Money Management

Like to use payment apps? Read on to see what trap you should steer clear of. 

Payment apps have been around for a while, and these days, consumers seem more comfortable using them. Recent research from The Ascent found that most Americans trust digital payment apps at least as much as they trust traditional payment methods that include cash, debit, and credit cards. And 58% of Americans say they use payment apps more than twice a week.

But if you’re going to use payments apps like PayPal and Venmo, you’ll want to avoid one big trap that could cost you money.

Don’t give up interest income

Payment apps can be extremely convenient. You can link them to your checking account and use them to do everything from reimburse friends for purchases to pay for items online and in stores.

That said, you’ll want to be careful not to leave too much money sitting around in your payment apps. Doing so could mean losing out on interest.

Let’s say you dish out the money for a holiday gift for your grandfather, and all of your siblings and cousins pay you back for their share by sending you Venmo payments, leaving you with a $500 Venmo balance. Money sitting in a Venmo account doesn’t earn interest, so if you keep your $500 there without transferring it over to a savings account, you could end up losing out.

Let’s say your savings account is paying 4% interest, and you leave that $500 in your Venmo account for three months before transferring it over. That means you’ve given up $5 in interest. Now that may not seem like a life-changing amount of money. But what if you keep leaving larger balances in your Venmo account for months at a time? The interest income you lose could really add up.

And besides, let’s say we are only talking about $5 in lost interest. That’s money that could buy you a latte at your favorite coffee shop. Why give it up?

It’s worth noting that some payment apps may give you an opportunity to earn interest on your money. PayPal, for example, has an option called PayPal Savings, where you can open a deposit account to earn interest on your money. But you’ll have to create an account to earn interest. Your PayPal balance won’t just automatically start accruing it.

Manage your money carefully

When you use payment apps, it can be easy to forget that your money is there. So if you’re going to get paid via these apps, you may want to get into the habit of transferring money out of them once it arrives and making sure it hits your bank account instead.

Along these lines, you may be inclined to treat a Venmo or PayPal balance as “not real money” that you might as well spend on just anything. If you take that attitude, you might end up wasting a lot of money during the year. So be sure to treat that money as “real money” and make certain you’re keeping solid tabs on 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.Maurie Backman has positions in PayPal. The Motley Fool has positions in and recommends PayPal. The Motley Fool recommends the following options: short June 2023 $67.50 puts on PayPal. The Motley Fool has a disclosure policy.

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Getting a mortgage to buy a reservation home isn’t easy. But it’s not impossible. Learn how you can get financing for a home on your reservation. 

Getting a mortgage to buy a home on a reservation is notoriously complex.

Because the Department of the Interior holds legal titles for a large percentage of tribal lands, members of these tribes can’t use federal land as collateral to secure a conventional mortgage. More often than not, banks and non-tribal lenders will find the transaction too risky, as they can’t foreclose on land that’s held in trust by the federal government.

But tribes have been fighting back, and several Native-owned banks and credit unions are working hard to make homeownership available across tribal lands. To be clear, there is much progress to be made, and many reservations still have fewer options than other home buyers. But if you’re wondering how to secure financing for a house on your reservation, here are three options to consider.

1. Native-American-owned banks

Native-American-owned banks are perhaps the best way to get financing for a mortgage. These banks are led by Indigenous Americans, and, as such, employ professionals who understand the complex rules that govern tribal land properties.

These banks might provide some of the mortgage options listed below — Section 184 loan or Native American Direct Loan — or they might provide other financing options.

Native-owned banks have the smallest presence of minority-owned institutions in the U.S. In fact, according to the banking analytics company Might Deposits, only 18 have a majority of their voting stock (51% or more) under Native ownership:

But this list isn’t exhaustive, and there are other financial institutions that provide services to Native American clients. For a more exhaustive list, you can look at the Federal Reserve Bank of Minneapolis’ map of Native American Financial Institutions, which might help you find an institution closer to you. You can also look at the National Credit Union Administration’s list of Minority Depository Institutions for Native-American-led credit unions.

2. Section 184 loan

If you don’t have a Native-owned bank near you, you can also apply for a Section 184 mortgage through the U.S. Department of Housing and Urban Development (HUD).

These loans can be used on most types of single-family homes, including new constructions, existing houses, and rehabilitations. To qualify, you have to be part of a federally recognized tribe, and the home you’re looking to buy must be within an approved state or area. Most states have full or partial approval, with only 11 having no approval at all (Delaware, Georgia, Kentucky, Maryland, New Hampshire, New Jersey, Ohio, Pennsylvania, Tennessee, Vermont, and West Virginia).

If you don’t have a credit score, that’s okay: your lender will manually underwrite the loan to see if you’re creditworthy. You will need to put down 2.25% for loans above $50,000 or 1.25% for mortgages below that amount. And when you’re approved, you’ll pay 1.5% of the loan as a one-time fee.

Keep in mind that only HUD lenders can issue these loans, which will limit your choice of bank. You can look at HUD’s website for a full list of lenders, as well as a map of areas that are eligible for these loans.

3. Native American Direct Loan

If you or your spouse served in the U.S. armed forces, then you might qualify for a Native American Direct Loan. These loans are issued by the Department of Veterans Affairs (VA) and are given out to Indigenous Americans who meet one or more of the following:

You served 90 continuous days during wartime.You served 181 continuous days during peacetime.You completed six years in the National Guards or Reserves.You’re the surviving spouse of a service member who died in the line of duty or from service-related disability.

Check in with locals for more information

If you live on a reservation, check with your local tribal office for information about local mortgage lenders, down payment assistance, and grants to cover closing costs. Your tribal office may also have more information on current mortgage rates, as well as what you might need in order to apply for financing.

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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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Debt doesn’t always stop at retirement. Find out how it can harm your golden years and what you can do to take control. 

While some people throw off the bonds of employment and ride into a wealth-filled retirement, they are not the norm. Actually, they’ve never been the norm. The average retiree has the same financial concerns as the rest of us. And one of those financial concerns includes debt.

Life happens, and no one intentionally enters retirement with a boatload of debt. Still, it’s important to remember why we want to keep debt at a minimum. Take a look at the following reasons.

1. Inflation is a reality

It’s as natural as the tide. Throughout American history, there have been years of low inflation followed by periods of high inflation. According to the American Institute for Economic Research (AIER), something that cost $100 in 1992 would cost roughly $209 in 2022 — thanks to inflation.

Living on a fixed income makes everything more difficult during periods of inflation. If you’re also dealing with too much debt, that leaves even less money to handle the ebbs and flows of the economy.

None of us can guess what’s around the corner. The best we can do is prepare for the worst, which means keeping our debt load low.

2. We’re entering retirement with less

Everyone, from financial advisors to television money gurus, tells us we need a huge nest egg to retire in style. Honestly, the numbers are intimidating.

Clever Real Estate recently conducted a study of 1,000 retirees, and the findings may surprise you. Some experts recommend having $555,000 in savings by the time we retire (although many recommend much more).

However, according to the survey, only about 12% of retirees have that much put away. On average, the average retiree has $170,726 in savings. Worse yet, Clever found that around 37% of retirees have no savings at all.

The less we have to fall back on during retirement, the more debt can cripple our ability to do what we want and cover unexpected expenses.

3. We’re living longer

In 1940, the average American had a life expectancy of 63½ years. By 1960, it was just under 70 years. In 1980, life expectancy had extended to 73½ years, and today, we’re sitting at just shy of 80 years.

Medical advancements are incredible, and as long as a person remains relatively healthy, there are few downsides to living longer. However, carrying excess debt is a sure way to tarnish the fun of those golden years.

There are plenty of reasons a 75-year-old may go back to work, including a desire for stimulation and socialization. But if that person works to pay off debt instead, it changes the entire dynamic.

Finding a balance

Life happens, and things come up. For most of us, suggesting that we’ll never borrow money or put an unexpected expense on a credit card is unrealistic. However, the financial services company Charles Schwab suggests we use the “28/36 Rule.” Here’s how it works:

28%: We spend no more than 28% of our pretax income on housing. This includes principal, interest, taxes, and insurance. Or, if you rent, 28% should cover that expense.36%: We spend no more than 36% of our pretax income on all debt, including credit cards and loans.

You’ll notice that the 28/36 Rule doesn’t say we should be debt-free. It simply says that our debt must fit inside specific parameters. Let’s say a person has a net retirement income of $5,000 monthly from all sources. According to the 28/36 Rule, their housing should cost no more than $1,400 per month, and their overall monthly debt costs should not exceed $1,800.

Meanwhile, 36% does not apply to all monthly bills, only to fixed costs. The remaining 64% will cover other expenses, including taxes, groceries, utilities, clothing, and additional monthly costs.

If you have years before it’s time to retire, that’s great. Not only do you have more time to save and invest for retirement, but you also have time to work toward living within 28/36 Rule parameters. If you’re already retired and carrying more debt than is comfortable, a nonprofit organization like the National Foundation for Credit Counseling (NFCC) may be able to help.

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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.Charles Schwab is an advertising partner of The Ascent, a Motley Fool company. Dana George has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab. The Motley Fool has a disclosure policy.

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Tying the knot? Read on to see what financial move is key. 

Summer is a popular time to get married, and if your big day is coming up, you may be growing increasingly excited about it by the minute. But once you get married, it’s a good idea to sit down with your spouse and check some key financial matters off your list.

You may, for example, decide to combine your savings into a single savings account you manage jointly. You might also decide to buy a home or take on other debts together. And if you’re going to do that, it’s also really important that you and your spouse put life insurance policies in place.

Why married couples need life insurance

You and your spouse might each have a job that pays you well so that if one of you were to pass away, the other would still be earning an income. But even so, there’s a good chance you’ll rely on each financially to some degree, so buying life insurance is a good way to help one another avoid financial heartache on top of emotional heartache in the event of someone’s untimely passing.

Furthermore, it’s common for married couples to take on debts jointly. Let’s say you’re buying a house. It may be that with both of your salaries, you’re able to swing your monthly mortgage payments quite easily. But if you were to lose one salary, those bills might be difficult to manage on a single income alone. Life insurance could come in very handy in a situation like that, especially if you buy a policy with a large enough benefit to pay off your mortgage balance in full.

An expense that’s more affordable than you might think

You may be hesitant to take on the expense of life insurance shortly after getting married — especially if you’re paying off various bills related to your wedding. But you may be surprised at how inexpensive it is to put life insurance in place, especially if you apply at a fairly young age.

Financial guru Dave Ramsey says that a 30-year-old man will pay an average of just $54 a month for a 20-year term life insurance policy with a benefit of $1 million. A 30-year-old woman will pay even less — just $43 a month for a policy with the same length and payout.

Of course, the amount you end up paying for life insurance will hinge on different factors, including the state of your health. But if you’re in relatively good health, then you may find that life insurance isn’t unbearably expensive at all.

Getting married is a big deal. You’re combining your life with someone else’s and are committing to a lifetime together. And hopefully, you’ll get many, many years to enjoy one another’s company.

But unfortunately, you never know when the unthinkable might happen. By putting life insurance in place, you’ll be protecting one another in case the worst occurs. And while getting life insurance is something you and your new spouse should do for each other, individually, you’ll each gain peace of mind to boot.

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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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Love shopping at Costco? Read on to learn more about its signature Kirkland brand. 

If you’ve ever shopped at Costco, you’ve probably seen your fair share of Kirkland products on the shelves, from baked goods to snacks to paper goods. Kirkland is Costco’s signature brand, so it makes sense for it to have a huge presence in your local warehouse club store. Here are some interesting facts about Kirkland products.

1. They’re extremely profitable for Costco

You may not be so surprised to learn that Kirkland products are a nice source of revenue for Costco. But check this out — for the fiscal year ending in August of 2021, Kirkland products brought in a whopping $58 billion of sales.

2. They’re often made by major brands

Think of Kirkland products as the equivalent of generic medications. You get the same results, only at a fraction of the price. That’s because you’re not paying for marketing and fancy labels.

But it may surprise you to learn that a number of Kirkland products are actually made by major brands you’re probably familiar with. Costco will often reach out and ask those companies to produce a Kirkland version of their products. So if you’ve ever thought to yourself, “I’d rather not take a chance on Kirkland,” realize that you may not be taking a chance at all, because in reality, you’re buying a product you already consume.

And in case you’re curious, some of Costco’s Kirkland coffee is made by none other than Starbucks. It even says so on the label.

3. You can buy them on sale

You might assume that because Kirkland products are available at such a low price point to begin with, you can’t snag a further discount on them. But that’s not true.

Costco rotates its sale items on a monthly basis, and often, you’ll have an opportunity to buy Kirkland products at a lower price than what they usually retail for. Right now, for example, Costco is offering $6 off a 10-pound bag of its Kirkland Signature Chicken Wings though May 18.

4. They’re not always the cheapest option

Buying Kirkland brand products will often result in a lower credit card tab than buying name-brand products. But that doesn’t mean you’ll always get the best deal on Kirkland items.

If your supermarket has a well-known brand on sale, that could end up being the more cost-effective bet. Plus, if you’re willing to buy other store brands, they might be cheaper than Kirkland.

As an example, a 12-pack of Kirkland Signature Paper Towels is $22.99 at Costco online in the New York metro area (do note that Costco prices vary by region). Meanwhile, you can buy a 12-pack of Amazon Basics paper towels for $16.89. Now, the Kirkland paper towel rolls have 160 sheets apiece, whereas Amazon’s only have 150. But still, Amazon’s offer is the better deal, especially since you can save an extra 15% by ordering its paper towels via the Subscribe and Save program.

Loading up on Kirkland products could result in getting to keep more cash in your savings account. Best of all, one thing Costco is known for is standing behind the products it sells. So if you decide to spend money on Kirkland products, you can rest assured that you’re getting items that are high in quality. And if you end up feeling differently, Costco is more than reasonable when it comes to giving out refunds.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com, Costco Wholesale, and Starbucks. The Motley Fool has a disclosure policy.

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There are steps you can take to lower your tax burden. Read on to learn more. 

At the start of the 2023 tax season, filers were warned to gear up for smaller refunds than what they received in 2022. The reason? Many of the pandemic-era tax benefits that came about in 2021, like the boosted Child Tax Credit, expired that same year. So that left filers with fewer tax breaks to claim for 2022.

As of the week ending April 21, the average tax refund was $2,753. A year prior, it was $3,012, so that’s a notable difference.

If you’re not happy with your most recent tax refund, there are steps you can take to eke out a larger one. But it’s also worth noting that a smaller tax refund isn’t necessarily a bad thing.

How to boost your tax refund

The IRS offers taxpayers a host of opportunities to lower their taxes. And perhaps the most effective way to do so is to take advantage of savings plans like IRAs, 401(k)s, and HSAs.

If you fund a traditional IRA or 401(k), the money you put in for retirement savings will represent earnings the IRS can’t tax you on. So if you normally don’t save for retirement in one of these plans but make a $3,000 contribution in 2023, you’ll protect $3,000 of earnings from being taxed. That could lead to a higher refund when you file your 2023 taxes in 2024.

Now do note that it’s only traditional IRAs and 401(k)s that give you an upfront tax break. If you fund a Roth IRA or 401(k), your contribution won’t exempt your income from taxes.

Another plan worth looking at is a health savings account. If you’re enrolled in a high-deductible health insurance plan — one with an individual deductible of $1,500 or more, or a family deductible of $3,000 or more — then your plan might render you eligible for an HSA. In that case, you can set aside funds on a pre-tax basis for healthcare spending purposes, thereby exempting more of your earnings from taxes.

Should you try to boost your tax refund?

It definitely pays to take advantage of IRAs, 401(k)s, and HSAs. Aside from the tax benefits these plans give you, they also help you save money for important goals, like retirement and future healthcare. But while it’s a good idea to contribute money to these plans, you may not want to fixate so much on a larger tax refund.

See, a tax refund is simply money you were entitled to collect during the year but didn’t. If you got a $600 refund this year, it means you were entitled to an extra $600 in 2022 you didn’t collect.

Now, think back on 2022. Could you have used an extra $50 a month? Given what inflation looked like, the answer is probably yes.

As such, while you can definitely take steps to be as tax-savvy as possible, you shouldn’t necessarily sweat it if this year’s tax refund is lower than the tax refund that hit your bank account in 2022. All that means is that you collected more of your money as you actually earned 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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