Money Management

I’m looking to buy a new house soon. I’m looking forward to some things like visiting open houses but I’m dreading the offer process. Here’s why. 

Soon, I am planning to buy a new home. I’m very excited about some aspects of this big adventure. But, there are also some things I’m dreading about the entire process.

Here’s what I’m most looking forward to — as well as some tasks I could happily live without as I move forward with getting a mortgage and purchasing a property.

Here’s what I’m most excited about

Most of the things I’m excited about center around the process of picking a house. Here are some of the things I’m most looking forward to:

Going to open houses: Going to open houses is really fun. You get to see how other people have decorated, what their properties look inside, and how much interest each property has in terms of visitors popping in to see it. This is an exciting process during the house-hunting phase. Visiting properties for showings: Setting up showings on houses I’m especially interested in is also very exciting. When I go to a private showing of the home, I have more time to take in the details without distraction. I can also take the chance to picture myself living there, which I find to be enjoyable. Exploring different neighborhoods: When we visit houses we’re interested in, my husband and I usually try to take a walk or drive around the neighborhood and surrounding areas. We do this to help us picture what it would really be like to live there, walk our dogs there, and do basic everyday tasks like grocery shopping. It’s also fun to get to see what types of restaurants, stores, and attractions are in different areas.

These are some of the biggest things I am looking forward to as I search for a house. Obviously, I’m also excited about the prospect of actually moving to a new place — but I’m realistic in knowing that finding the perfect new home will take time. In the meantime, I’ll enjoy these parts of the process.

Here’s what I dread

Although I have many things to be excited about, there are also some things I dread, including the following:

Homes that don’t live up to their potential. When we have house hunted in the past, we’ve visited homes that looked awesome in their online listing pictures but that were a huge disaster in person. This is never fun, both because it is a waste of time and because it means we aren’t moving any closer to finding the home of our dreams. Waiting for a house to come on the market. Sitting around waiting for new home listings is really frustrating when I feel like we’ve looked at every possibility in our target area. There’s nothing I can do to make this process faster or better, either. I just have to hope some people who have a house we like decide to move and list their home for sale. Dealing with the mortgage process. I’ve already gotten pre-approved for a home loan, which was a huge hassle. I’m dreading going through the final approval process and dealing with the stress and costs involved in things like getting a home appraisal and paying mortgage origination fees.

The good news is that the pros outweigh the cons. I’ll be enjoying as much of the home search as I can while trying to keep my patience — and get my mortgage loan documents ready as I wait so I’ll be prepared to close quickly once I find the perfect house.

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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.Christy Bieber has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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As of now, everything, from your GPA to the major you choose, sticks with you. Here are four financial decisions you don’t want to add to that list. 

As you head off to college this fall, you’ll join roughly 16 million others in the U.S. pursuing higher education. And as you move into this new chapter of life, you’ll have hundreds of small decisions to make. Some of those decisions will undoubtedly concern finances. The last thing you want to do is make financial mistakes that could haunt you for years. Here are four you definitely want to avoid.

1. Overspending

Whether you’ve been saving money for school, plan on financing your education, or are fortunate enough to have someone footing the bill, it’s surprisingly easy to overspend before the first semester even begins. This summer, as you plan for that next big step, you may be thinking about all the stuff you’re going to need. A simple online search for “things I’ll need for college” produces a comically long and inaccurate list. For example, here are some of the items you’ll be told you “must” have if you’re living away from home:

Mattress topperCoffee makerInstant potFull-length mirrorNoise-canceling headphonesArea rugCloset organizer

And the list goes on. Before you buy anything, check with anyone you’ll be sharing a space with. If a roommate is bringing an area rug, why spend the money yourself? Everything is negotiable, from who’s supplying a floor lamp to who’s responsible for picking up room-darkening curtains. In your enthusiasm to create the “perfect” college experience, it’s easy to waste money you’ll need later.

2. Accepting too many credit card offers

Credit card companies absolutely adore college students. Back when I was in college, we used to believe that it was because companies thought we would eventually be successful enough to pay them back. We now know that it’s a numbers game.

The more students credit card companies can sign up, the more students will come to depend on cards to pay for the things they want and need. And once someone is using credit cards to cover basic expenses, they are one step closer to falling into a high-interest trap.

There’s nothing wrong with taking out one credit card, using it sparingly, and paying it off in full at the end of each billing cycle. In fact, it’s a pretty easy way to build a strong credit score. The problem occurs when too many cards to manage are taken out, or payments are missed.

Now might be the right time to ” just say no” to more than one manageable credit card.

3. Failing to work while studying

The millions of us who were foolish enough to borrow, borrow, and borrow some more to get through school will attest to this fact: It’s okay to work and pay your way through school, even if it takes you longer to finish that degree.

Will your experience be like all those fun-loving coeds featured in movies? Nope. Probably not. What the movies don’t show are those coeds 15 years later, still digging their way out of debt. You may not have as much fun in college if you work, but you just might end up with more money in the bank.

4. Believing you absolutely must live on campus all four years

You know what’s expensive? Paying for housing you don’t need. There’s no denying that living on campus provides experiences you may not otherwise have. But you have to decide how much you’re willing to spend on those experiences. Let’s consider another scenario.

Attend a community college for the first two years

The amount varies a bit by state, but let’s look at the average student living in Illinois. Because community colleges in Illinois are approximately 71% cheaper than four-year state colleges, earning the first 60 credits toward a degree at a community college in the Land of Lincoln would save nearly $21,000. And this does not even take into account the money saved by not paying for a dorm or any interest paid on loans.

If you’re in a dorm for the first two years of college, you may find that taking on roommates and renting a place off campus saves money in your final years of school.

The point is, there’s no single way to do it right. You have options. The less money you spend today, the more you can save for the future.

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You’d think older homeowners would have a pretty easy time refinancing their mortgages. Read on to see why you’d be wrong. 

These days, refinancing a mortgage doesn’t make a lot of financial sense for many homeowners. That’s because a lot of people refinanced back in 2020 and 2021, when mortgage rates fell to record lows. To refinance now would, for a large number of property owners, mean getting stuck with a higher borrowing rate on a mortgage, which won’t result in savings.

That said, a cash-out refinance is an option for accessing home equity that could, for some borrowers, make more sense than a home equity loan. And it could make sense today, even with mortgage rates being higher.

But a recent New York Times report reveals that in recent years, older homeowners have struggled to get approved to refinance their mortgages. And the reason boils down to two key factors.

It’s a matter of income and mortality

The New York Times says that older adults have higher credit ratings than any other age group. They also tend to have large amounts of home equity due to having owned their homes for many years.

In spite of that, recent studies have shown that older homeowners are more likely than their younger counterparts to be denied a refinance. And there are a couple of factors at play to explain why.

The first is income, or a lack thereof. Many older people either retire eventually or shift over to part-time work, resulting in lower incomes. But that could be a barrier to getting a mortgage, or any type of loan, for that matter.

Then there’s the matter of mortality. Lenders are often hesitant to let older homeowners refinance a mortgage because then they have to worry about the borrower potentially passing away before their loan is paid in full.

Of course, in these situations, lenders do have recourse, since mortgages are secured by the properties they’re used to finance. But it’s a risk for lenders nonetheless. And that’s why refinancing is an option today’s retirees might struggle to take advantage of if borrowing conditions become more favorable for it.

Tapping home equity may also be a challenge

Although refinancing a mortgage is not such an attractive option these days, older borrowers may seek to tap their home equity if a need to access money arises. But even that may prove challenging.

Home equity loans don’t necessarily have the same lengthy repayment terms as mortgages. But even if mortality issues don’t arise in the course of a home equity loan application, there’s still the income factor to consider. Lenders may not want to take a chance on borrowers whose sole source of income is a modest Social Security check.

Of course, a big problem that might emerge from this trend is that a growing number of seniors might seek to rely more on credit cards for borrowing purposes in the absence of being able to tap home equity. And that could mean subjecting themselves to very high interest rates and getting trapped in a dangerous cycle of debt.

All told, it’s unfortunate that seniors looking to refinance their mortgages might struggle to do so. But it’s a trend that aging Americans should be aware of, so they can plan around 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.
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I want enough money in my savings account to cover three to six months of living expenses, fund vacations, and pay for big purchases. Find out why I don’t want more. 

I have multiple savings accounts. But, except in special circumstances, I do not keep more than $20,000 total across my accounts. I don’t want to exceed this amount in most cases for one very important reason.

Here’s how I decided on my $20,000 cap, along with some insight into why I feel it’s important not to have too big of a balance in my savings account.

I keep the bare minimum I need in savings to feel comfortable

The reason I keep about $20,000 in savings is because I need this money to be accessible.

The $20,000 in my savings accounts includes my emergency fund, which is money I’ve set aside to cover several months of living expenses. It also includes money I’m saving for short-term purchases like vacations or car repairs.

I don’t want to invest this money because I cannot afford to lose it and I don’t want to be afraid to take the money out of a brokerage account if I need it. In a savings account, there’s no risk my funds will be lost or that I’ll feel bad about selling before my investments have a chance to make me money.

The rest of my money earns better returns in my brokerage account

I don’t keep more than $20,000 in my savings account because I will not need to have more than this amount readily available. It’s very unlikely there would be a scenario where I would need more than $20,000 for emergencies or large purchases in the short term.

My savings account pays a pretty low interest rate compared to my investment account. I’m currently earning a 3.85% APY on my savings. While I could perhaps move banks to get a slightly higher APY, I’m not likely to earn above 5% in a savings account.

In my brokerage account, though, I’m invested in index funds that track the performance of the S&P 500. This index has produced average annual returns of around 10% for decades. I would personally rather earn 10% on my money than 3.85% on my money, even if doing so means I’m taking on more risk since it’s possible to suffer losses — even when invested in the S&P 500 — if you have a short investing timeline and end up selling at a bad time.

The difference really adds up

For every $1,000 I have invested in my savings account earning 3.85%, I can earn about $38.50 in interest during a year. If that same money earned me 10% instead, I’d earn around $100 in interest. I can’t afford to just pass up all that extra money, and I don’t want to — so that’s why I won’t keep more money in savings than I absolutely must.

When you decide where to put your money, be sure to consider risk and return — including the risk of being too conservative in your investing. You may just decide that you should cap the amount you put in savings as well, and start funneling as much spare cash as you can into a brokerage account where you can earn a return more conducive to building wealth.

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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.
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If you didn’t sign a prenup, it can impact your assets and property if your marriage ends. Read on to find out how. 

Getting married is one of the most exciting moments in life. However, many couples never give much thought to securing their property in any legal sense, thinking that marriage is evidence enough of their unity. It’s essential to prepare for the worst-case scenario, even if you believe it will never happen to you. Here is how property is generally divided in the absence of a prenuptial agreement.

What is a prenup?

A prenuptial or premarital agreement is a legal agreement between two individuals who are planning to get married. The purpose of a prenuptial agreement is to protect both parties’ assets and to establish financial responsibilities in case of a divorce.

It’s important to understand that a prenup doesn’t reflect a lack of trust in your partner’s intentions, but can be a sound financial decision to help you avoid legal disputes and financial stress in the future.

While it may not be the most romantic topic, a prenuptial agreement can offer peace of mind and security to both parties. A prenup is often recommended if one spouse is considerably wealthier than the other, one has significantly more debt than the other, and if there are children from a previous marriage.

What happens if there is no prenup?

In the absence of a prenuptial agreement, the property is divided based on which state you live in. Any property that you acquired independently before marriage remains yours.

For example, if you inherited a house from your parents before getting married, you still own that property, and it remains under your jurisdiction. The same goes for other assets acquired before marriage, such as a car, shares in a company, or any brokerage account.

However, for any property acquired together after marriage, it’s a different ball game. The law considers such property to be marital or joint property, and your state’s laws determine it.

Equitable property states

The vast majority of states use equitable distribution as a fair way to divide property in a divorce. This means that property acquired during the marriage is divided in a way that’s considered fair, but not necessarily equal.

This means that a judge will determine how to divide up the assets in a fair and equitable manner. Factors such as income, contributions to the household, and individual needs are considered.

If you live in an equitable property state and don’t have a prenup detailing how to divide your assets, a judge will make this decision for you, regardless of your wishes.

Community property states

For community property states, the division is straightforward: Any property acquired during the marriage is considered the property of both parties. This includes assets such as income, bank account balances, retirement benefits, or any property purchased, with the significant exception of gifts and inheritances acquired solely by one party during the marriage.

There are nine community property states:

ArizonaCaliforniaIdahoLouisianaNevadaNew MexicoTexasWashingtonWisconsin

If you live in one of these states and didn’t sign a prenup, you could lose property that you thought was exclusively yours.

It’s also important to know that any debts acquired during the marriage, like a personal loan, are also split evenly, even if only one spouse incurred the debt.

Consider a postnup

If you didn’t sign a prenup but are concerned about your property’s protection in the event of a divorce, you can always consider a postnuptial agreement. Similar to the prenuptial agreement, a postnuptial agreement helps protect your property.

It ensures that you both are clear about your rights and obligations in the event the marriage ends in divorce. In addition, understanding your state’s laws and how they apply to your situation is crucial.

Seek the assistance of a lawyer who can help guide you through the process and provide personalized advice tailored to your unique situation. You may also need to work with an appraiser to get a fair estimation of the value of all marital property.

While no one wants to think about the possibility of a divorce, it’s important to plan for the unexpected. If you didn’t sign a prenup, it’s essential to understand the laws in your state and the potential outcomes. You may also want to consider a postnuptial agreement so everyone is on the same page. Getting married without a prenup doesn’t necessarily mean you’re doomed. It just means you need to be more proactive about protecting your property rights.

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HOAs are pretty common — but they may not be a great thing to join. Read on to see why. 

A big reason so many people are motivated to stop renting and buy a home is that they’re tired of having to follow a landlord’s rules. Sure, the idea of getting to build equity in a home may be appealing, too. But it’s hard to argue the benefit of getting to make your own decisions when it comes to the place you live.

But if your primary goal of becoming a homeowner is to make your own rules, then you may want to avoid a home that’s part of a homeowners association, or HOA. HOAs are entities set up to govern groups of homes. They’re common in condo and townhouse communities. But they can also be extremely restrictive, not to mention impose hefty fees. Comedian John Oliver recently discussed HOAs on his show Last Week Tonight, and he thinks buying a home in one has the potential to be a huge mistake.

A decision you might sorely regret

Oliver says that 29% of the U.S. population lives in an HOA. That’s reasonably consistent with recent data from Today’s Homeowner, which found that about one in five U.S. homes is part of an HOA. But while HOAs may be common, that doesn’t make them wonderful.

The problem with HOAs is that they have the authority to impose different rules. And those rules might range from annoying to downright ridiculous. It’s not uncommon for an HOA to tell you how tall your grass can be, what kind of shutters you can put on your windows, and what holiday decorations are or are not acceptable. And when you’ve spent a ton of money to buy a home, those are decisions you’d probably rather make yourself.

In fact, Oliver called out some particularly specific HOA rules he found notable. One that really stands out is, “All garage doors must be painted Benjamin Moore Mayonnaise OC-85.” This doesn’t automatically mean that if you buy a home in an HOA, you’ll be given a single paint choice option for your garage door. But it’s a possibility to brace for.

Your costs could be significant

Today’s Homeowner says that in most states, the average monthly HOA fee ranges from $300 to $400. But your costs might be higher, depending on the number of amenities your HOA offers.

Furthermore, it’s not just HOA fees you’ll be responsible for paying. You might also get hit with fines for failing to follow the rules. And as Oliver says, “HOAs can be pretty unforgiving about handing (fines) out.”

Oliver also warns that “some HOAs can be surprisingly aggressive about actively seeking out rule violators,” pointing to a situation where an HOA used Google Maps to spot an unauthorized shed in a homeowner’s backyard that could not otherwise be seen from the street.

Think twice before buying a home in an HOA

All told, buying a home in an HOA might end up being one giant source of aggravation. And so you may want to find a home that isn’t part of one. Unfortunately, though, these days, that’s easier said than done. Of all of the single-family homes sold in 2021, a whopping 82% were part of an HOA, says Oliver.

Still, if the idea of having to answer to an HOA doesn’t sit well with you, then you may want to specifically look for a home that isn’t subject to one, even if it means delaying homeownership until you find a property that meets that requirement. Paying a mortgage loan and covering the various additional costs that come with homeownership is hard enough. You don’t need the added stress of an HOA to potentially make you regret your decision to buy a home in the first place.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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