Money Management

Have spare cash? Read on for some options for housing that money. 

These days, inflation is eating up a lot of people’s paychecks. So if you don’t have spare cash to go around, that’s understandable. But if you do, then it’s important to find the right place for your money. One of these options could fit the bill this month.

1. A savings account

A savings account is a great place for money you have earmarked for emergency expenses, or for money you’re setting aside for a relatively short-term goal. Right now, savings accounts are paying pretty generously. Some of the best high-yield savings accounts are paying upward of 4% interest. And as long as your bank is FDIC-insured and your deposits don’t exceed $250,000, that’s a risk-free 4% or more you can earn.

2. A certificate of deposit

Certificates of deposit, or CDs, commonly offer higher interest rates than savings accounts. That’s because they require you to tie up your money for a preset period of time and risk penalties for cashing your money out early. Some of the most generous CDs today are paying 5% or more, and many are paying in the 4% range.

You may, however, want to be careful when opening a CD. If you commit to a lengthier term, you could end up losing out if interest rates rise even more once you’ve opened your CD.

On a positive note, like savings accounts, CDs at FDIC-insured banks are protected for up to $250,000 per person. If you open a CD with a joint depositor, that limit rises to $500,000.

3. An IRA

Contributing to an IRA account is an important thing to do if you want to retire comfortably. Plus, it could result in a nice tax break for you. When you fund a traditional IRA, the amount you put in it exempts income of yours from taxes. For example, sock away $2,000 in a traditional IRA, and the IRS won’t tax you on $2,000 of your earnings.

Another perk of putting money into an IRA? You get an opportunity to invest it. The stock market, as measured by the S&P 500 index, has delivered an average annual return of 10% over the past 50 years. If you put $2,000 into an IRA this year, invest it at 10%, and leave it alone for 30 years, it could turn into almost $35,000.

That said, this year, IRAs have an annual contribution limit of $6,500 for savers under 50 and $7,500 for those 50 and over. Be sure to adhere to these limits, and if you have money to invest beyond them, consider a regular brokerage account.

4. A taxable brokerage account

Investing in a regular brokerage account won’t result in any sort of tax break. But the nice thing about taxable brokerage accounts is that they don’t come with restrictions. Unlike IRAs, there are no annual contribution limits, and your funds are yours to withdraw whenever you want — without penalty.

To be clear, though, you should only invest funds in a brokerage account that you don’t expect to need for a good number of years. The reason is that the value of your portfolio might fluctuate due to market conditions, so you’ll want to give yourself time to ride out any potential downturns that could ensue.

Where should your money go this month?

Clearly, you have plenty of choices when it comes to finding a home for your money. If you don’t have a complete emergency fund — enough money to cover three months of essential bills — then your best bet is to put your money into a savings account. But from there, you have choices, so think about your goals for your money and how much risk you’re willing to take on.

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If you are trying to make a choice about listing your house, finance expert Dave Ramsey warns not to focus too much on the housing market. Here’s why. 

If you’re thinking about whether or not to sell your home, you need to understand the impact your choice will have on your housing options and your bank account balance.

You may be tempted to focus on the state of the housing market as you make the choice about whether it’s a favorable time to list your property. But, finance expert Dave Ramsey warns not to put too much emphasis on this one issue.

Why Ramsey doesn’t want you to focus too much on the state of the real estate market

According to Ramsey, putting too much emphasis on the state of the housing market isn’t the best approach when deciding whether to sell your property because there’s something more important to focus on.

“You should never decide to sell your house (or not sell) based on the state of the housing market alone,” he warned. “Market conditions are only part of the picture — and they’re not even the most important. Your personal situation needs to take center stage. The best time to sell a house is when the market and your individual situation line up.”

In other words, Ramsey doesn’t want you to be swayed by external factors like whether home prices are up or down. You should first look at your own unique financial circumstances, and only if you are in a good situation to list your house, should you then consider whether you’re likely to get a favorable offer in the current market.

To consider your financial circumstances, Ramsey suggests making sure you have sufficient equity in your home to pay your current mortgage in full and make a 20% down payment on your next house. He also said to make sure you can afford the move, have a new place to live, and that your overall financial situation will be improved by moving.

Is Ramsey right?

Ramsey is right that your personal finances matter more than the state of the market. If your home has gone up in value but so have other houses you’d want to move into, then selling it wouldn’t do you any good if it would cost you more to buy your new place than you could afford. This is especially true if you don’t have much equity in your current home and wouldn’t be able to sell for enough to pay a down payment.

The reality is, you can’t predict what’s going to happen to housing prices in the future. While you may think now is not a great time to sell because mortgage rates are high and demand has slowed a bit in some markets, the housing market could get worse in the coming years and you may get less money for your home if you wait.

Since you can’t know what’s going to happen, you can try to look at the current state of the market to inform your choice, but you should focus on the knowable factors first. If you are in a good position to sell for enough to finance your next move after paying off your mortgage loan, and you have your other ducks in a row that Ramsey describes, then you can go ahead and list your property if you want. Otherwise, holding out is a better bet.

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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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There are all kinds of ways you can take a vacation while on a budget. Get some ideas from this list of cheap ways to travel this summer. 

Summer is a big travel season, but that also means it’s one of the most expensive times to travel. And this summer is shaping up to be particularly expensive, as demand has been soaring. Last month, the Delta Air Lines CEO even predicted record advance bookings for the summer.

That makes it harder to take a summer vacation if you don’t have much money saved, but it’s not impossible. To book a trip that works with your budget, here are the best cheap ways to travel this summer.

1. Pick an affordable destination

One of the easiest ways to save on travel is to visit cheaper places. Some cities are just plain expensive. If you want to visit Paris, New York City, or Dubai, to give a few examples, it’s going to be tough to stick to a tight budget.

Fortunately, there are tons of affordable and fun-to-visit destinations. Here are some countries that have plenty of affordable cities to visit:

ColombiaRomaniaSpainThailandVietnamMexico

Those are just a few of many options. Try picking a region you want to visit first, such as Europe, and then looking for affordable options within that area.

2. Walk, bike, and use public transportation

Renting a car or using rideshares and taxis all the time can get expensive. When possible, look for alternative methods of transportation.

If where you’re going is within walking distance, going on foot is a great way to save and to explore the area. In many cities, you can rent a bike, either from local shops or through apps like Uber and Lyft.

There’s also public transportation, which can be both convenient and even fun to ride. For example, some parts of Colombia have a Metrocable system that takes you over the city in a cable car. The first time I visited, I rode one just because I wanted to check it out, and it was well worth it.

3. Travel during the week

Booking travel during the week instead of on weekends could help you get a better deal. Flights departing on Monday, Tuesday, or Wednesday are 12% cheaper than weekend departures, according to analysis by Google Flights. You can also sometimes get a lower price if you’re willing to take a red-eye flight.

4. Pay with travel rewards

The No. 1 way that I save on travel is by paying with points and miles as much as possible. You can earn these through airline and hotel loyalty programs, but if you’re a frequent traveler, it’s also a good idea to look into travel credit cards.

Most of these credit cards have benefits that can help you save money on your trips, such as spending credits on travel purchases or free checked baggage. They also allow you to earn rewards on all types of purchases, making it much easier to max out your rewards. I’ve saved thousands of dollars on airfare several times thanks to my travel cards, so they can definitely help you travel for much less money.

5. Go where the deals are

If you’re the adventurous type and down to go anywhere, pick a destination based on which place has the best flight deals from your home airport. Sites like Skyscanner and Kayak let you enter your home airport and perform an open-ended search, where you can check flight prices for different destinations. This is a useful way to compare options and see where you can go without spending too much.

6. Find low-cost activities

Travel expenses quickly add up if you’re spending lots of money on activities every day. But just about every city has lots of free and low-cost things to do. Here are some activities that don’t cost much, if anything:

Visit parks and hiking trailsGo to art galleries or museumsExplore interesting neighborhoods on foot, or take a walking tourSee a show at an independent theaterCheck out historic areas or local architecture

7. Make a budget and track your spending

If you want to be careful about how much you spend while traveling, it’s important to follow a travel budget. It’s easy to overspend when you haven’t set a spending limit and when you’re not tracking your expenses.

To make a travel budget, start by figuring out how much you want to spend on your trip, at most. You can then decide which activities fit into your budget and how much you can afford to spend per day. Make sure to keep track of your spending, too. Budgeting apps are a convenient way to do this.

Even though some people see travel as a costly activity, that depends on how you travel. If you don’t mind planning a budget-friendly trip, it’s entirely possible to travel on the cheap.

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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. Citigroup is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has positions in Delta Air Lines. The Motley Fool has positions in and recommends Alphabet and Uber Technologies. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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The more you earn, the more house you can generally afford. Read on to see if you’re ready to buy a more expensive home. 

When you first sign a mortgage, there are different factors your lender takes into account when determining how much you can borrow. One such factor is your salary.

But what if you’ve started earning a lot more money at work — perhaps on the heels of a promotion? You may be inclined to upsize to a larger home now that your salary has increased. But is doing so a financially sound move?

Make sure you don’t get in over your head

As a general rule, it’s important to keep your housing costs to 30% of your take-home pay or less. Doing so could help ensure you’re able to keep up with your housing expenses, and all of your bills, without running into any issues.

Now, let’s say you were bringing home $4,000 a month when you bought your current home, and you spend $1,000 a month on housing. That’s a reasonable percentage of your income — 25% — to spend to put a roof over your head.

If you’ve recently gotten a major bump in salary, to the point where you’re now bringing home $6,000 a month, then you may be able to afford to spend up to $1,800 a month on housing. So if that’s the case, and you feel you need more space, then you may want to upsize.

Doing so isn’t necessarily a bad idea if you can find a home that allows you to stick to that $1,800 limit. But that may be a pretty big “if.”

Remember, mortgage rates are higher today, so chances are, the interest rate you pay on your mortgage is going to go up once you get a new home loan. In fact, the average rate for a 30-year mortgage is 6.39% as of this writing, according to Freddie Mac.

But, on the flipside, perhaps you have a lot of equity in your existing home you can put toward your down payment. So all told, you may not have to borrow that much, and upsizing might be financially feasible, even if you’re signing up for a mortgage with a higher interest rate.

Take all of your housing costs into account

When we talk about keeping your housing costs to 30% of your income or less, that doesn’t mean your mortgage payment only has to come in at 30% or less. Rather, it means that all predictable home-related expenses, including property taxes and homeowners insurance, need to keep you at or below that 30% mark. So you’ll need to run the numbers to make sure that’s doable.

Also, keep in mind that if you upsize your home, your peripheral costs are likely to increase. You’ll probably spend more on maintenance and utilities, for example, if you go from 1,800 square feet of living space to 2,900 square feet. So you’ll need to make sure you can handle that higher expense.

Finally, before deciding whether to upsize or not, make sure it’s worth it to spend more on a home. Even if you can afford the more expensive mortgage, property taxes, and other expenses, every extra dollar you spend on housing is money you won’t have for other things, like hobbies and vacations. So you’ll need to ask yourself if it’s worth having to potentially give some of those things up.

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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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