Money Management

Homeownership has gotten expensive. Read on to see why so many people are struggling to buy. 

There’s a reason so many people are struggling to buy a home these days. Not only are property values still elevated, but mortgage rates are far from cheap. It’s therefore not so shocking to learn that 63% of renters in the U.S. are priced out of homeownership in the city they live in now, according to research from HireAHelper.

If you can’t afford to buy a home where you live, you may be wondering whether it makes sense to move elsewhere to be able to swing a home purchase. The answer? It depends.

How much do you love your current city?

There are certainly benefits to owning a home, like getting to build equity in a place of your own and not having to follow a landlord’s rules. And so you may be inclined to ditch your current city and move to a less expensive one if that’s what it takes to become a homeowner.

But there’s also something to be said for liking where you live. So before you make plans to uproot your life and relocate, you may want to think about the implications of moving to a new city that’s cheaper.

Owning a home might improve your quality of life to some degree. But what if moving means giving up access to the amenities you love, like being able to walk to stores and restaurants and having great public transportation nearby?

Also, moving to a new city could mean having to start over and build a whole new social network. That’s not always an easy thing to do as an adult.

Plus, moving to a new city could mean having to give up your current job. It could also mean moving to an area where jobs in general aren’t as easy to come by.

That’s why it’s important to think about how much your current city has to offer when deciding whether to relocate to make homeownership possible. At the end of the day, it may not be worth it to abandon a city you love just to purchase a home.

Renting isn’t a bad thing

Many people are wired to believe that renting a home is a poor financial choice, since it means paying a landlord’s mortgage rather than paying your own. But remember, the costs of homeownership extend well beyond monthly mortgage payments. There are also property taxes, maintenance, and repairs to contend with.

In fact, you may find that owning a home costs a lot more money than renting one, even if you move to a less expensive city. And pumping all of that money into a home might prevent you from meeting other financial goals you have.

This isn’t to say that owning a home is a bad decision. But if homeownership is unattainable for you based on where you live currently, and you’re also not eager to move, then you should know that there’s nothing wrong with continuing to rent.

You never know when your financial situation might change, and it may be that in a few years from now, you’ll be able to buy in your current city. But you shouldn’t force yourself to pick up and move to a new city simply to be able to buy.

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It’s important to find the right home for your savings and investments. Read on to learn about one option worth considering. 

When you’re young, saving and investing for retirement may be the last thing on your mind. At that stage of life, you may be busy trying to build an emergency fund, pay off your credit cards, and figure out how to advance your career.

But the reality is that if you’re in your 20s, you have a prime opportunity to build yourself a nice retirement nest egg. That’s because the longer you give your money to grow, the larger a balance you might end up with.

Now, when it comes to saving and investing for retirement, you have choices. If you work for a company that offers a 401(k) plan, you may be motivated to participate in it — especially if your employer offers a matching incentive. But if you don’t have access to a retirement plan through your job, your next best bet may be to open an IRA.

IRA accounts come in two main varieties — traditional and Roth. And recent data from Empower shows that 38% of Generation Z considers a Roth IRA a top investment vehicle. Here are a few reasons it pays to save for retirement in one of these accounts.

1. Tax-free gains and withdrawals

You don’t get a tax break on the money you put into a Roth IRA. Instead, you get to benefit in the form of tax-free investment gains in your account, and tax-free withdrawals from your account. The latter could be a really huge perk in retirement.

Many seniors find that money is tight once they stop working full time. Getting to take money out of your savings without an associated tax bill could ease a lot of your financial stress later in life.

2. No RMDs

If you save for retirement in a traditional retirement plan, you’ll generally be subject to required minimum distributions, or RMDs. These force you to remove a portion of your plan balance every year once you reach a certain age or otherwise risk penalties.

So why do RMDs exist? The money in any sort of IRA or 401(k) gets to enjoy tax-advantaged growth. The IRS is fine with you getting that benefit if you’re using your savings to fund your retirement. But the IRS doesn’t want IRAs and 401(k)s to become wealth-transferring vehicles — at least not primarily. So by imposing RMDs, the IRS forces retirees to spend down their savings.

Roth IRAs, however, do not impose RMDs. So if leaving wealth behind for future generations is something that’s important to you, a Roth IRA gives you that option.

3. Back-up emergency savings

Your Roth IRA should absolutely not serve as your emergency fund. Rather, you should sock away money in the bank for that purpose.

But sometimes, things happen. Let’s say you built a $10,000 emergency fund, only your home ends up needing a $12,000 repair. Even though you were diligent and saved well, you’re at risk of debt.

Because you don’t get a tax break on Roth IRA contributions, you can withdraw your principal contributions (not the gains portion of your account) without penalty at any time. This doesn’t mean you should simply tap your Roth IRA whenever a need for money arises. But if you find yourself in a truly desperate situation, you should know that you have the flexibility to access your Roth IRA.

It’s a good idea to explore your options when it comes to finding a home for your retirement savings. But for these reasons, a Roth IRA is one account that’s definitely worth considering.

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Personal loans can be a convenient and affordable way to borrow. But read on to see why some consumers may be taking that concept too far. 

When you have a need to borrow money, you may be inclined to turn to a personal loan. The great thing about these loans is that they allow you to borrow money for any purpose — whereas with a mortgage loan, for example, you can only use the proceeds to finance the purchase of a home.

Personal loans can also be a relatively affordable way to borrow money. Granted, these days, pretty much any type of borrowing you do is apt to be pretty expensive because interest rates are up across the board. But you’ll likely pay a much lower interest rate on a personal loan balance than you will for, say, a credit card balance.

Meanwhile, data from Experian shows that U.S. personal loan balances rose substantially in 2022 compared to the year prior. And the average personal loan balance last year came to $18,255. But that’s not really a good thing.

A trap that’s easy to fall into

The fact that personal loans are convenient, flexible, and affordable is both a positive and a negative. On the one hand, it’s good to have options when it comes to financing a random purchase that may not fall into its own borrowing category, like a home or car does. On the other hand, some consumers risk falling into the trap of borrowing freely with a personal loan — and paying the price afterward.

In 2022, total personal loan balances rose by 19.1% compared to 2021. And while we can potentially point to inflation as a factor that caused those loan balances to rise, it’s probably not the only thing that prompted consumers to borrow more.

It may be that consumers are growing increasingly comfortable with personal loans. But because of that, they risk taking on higher balances and paying more interest on their debt.

Remember, personal loans might come with lower interest rates than other borrowing options. But you’ll still pay some amount of interest, and it may not be a small amount if you’re taking on a larger balance.

Also remember that if you fall behind on a personal loan, you’ll risk damaging your credit score. That could make it very difficult to borrow money the next time you need to.

Be careful when signing a personal loan

You may be looking to take out a personal loan so you can fix up your home, start a business, go back to school, or do something else that might greatly improve your quality of life or set you up to earn an income. But be careful not to take out a personal loan for non-essential purposes.

It’s tempting to sign a personal loan when you can use your proceeds for anything you want. But if the something you want to finance is a vacation, for example, that’s really not a good reason to be borrowing money.

Personal loan debt is just that — debt. So if you’re going to take it on, make sure you’re prepared, and do your best not to get in over your head.

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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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Looking for the perfect Father’s Day gift? You don’t have to spend a lot of money to show your love. Check out these great Etsy finds that cost under $50. 

With Father’s Day just around the corner, you may still be searching for the perfect gift. If you’re feeling stressed about timing, don’t worry — there’s still plenty of time to buy the ideal present for all the father figures in your life. Etsy is a great place to shop for a truly unique gift. You can find all sorts of handmade items that will make for a one-of-a-kind way to spoil your favorite guys. Here are a few Etsy gifts for under $50.

1. Beard care gift set

Dads deserve self-care, too. If your dad rocks a beard, a beard care gift set is a fantastic way to spoil him. OzarkOriginalsStore sells various gift sets. One option is the Ozark beard care gift set which features beard oil, beard balm, a candle, and two soaps. You’ll pay $39 with shipping included, so you won’t have to worry about draining your checking account to buy a great gift.

2. Leather toiletry bag

Why not treat your dad to a high-quality toiletry bag so he can store all his toiletry essentials in one organized place? You can buy a large handmade leather toiletry bag from the Etsy shop LeatherBagsTX. This bag usually costs around $50 but is on sale for under $35, and shipping is free. As a bonus, you can add a custom name or initial engraving at no extra cost.

3. Customizable super daddio t-shirt

This one is for the video-game-loving father figure in your life. The ElegenceApparelUS shop sells a customizable, super daddio t-shirt in various styles and colors. You can add each kid’s name before checkout to complete this Super Mario Bros.-inspired shirt. Prices vary by shirt style, but most shirts cost less than $30. Shipping costs extra.

4. City map etched whiskey glasses

Etsy shop GreenlineGlassware sells handmade glassware, including whiskey glasses. You can buy a set of two 10 oz. old fashioned rocks glasses with your city’s map etched onto each glass. Prices vary by design, but you can expect to pay $30 to $40 for two glasses, which includes shipping. This gift idea is perfect for the whiskey-drinking dad in your life.

5. Best dad ever hat

You can find all sorts of hats on Etsy. But one that would work well for a Father’s Day present is the best dad ever hat from the foxandfawn shop. After shipping charges, you can get this hat for a little over $30. A best grandpa ever hat is also available if you need a gift for your grandfather.

6. Wood phone docking station and organizer

A wood phone docking station and organizer is a great gift if your dad frequently leaves all his everyday essentials in various places around the house. With the wood phone docking station from TheEchoCraft shop, your dad can charge his phone and keep his glasses, watch, keys, and other knick knacks all in one place. You’ll pay under $45 for this fantastic find.

Don’t risk going into debt as you shop for a gift

As you shop for a gift for your dad, remember that you don’t have to spend a ton of money to show your love. You may feel tempted to spend more than planned to get a special gift. But purchasing an expensive present that will result in credit card debt is not a good idea. Keep your personal finances in mind as you shop so you don’t overspend. Your dad just wants to feel appreciated, and any thoughtful gift will show that you care.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

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