Money Management

Impulse buys can be hard to avoid. Read on to see why you should allow yourself to make them. 

I pride myself on being a pretty frugal person. I don’t have a particularly lavish home, I drive an older car, and I generally don’t spend more than $8 on t-shirts or pants for myself or my kids because, well, I can get away with spending less and clothing isn’t something I particularly care about.

But just because I’m mindful of my spending doesn’t mean I don’t tend to fall victim to impulse buys. Quite the contrary — I commonly wind up spending more money than anticipated in the course of my food shopping (I don’t really tend to be tempted to buy other items on a whim).

Sometimes, I’ll head over to Trader Joe’s to pick up a preset list of items only to wind up with a credit card tab that’s $40 higher than expected because too many new products caught my eye. And I’ve certainly been known to buy my fair share of unplanned Costco desserts. (I mean, who can resist a massive cheesecake for just $12.99?)

But I’ve learned to not only make my peace with impulse buys, but embrace them. And I’d highly encourage you to automate your savings so you can do the same.

It’s the little things that make life fun

The problem with impulse buys is that they can wreck your financial goals. In spite of that, so many of us make them. In 2022, a good 64% of Americans said they increased their impulse spending, according to Slickdeals. And last year, the average consumer spent $314 per month on impulse purchases.

There was a period in my life when I tried to really cut back on impulse buys, but I no longer do that. I’ve found that it’s those impulse buys — little treats at Trader Joe’s, Costco, and other stores — that make me really happy. Sometimes, I get more joy out of those purchases than larger, planned purchases. So rather than cut out impulse purchases, I’ve reworked my budget to allow for them.

I also make a point to automate my savings so I don’t have to worry about impulse buys. What I do is arrange for a portion of my earnings to leave my checking account every month and land in my savings. And from there, the way I see it, the rest of my money is mine to spend, because I’ve met my savings goal for the month. So as long as I’m keeping up with my essential bills, impulse buys don’t have to be a problem.

You deserve the occasional treat

Do I recommend making impulse purchases on a daily basis? Not necessarily — and especially not if money is tight. But if buying a box of donuts on a whim gives you an afternoon snack to look forward to, or if splurging on a latte you didn’t expect to buy makes a busy morning at work easier to cope with, then why deny yourself those small things?

If you make a point to automate your savings so you’re meeting your goals, then impulse buys won’t be the thing that stops you from meeting those goals. And that way, you can enjoy those spur-of-the-moment purchases without having to harbor feelings of guilt.

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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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Big dogs are typically the most expensive to insure. Read on to find out which 15 dog breeds cost the most for pet insurance. 

Pet insurance helps you offset vet bills and ensure you can handle pet emergencies without going into debt or sacrificing your financial goals. Pet insurance for dogs usually costs about $40 to $50 per month for accident and illness coverage. But for certain breeds, the cost is almost double that.

Typically, the bigger your dog, the more expensive your pet insurance premiums. Other factors can contribute to higher premiums, too, such as your dog’s age, sex, and the pet insurance company itself. But, in general, you can expect the following 15 dog breeds to have some of the highest monthly premiums, according to a study by Spot Pet Insurance as aggregated by LendEDU.

The 15 most expensive dogs for pet insurance

Before we jump in, keep in mind that “accident only” (AO) coverage only covers dogs for injury-related vet visits, like car accidents, poisoning, or lacerations. Accident and illness coverage (A&I) covers accidents and also illnesses, like cancer or infections.

What if you’re paying more for your dog?

If a dog owner is paying more than $70 to $100 per month for pet insurance, then they might be overpaying for their policy. Here are a few ways to cut your monthly premiums if you think your policy is too high.

Pay your annual policy in full. Most pet insurance companies will give you a discount if you pay annually rather than month to month.Choose lower coverage. Your dog might not need an accident and illness policy. Take a close look at what each policy offers and decide if your dog needs both types of coverage.Shop around for pet insurance. Don’t go with the first pet insurance company you find. Compare premiums among several companies and see which one offers you the best deal.Bundle your insurance. If your car insurance company also offers pet insurance, see if you get a discount by bundling them. Likewise, if you have more than one pet, some insurance companies will offer a “multi-pet” discount if you buy coverage for more than one.

Pet insurance for big dogs can get really expensive. But there are pet insurance companies that may provide coverage for big dogs at a good price. Take a look at some of the best pet insurance companies and compare prices to see which one offers you the best rate.

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Wondering how your retirement savings stack up? Read on to see whether you’re good on savings or should push yourself to save more. 

Socking money away for retirement is not an easy thing to do — not when you have bills like car and mortgage payments to contend with. If you’ve managed to save $100,000 in your IRA account, you should be proud.

But are you all set for retirement with a $100,000 IRA balance? Well, that’s questionable.

Your $100,000 balance may not go as far as you think

The average IRA balance as of the fourth quarter of 2022 was $104,000, according to Fidelity. So if you have $100,000 saved for retirement, you’re pretty much on par with that. But while $100,000 is clearly a lot of money, you may be surprised by the relatively small amount of annual income it might translate into.

Your retirement savings have to last throughout your senior years. But it’s hard to know how long you’ll live once your career comes to an end. You might live 10 years, 15 years, 20 years, or longer. And so you’ll want to withdraw from your savings very carefully to help ensure that you don’t whittle your balance down to $0 early on.

For years, financial experts swore by the 4% rule in the context of retirement savings. This rule had you withdrawing 4% of your savings balance your first year of retirement and then adjusting subsequent withdrawals for inflation.

At this point, it’s become pretty clear that the 4% rule is outdated, and that 4% is actually too aggressive a withdrawal rate. A safer rate of withdrawal for most seniors is probably somewhere in the 2% to 3% range.

But even if we go with a 4% withdrawal rate, when we apply that to an IRA with $100,000 in it, it results in just $4,000 a year of income. Now that $4,000 should be in addition to the benefits you’re able to collect from Social Security. But right now, the average senior on Social Security only gets $1,827 a month.

That figure should rise in time due to inflation. But it might also be offset by Social Security cuts, which could be coming in a little more than a decade.

So all told, you’ll probably want more than $4,000 of annual income to come from your retirement savings. And so if you’re sitting on a $100,000 IRA, you may still have some work to do.

It pays to ramp up your retirement plan contributions

While $100,000 is far from pocket change, you may want a lot more money than that to have on hand for retirement. So if you still have a number of working years ahead of you, try your best to keep contributing to your IRA.

You may need to limit what you spend in certain expense categories to make that happen. But in exchange, you’ll set yourself up to have more financial freedom later in life.

It could also pay to take a look at how your IRA is invested, and make sure you have assets in that account that lend to solid growth over time, like stocks. Playing it too safe in your IRA might force you to have to part with more money to grow your balance. But if you invest savvily, you might manage to turn your $100,000 IRA into a $200,000 IRA without having to contribute too much of your own earnings.

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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’ve got an offer accepted on a home, you may think you’re good to go. But find out why an appraisal issue could send you back to square one. 

Buying a home involves a lot of steps. You’ll need to get preapproved for a mortgage, first and foremost. You’ll also need to find a property and get an accepted offer. Then, you have to move forward with finalizing your loan approval.

Once you’ve completed the start of this process and have an offer accepted by a seller, you may feel like you are home free and going to be moving in any day. Unfortunately, that’s not necessarily the case.

Finance expert Dave Ramsey warns that one issue could arise that could set you back to square one. Here’s what the problem is and why it’s such a big issue.

Could this problem derail your home purchase?

The issue Dave Ramsey warns about has to do with your home appraisal. “If the appraiser determines that the home value is drastically different than the selling price, it could set you back to square one on the mortgage process,” Ramsey warned.

An appraisal is typically required by a mortgage lender after you’ve gone through the preliminary approval process and found a home you want to buy. The appraiser will come to the house, assess the condition, find out about key features (like square footage and number of bedrooms), and then determine how much the home’s fair market value is.

Lenders will mandate you get this appraisal done to make sure that you are not borrowing too much relative to the home’s fair market value. Typically, you must put some amount of money down on a home — around 3% is the minimum, but ideally 10% or 20% of the home’s value. The problem is, if the house is actually worth less than what you’re paying, the proposed down payment you’re making might be an even lower percentage of its value than it appears.

Say, for example, you are making a 10% down payment on a home you are paying $400,000 for. You’d put $40,000 down and borrow $360,000. But what if the appraisal showed the house was only worth $350,000? You’d be borrowing more than the house was actually worth — and the house is supposed to be collateral guaranteeing the loan. The mortgage lender wants to be sure they can sell it for more than you owe if you stop paying on the loan.

If it turns out a house isn’t worth enough, a lender isn’t going to give you a loan under the current terms.

How to cope with a low appraisal

If your chosen house appraises for less than you expect, you have a few options. You may be able to appeal the appraisal, which involves asking the appraiser to take another look (and perhaps providing some data on other comparable sales that may make a higher price seem justified).

You could also switch lenders and hope the appraiser they send out gives your chosen home a higher valuation. There’s no guarantee this will work, though — and you’d be out the money for another appraisal, perhaps only to find the home still appraised for too little.

The third option is to put more money down. In the above example, you might have to pay an extra $50,000 on top of your $40,000 down payment out of your own pocket if you still bought the home for $400,000. If you did that, you’d only need to borrow $310,000, so your home loan would be 86% of your house’s value — an allowable loan-to-value ratio for most lenders.

You could also try to renegotiate with the seller to accept a lower price — if they were willing.

If one of those solutions doesn’t work, though, you’d be back to square one in your home search and would have to find a different place to buy.

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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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The IRS is looking to increase audit activity. Read on to see why that probably won’t affect you. 

Filing taxes can be a daunting process. You have to gather paperwork, run a lot of numbers, and hope you aren’t making any mistakes that land you on the IRS audit list.

But the reality is that tax audits aren’t really the scary thing the media might make them out to be. Often, a tax audit is really just the IRS requesting more information about a given return.

If you claim a $2,000 deduction for small business equipment, for example, on your tax return, the IRS might send you a notice asking for proof of that deduction. Send in copies of your receipts, and the matter is closed.

Still, most people would rather not have their taxes audited. And so you may be worried that the IRS’s recent batch of funding is going to increase your risk of an audit. But unless you’re a higher earner, you can expect that your chances of getting audited are going to stay the same.

Tax audits are increasing, but not for the typical American

The IRS recently got approved for $80 billion in funding as part of the Inflation Reduction Act. And the agency has said repeatedly that it plans to use some of that money for enforcement — meaning, going after taxpayers to ensure they’re not cheating the agency out of money it’s entitled to.

You may be worried that as the IRS ramps up audits, your chances of having your tax return further scrutinized will increase. The good news, though, is that the IRS is not planning to increase audit rates among average earners.

The IRS even said on its own website, “The agency is focused on pursuing high-income and high-wealth individuals, complex partnerships and large corporations that are not paying the taxes they owe. As a result, the IRS has no plans to increase the audit rate for households making less than $400,000.”

What if you’re a higher earner?

Clearly, the IRS is not looking to target taxpayers earning $70,000 or $80,000 a year when it ramps up audit rates. But what if you earn $500,000 a year? Should you be worried? The answer is, not necessarily.

One thing you should realize is that if you’re honest on your tax returns and report all of your income, your chances of getting audited will be minimized. The IRS is less likely to go after you for more money if you’re already disclosing your income and making an effort to pay taxes on all of it.

What’s more, even if the IRS does audit your taxes, it doesn’t mean you’re going to end up owing more money or getting fined. The IRS might question a certain deduction you’re claiming. But if you have evidence to back it up, then there’s no real problem. At most, all that’s happened is that you were inconvenienced by having to respond to an IRS notice.

The purpose of tax audits is to make sure that everyone pays their fair share of taxes. If you’re already doing that, then chances are, you don’t have anything to be concerned about.

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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 Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Warren Buffett is concerned about banking, commercial real estate, and geopolitical issues. Find out why the billionaire investor is not optimistic about the American economy. 

When Warren Buffett speaks, investors pay attention. It’s hardly surprising, given that the 92-year-old has amassed a fortune of over $100 billion, making him the fifth-richest person on Bloomberg’s Billionaires Index. Indeed, the annual meeting of Berkshire Hathaway, the investment firm he has led for over 50 years, has been dubbed the “Woodstock for Capitalists.”

This year’s event took place last weekend and was attended by tens of thousands of people. Buffett and his vice chairman, Charlie Munger, talked about everything from AI to the banking industry and the U.S. economy. Buffett warned that the economic climate has changed a lot in the past six months and said a lot of businesses will report lower earnings this year.

Why Buffett is downbeat on the U.S. economy

The Oracle of Omaha has concerns about the U.S. in the short term. But, in fairness to Buffett, he’s still positive about the U.S. He told shareholders that given the choice, America is the country he’d want to be born in if he were to be born today. He also thinks the U.S. dollar will continue to be the reserve currency.

All the same, he thinks that what’s been an “incredible period” for the economy is coming to an end. He said many of the businesses in Berkshire’s portfolio had benefited from low interest rates and government economic stimulus in recent years. Buffett believes this period is now over. According to Insider, he said, “It’s a different climate than it was six months ago.”

Buffett raised concerns about increased tensions between the U.S. and China and expressed a hope that the two world superpowers could find a route where both prosper. Munger warned of issues in commercial real estate, and both men were uneasy about the ongoing banking crisis.

Throw in high interest rates and Buffett is not optimistic about the near-term performance of a number of companies. “The majority of our businesses will actually report lower earnings this year than last year,” he said. He added that some companies were caught by surprise by the economic changes and have too much inventory on order.

Another warning sign is that Berkshire has made a combined $25 billion in net-equity security sales over the past two quarters, according to The Motley Fool. This increases its already sizable cash reserves to around $130 billion. This could signal a lack of confidence in the stock market as well as demonstrating that Buffett and his team don’t see many buying opportunities right now.

Is he right?

Buffett may be a highly respected and successful investor, but he doesn’t always get things right. He initially steered clear of tech companies because it isn’t an industry he understands deeply, which meant he missed early opportunities with companies like Google and Amazon.

However, his cautious approach to the U.S. economy is understandable right now. We don’t know how the banking crisis will play out, though Buffett says the FDIC and government have no interest in allowing Americans to lose their deposits. The full impact of the Federal Reserve’s aggressive rate hikes has yet to fully play out. Higher rates are designed to slow the economy by making it more expensive to borrow, which the Fed hopes will reduce inflation. It may also tip us into a recession.

Bottom line

Given that we’ve been hearing the sky will fall for quite some time, it’s tempting to dismiss the latest wave of recession warnings as fear mongering. For sure, Buffett’s words will come as a blow to those economists who think we can still avoid a recession. We might. But there’s also no harm in being prepared.

One leaf we can all take out of Buffett’s playbook is to have cash in the bank so we can either pounce on investment opportunities or weather economic storms. If you’re able to stash extra cash into a savings account and take steps to pay down debt, both will make your finances more resilient.

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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Emma Newbery has positions in Amazon.com and Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Amazon.com, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

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