 per month but would go up to $1,831 at the end of the seven-year period. By contrast, if you took out a traditional fixed-rate loan, your monthly payments would be $1,610 for the life of the loan. With the interest-only mortgage, you’d also pay $310,416 in interest over time compared with $279,767 for the fixed-rate loan.

So, while you would get a lower starting payment, it would become much more expensive later to repay your loan. It would also be costlier to pay off your debt over time. It doesn’t really make sense to commit your future self to making higher payments when you can instead get a loan that gives you predictable payments and ultimately costs you less.

2. Balloon loans

A balloon mortgage allows you to make payments for a period of time that is below the amount you would pay with a standard mortgage.

Typically, what happens is you take a loan for a short period of time such as five or seven years. However, your payment amount will be calculated as if you were taking a much longer period (such as 30 years) to pay off your loan in full. Depending on the terms of the loan, you may pay only the interest due or may pay both principal and interest but be offered a lower rate than you’d pay with a standard fixed-rate loan.

At the end of your balloon period, however, you would have to make a lump-sum payment for the entire remaining amount due. And that would be a huge amount.

Say, for example, you borrowed $300,000 at 5% on a balloon loan with a 30-year amortization period (which means each payment would be calculated to be enough that your loan would be fully repaid after three decades) and your balloon payment was due after 10 years. Your monthly payment would be $1,610.46 and your balloon payment would be $245,637.40. Your total interest costs would be $137,282.14.

The huge risk of these kinds of loans is that you won’t have the money to make the balloon payment.

Rather than taking a chance of this happening, it’s best to just opt for a fixed-rate loan from a reputable mortgage lender without any of these quirky features that can make your payment cheaper upfront but cost you in the end. It’s worth paying a higher starting payment to avoid the stress of either rising payments or a huge bill coming due in just a few years’ time.

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Your 20s are a great time to lay a strong foundation for your financial future. Learn which seven investments you should focus on. 

As a 20-something, you have one major advantage over older investors: time. Yes, when it comes to building wealth, you have time to invest, grow your money with compound interest, and make up for any short-term losses. That doesn’t mean you should throw your money at NFTs, crypto, or investments that promise you’ll “get rich fast.”

But financial decisions you make today can have a long-lasting impact on your financial future. To put you on solid ground, here are seven of the best investments you can make in your 20s.

1. Pay for your education

While you might be eager to break into the workforce and start working your way up, trust me: Nothing — nothing — can replace two to eight years of dedicated study and practice. It doesn’t have to be a college or an advanced degree either. Any educational program that teaches you how to think and improves your ability to solve problems can go a long way in helping you secure a job you love and that pays you well.

2. Become more financially literate

Personal finance is so much more than money. While earning and saving are the engines of building wealth, you also have to protect yourself against lawsuits (insurance), leverage debt to buy things you wouldn’t have otherwise afforded (mortgage), and navigate complex codes that have a bearing on your income (taxes).

Learning the fine print of finances can help you make savvy decisions, simply because you know the options and understand how they can benefit you. As a 20-something, here are a few subjects you should master:

BanksInvestingCredit cardsMortgagesInsuranceLoansTaxes

3. Pay off debts

High-interest debt, like that carried on credit cards, is the opposite of a great long-term investment. The longer you have it, the more money it costs you. Taking care of your debts in your 20s can free up income for later years, helping you save for bigger goals, like buying a house or investing for retirement.

4. Save for emergencies

Once you’ve paid off your debts, start setting money aside for emergencies. Ideally, you should have three to six months of living expenses in a savings account that’s easily accessible. This could be a high-yield savings account, money market account, or regular savings account. This might take some time. But be patient, as accomplishing this goal will give you a security net to fall back on and prevent you from reaching into your retirement accounts or leveraging high-interest debt.

5. Consider growth stocks

Growth stocks are offered by companies that are increasing revenue and gaining market share at a faster-than-average pace. The most successful growth stock companies start out as small, little-known startups who, through innovation and grit, emerge as industry leaders.

Growth stocks are risky, and you can lose money on them. But when you have a long time horizon, it’s okay to take a little risk, especially if you’re sufficiently informed on what you’re buying. You can buy and monitor your growth stocks through a brokerage account, and many of the best will even educate you with research and stock analysis tools.

6. Invest in the S&P 500

The S&P 500 index is one of the best long-term investments for anyone, regardless of age. Composed of the 500 largest publicly traded companies in America, this index can give you broad exposure to stocks at a relatively low fee. While not as exciting as growth stocks, it can give your investment portfolio some firm ground for long-term growth.

7. Use a robo-advisor

Robo-advisors are an excellent way to learn how to invest and put your money to work without requiring you to hand-pick stocks yourself.

Robo-advisors supervise and automate your investment planning. They ask crucial questions from the get-go, such as your age, investment goals, and when you want to retire, then they build a portfolio to match your risk tolerance and objectives. Many of the best robo-advisors charge low fees, require minimum deposits, and will automatically rebalance your portfolio to align with your goals.

A robo-advisor is helpful for investors of any age, but they can be especially valuable for those just starting out. They can take heavy investment responsibilities off your shoulders, while you focus on other more immediate goals (like education or starting a small business).

Ultimately, your 20s are the years to lay a strong foundation on which you can start building wealth in your 30s. You don’t have to accomplish everything in your 20s (trust me: you have time), but focusing on the seven investments above will help you get familiar with how money works — and what you can do to make it work harder for you.

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Costco earnings did not meet expectations this past quarter. Read on to see if a fee hike is more likely to be in the cards in light of that. 

Raging inflation has caused many consumers to change their spending habits. Many have cut back on non-essential spending to conserve cash and avoid adding to their credit card debt. That, in turn, is impacting many retail giants. And Costco is one of them.

Costco recently reported earnings for the quarter ending March 31, and the numbers fell short of expectations. The warehouse club giant had a quarterly profit of $2.93 per share, missing analysts’ expectations of $3.29, according to Refinitiv data. Meanwhile, Costco’s total revenue for the quarter was $53.65 billion, compared to estimates of $54.57 billion.

Now, one thing that helps Costo generate revenue is the fees it charges for memberships. For its most recent fiscal quarter, Costco reported $1.044 billion of membership fee income.

But Costco also hasn’t imposed a membership fee hike since June 2017. And that therefore begs the question — in light of missed earnings, will the warehouse club giant increase fees to compensate and ramp up revenue next quarter?

A fee hike wouldn’t be out of the question

Costco normally raises its fees at around the five-and-a-half-year mark. So at this point, the warehouse club giant is actually overdue for an increase. And given the company’s recent earnings, it wouldn’t be so far-fetched to think that a near-term fee hike is coming.

But that may not necessarily be so problematic for consumers. If Costco raises its fees, that increase is likely to be minimal. The last time Costco raised fees in June 2017, a basic membership went from $55 to $60, and an executive membership went from $110 to $120.

Chances are, Costco will follow a similar pattern for its next fee hike. We could see the cost of a basic membership rise from $60 to $65, while an executive membership could go from $120 to $130.

Price increases are aggravating at a time when consumer goods are so expensive. But, were they to occur, they’d also be reasonable given that they apply to the yearly membership price. If the cost of executive membership rises $10, that’s less than $1 extra a month for the privilege of shopping at Costco, saving money, and earning 2% cash back on purchases (a perk that comes with the upgraded executive membership).

Will a Costco membership still be worth it following a fee hike?

That depends. Shoppers who visit Costco frequently will likely retain their memberships even if the cost goes up. But those who have been on the fence about canceling may use a fee hike as the impetus to cut ties with Costco and either take their business elsewhere or stop shopping at warehouse club stores altogether.

Of course, it’s worth noting that a near-term Costco membership fee hike is not a given. And missed earnings won’t necessarily be the catalyst for an increase. However, when we consider the timing of Costco’s last fee increase, a hike in 2023 does make sense. So all told, consumers shouldn’t be shocked to see their costs go up before the year comes to an end.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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I’m currently in the market for a new house and there are a few features I absolutely insist on for my purchase. Here’s what I’m looking for in a home. 

I am currently in the process of house hunting to buy a new home. I have already been pre-approved for a mortgage loan and I have my down payment money waiting, but it’s been weeks and I haven’t yet found a property I would consider buying.

While there are a lot of different features I’m interested in finding in a house — like a swimming pool and a cute kitchen — there are only a few absolute must-haves that would be deal-breakers if I’m not able to find them.

Here’s what they are.

A safe and convenient location

The No. 1 most important thing I am looking for is a safe, convenient location. The reason I sold my last home was because of huge traffic problems, and I do not want to repeat that experience. I want to make sure the home is in a location that is close to everything important and that is also quiet and safe enough for my two young children to play outdoors.

A first floor master bedroom

A first floor master bedroom is another must-have for me. I have an elderly dog and I want to be able to make sure my pup is able to easily get to my bedroom each night. She can get up and down stairs, but they are harder for her and I’m afraid there will come a time when she can’t, so a first floor bedroom is at the top of my list.

I also want a first floor room because, as my kids get older, I want them to have the upstairs space as their own domain with their bedrooms and a playroom. Plus, I want my bedroom to be safely at a distance so they can enjoy sleepovers and fun with friends without waking my husband and me up.

Plenty of storage

Storage space is a huge must-have for me because of those aforementioned children and also because I can’t stand clutter. I want to be sure that there are plenty of closets for clothing as well as toy storage. And I want dedicated spaces to store holiday decorations as well as my extensive collection of dishes and serving pieces.

Since homes in the area of the country where I am looking generally do not have basements and since we need our garage to store our vehicles and bikes and sports equipment, a lack of good indoor storage is an absolute dealbreaker for me.

A private backyard

A private backyard is another must-have for me. We tend to spend a lot of time outdoors and we don’t want to be looking into a neighbor’s home (or have a neighbor being able to see us). Privacy is something that you can’t really create if you don’t have it when you move in, so I am prioritizing this above almost any interior feature other than the storage and master bedroom location.

If I’m able to find a house with these features, I’ll be willing to accept a lot of other imperfections in order to get it. The key is, I’ve narrowed down my list and decided what’s most important so I actually have a chance of finding a home to buy. I know there’s no perfect house out there, but by defining what my biggest priorities are, I can find a home that will make me happy.

If you’re looking for a house of your own, I’d recommend you make a list of your must-have features, so you’ll be able to make rational decisions and end up in a house you’ll be happy with for the long haul.

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Bankruptcy allows you to discharge your debt and improve your financial situation. Learn what will happen to your credit cards if you declare bankruptcy. 

For consumers who are deep in debt, bankruptcy is sometimes the only option. If there’s no realistic way to keep up with your payments, declaring bankruptcy gives you the opportunity to discharge your debt and rebuild your finances.

People often wonder what will happen to their credit cards after filing bankruptcy, and if it’s possible to keep at least some of them. Here’s what you need to know about how bankruptcy affects your credit cards.

Your credit cards will be closed

When you file bankruptcy, you’re legally required to list all your debt on your bankruptcy petition. This includes all your credit cards, whether or not they have a balance on them. Even if a card has a $0 balance, you still need to include it, because it’s a credit account.

The bankruptcy court then sends a notice to all the creditors listed in your petition. Once your credit card issuers receive notice of your bankruptcy, they will close your credit cards. After all, your bankruptcy prevents them from being able to enforce and collect on debt.

You can’t exclude any of your credit cards from this process. Keep in mind that even if you omitted a card, the card issuer would still almost certainly find out about your bankruptcy. It’s a public record and gets reported by the credit bureaus. One way or another, your credit card issuer would get notified of your bankruptcy and cancel your card.

You might have trouble getting approved by those card issuers in the future

After bankruptcy, you can get a credit card once your debt is discharged. Since your credit score plummets during bankruptcy, your best bet will be credit cards for rebuilding credit. These have more lenient approval requirements than most credit cards.

However, it could be difficult to get approved by any of your previous card issuers. Many card issuers will blacklist you if you discharged debt with them during a bankruptcy. When a card issuer loses money on your credit card account, it’s going to be reluctant to approve you for another one.

This varies depending on the card issuer. Some are strict, and others are known for being more “bankruptcy-friendly.” Based on online reports, here are a few of the bankruptcy-friendly credit card companies that are more likely to approve you, especially if you didn’t discharge any debt with them:

Capital OneDiscoverCredit One (but it charges costly fees)

There are also several card issuers that normally don’t approve applicants with any recent bankruptcy history. And if you discharged debt with them, you could be on their blacklist. Here are a few of the card issuers with a reputation for being stricter about bankruptcy:

American ExpressChaseCiti

How long bankruptcy affects your credit

If you filed Chapter 7 bankruptcy, which allows you to discharge all your debt, it stays on your credit file for 10 years. If you filed Chapter 13 bankruptcy, which allows you to reorganize debt and set up a payment plan, it stays on your credit file for seven years.

That doesn’t mean you’re going to have a low credit score or find it impossible to get a credit card for that long. You can get a credit card once your debt is discharged, and in fact, you may start getting offers in the mail fairly quickly. Many card issuers market heavily to consumers who have recently completed the bankruptcy process.

Not all of these are quality credit cards, so you’ll want to make sure to review the fees and terms. Still, you’ll have options. And if you follow good credit-building habits, including always paying your bill on time, your credit score will gradually recover. Even though bankruptcy stays on your credit file for seven to 10 years, its impact gets smaller and smaller as time goes on.

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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. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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