Money Management

Economic uncertainty is always with us, and having cash savings can help you weather a storm. Read on to learn why and how to prioritize saving. 

If you were facing a surprise bill amounting to $400, would you be able to pay it without going into debt? Two-thirds of Americans couldn’t, as a report from SecureSave found earlier this year. Having emergency savings is your cushion against everything from an unexpected expense like a car repair bill to a more severe issue like a job layoff.

Financial guru Suze Orman is a big advocate for emergency savings, and for good reason. In a recent tweet, she noted that “recessions are part of our economy,” so despite the currently low unemployment rates, it’s important to prioritize building an emergency fund sufficient to cover a full year’s worth of bills. Let’s take a look at why Orman recommends saving so much in your emergency fund and why we can’t count on low unemployment forever.

Really, a one-year emergency fund?

The commonly held wisdom has long been that you should have three to six months’ worth of expenses saved up for emergencies. The idea is that this amount should be enough to cover many common financial emergencies (like a car repair, or maybe your homeowners insurance deductible in the event of a covered peril, or a surprise medical bill that your health insurance doesn’t cover in full). It could also get you through a few months of your regular bills if you were to lose your job. But in the wake of the COVID-19 pandemic, Orman has been recommending saving a full year’s worth of expenses.

When the world shut down in spring 2020, a lot of people lost their jobs, and the unemployment insurance system through individual states was slammed. A lot of people waited to receive benefits, and while we did get stimulus payments a few times during those earlier days of the health crisis, many people struggled to cover their regular expenses and had to go into debt to do so. Having a bigger emergency fund can help you weather a more extreme situation like a once-in-a-century pandemic.

Economic downturns are a matter of when, not if

Orman is also correct to point out that in our economy, recessions aren’t uncommon. A recession is a period of economic decline, and during one, job losses are more common as companies lay off employees in an attempt to save money and shore up their finances.

Having cash savings in a high-yield savings account can help you bridge the gap between your unemployment pay and how much your bills are, saving you from needing to rely on credit cards or other borrowed money. With that in mind, here are a few ways you can build more savings for a rainy day.

A few tips for building emergency savings

We’ve all heard from certain finance gurus who insist that the reason you don’t have as much money in savings as you need is because you spend too much on fancy coffee. While many people do spend more than is maybe advisable on small expenses like this, the fact of the matter is that your salary (or lack thereof) is likely a bigger problem. Yes, cut back on some of your discretionary spending — a good way to do this is to build a budget and see where all your money is going, then make changes. But cutting all the fun spending out of your life is a way to make you resent your budget in a hurry.

A more effective technique for building savings is to increase your income. This could be by getting a raise at work (never a guarantee) or by changing jobs altogether (often a better way to get a higher salary). Or you might consider adding a side hustle if you have a little time. There are many ways to approach this, and you could take on casual gig work like driving for a ride-hailing company, or you could find a more robust role if you have marketable skills like writing or graphic design. The great thing about side hustle money is that, less taxes, you can use it for whatever you want because it’s not already earmarked for your regular bills.

Another tip to build savings more easily is to automate the process. If you struggle to actually move the money from your checking account to your savings, this can really help. Schedule an automatic transfer from one account to the other for when you get paid, and the money will move over without giving you the chance to spend it.

Financial emergencies and recessions are an unfortunate part of life, but having a robust emergency fund can help you cope. Make your emergency fund a top priority and rely on the tips above to help.

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A writer explains how she and her husband reconcile different spending preferences. Read on to learn more. 

The U.S. has the sixth highest divorce rate in the world, with 40% to 50% of married couples eventually splitting up, according to Divorce.com. And it’s not really a secret that money-related disagreements are a huge driver of marital strife — and can commonly cause a couple to sever ties and end their relationship.

Thankfully, my husband and I don’t tend to fight about money so much these days. But that wasn’t always the case.

Earlier on in our marriage, when money was tighter, we constantly argued over whether we should be adding to our savings account versus spending on the things we wanted, with me frequently pushing for the former and him the latter. We also had a tendency to argue over how to spend money we didn’t need for bills like our mortgage loan and car payments.

See, my husband is really into technology, and so he loves to spend money on things like gadgets, computers, servers, and devices that, to this day, I can’t even begin to identify. I, on the other hand, prefer to spend money on experiences — things like a nice meal or a fun outing.

It took us a bit of time to find a way to address our different approaches to spending. But these days, we have a pretty good system that works for us.

When grown-ups get an allowance

The concept of an allowance is popular among kids. But my husband and I actually don’t give our kids an allowance these days. Rather, we one to ourselves.

What we do is set a budget at the start of the year that accounts for all of our expenses and savings goals. We also automate our savings so that we’re putting money into the bank and retirement accounts before we get a chance to spend our paychecks in full.

Once we’ve set aside money for savings and our essential bills, we allocate money for things like cable, streaming services, and family vacations — things we all get to enjoy. And from there, we give ourselves an allowance to work with — money we can spend on anything we want, no questions asked.

We’re also allowed to pool our allowance money and carry funds from one month to the next. So if my husband wants a really expensive gadget, he can save his allowance for a few months to buy it.

You might think this setup is demeaning. After all, we’re working adults with an allowance. But actually, it works nicely for us.

This way, we’re each allowed to spend money on the things we want without it being an argument and without having to feel guilty. We also don’t need to ask each other for permission every time we want to spend money on something that might benefit us alone, which gives us more autonomy.

An easy way to avoid conflict

For our marriage to work, my husband and I need to be on the same page when it comes to major financial goals and priorities. And thankfully, we are.

It’s important to both of us to be able to put our kids through college, and we both feel we should do what we can to build retirement savings. We also both feel that we shouldn’t overspend on housing, because we like having more leeway to spend on other things.

But at the end of the day, my husband knows I’m never going to get excited about the prospect of a new TV or programmable switch or router like he is. And that’s okay. I don’t have to love gadgets or even understand what half of his actually do. I just need to respect the fact that that’s how he likes to spend his money, and work things out so he’s able to do just that.

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April is a great time to learn more about money management. Keep reading for some tips to avoid getting scammed when taking out a loan. 

Like many people, you may need to borrow money sooner or later. This could be to buy a home or a car, to start your own small business, or to get some work done on your house. Whatever the reason, you don’t want to fall victim to a predatory lender. Predatory lenders charge excessive fees and trap you in expensive loans, and your finances and credit can suffer as a result. April is Financial Literacy Month, so let’s take a look at a few ways to ensure you’re dealing with an above-board lender.

Keep on top of your credit

For a lender, your credit score and credit report are some of the most useful bits of information about your financial life. Luckily, you have access to them, too. You can view your credit report for free every week for the rest of 2023, and you can likely see your credit score on the website or mobile app of your bank or credit card issuer.

If you already know the state of your credit before applying for a loan, you’ll be able to target lenders that work well with people like you. For example, if you know your credit needs some work, you might apply with a lender on our list of the best personal loans for fair credit. And if you know your credit is in great shape, you can target lenders that offer loans for good credit. If you have time to do so before borrowing, consider boosting your credit score to get a better deal on a loan.

Shop around and research lenders

If you’re borrowing money, don’t just go with the first lender you speak to about rates and terms. Make it a point to consider multiple lenders and even multiple types of loans. You never know which will offer you the best deal, and if you have a range of options to choose from, you’re less likely to end up a victim of a predatory lender.

For example, if you’re buying a home, don’t just assume you have to choose a conventional mortgage. If you’re a first-time home buyer, you might qualify for an FHA loan, or if you’re intending to buy in a rural area, you might be able to get a USDA loan. And check with your regular bank (if it offers mortgage loans), but also consider the credit union in your neighborhood, as well as the online-only lender you’ve heard so much about.

And when it comes to vetting those lenders you’re talking to, be sure to read reviews and even ask friends and family which ones they’ve had good (or bad) experiences with. The Ascent has reviewed many lenders, and you’ll find other resources aplenty out there on the internet.

Check out the fine print and ask questions

When you pick a lender, read everything before you sign anything. Ask questions, and if you don’t understand a term or a fee you’re going to be charged, wait for it to be explained to you before you sign. In the case of, say, buying a car, if you’ve never been through the process before, you might want to bring a trusted (and experienced) friend or family member with you.

If the lender refuses to answer your questions, pressures you to sign the paperwork, or otherwise gives off any red flags, trust your gut. Don’t sign, back away, and find a different lender.

See what fees you’ll be charged on top of interest

You can certainly expect to pay interest on your loan because that’s how the lender makes money on the deal. But what you need to be careful of is additional fees on top of the interest. For example, some lenders charge a loan origination fee to cover their costs in processing your loan application, and this could amount to 1% to 8% of the amount you’re borrowing.

Another extra fee you might face is a prepayment penalty, which could be charged if you pay your loan off early. Thankfully, not all lenders charge these, and if the one you’re considering does, you may be able to negotiate those fees.

Avoid payday lenders at all costs

If you’re really in a pinch and need money sooner rather than later, you may consider going to a payday lender. Don’t do this. Depending on where you live, payday loans may be illegal, which should tell you all you need to know about these predatory loans. Payday loans can trap borrowers in a cycle of debt that can be hard to break free from. Instead, can you borrow money from friends or family? Can you sell some belongings? Maybe your bank or credit union can offer you a small-dollar (or salary advance) loan.

If you’re borrowing money, go in with your eyes wide open and be sure to shop around, research lenders, and avoid known predatory lenders like those offering payday loans. You might be paying a loan back for several years (or longer, in the case of a mortgage), so it’s good to put in the time and effort to protect yourself from financial entities out to do you harm.

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

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Buying property with a friend may help you get a better deal. But read on to learn why it’s important to get everything in writing before you take that leap. 

The dynamics of couples and families have changed dramatically even in my lifetime. According to the Pew Research Center, the number of Americans who don’t live with a spouse or partner is rising. That has an impact on buying property — it’s harder to get a foot on the property ladder if you’re buying alone.

That’s one reason I opted to buy with a friend. It makes homeownership more affordable, whatever your relationship status. If you’re considering going that route, here’s how you can learn from my mistake.

The pros and cons of buying a house with a friend

One of the biggest benefits of buying with a friend — or even friends — is that you can afford a property that would otherwise be out of your reach. Assuming you both have good credit, you may find it easier to qualify for a mortgage loan. You could also get a better mortgage rate than if you were going solo, particularly as pooling your resources will help you raise a bigger down payment.

Plus, you can split some of the costs associated with buying a home, such as origination fees, home appraisals, and other closing costs. And once you own the property, you can share the bills and maintenance costs. If you’ve never owned property before, the process is less scary if you’re doing it with someone else.

On the flip side, you’re tying your future and a significant chunk of money to someone who is not your spouse or significant other. If your friend doesn’t pay their part of the mortgage, you will be on the hook for that money. Any missed payments will impact your credit score. And, unlike a flat share, if one of you wants to move out, it isn’t a simple process. You may need to sell the property or refinance the mortgage to get it under just one name. That can take time, and — as is the case in my house — you may still need to live with one another while it plays out.

My biggest joint house-buying mistake

My friend and I did a lot of things right when we bought the property together. We’d already lived together for several years, we trusted each other both personally and financially, and we knew we had similar priorities. We talked through what we could realistically afford and kept money aside for renovations and unforeseen expenses.

We talked a lot about, for example, what would happen when one of us wanted to sell. How we’d manage it if one of us entered a serious relationship. Who’d pay which utility bill and how we’d keep things fair. We weathered the COVID-19 lockdowns better than some married couples.

But the big mistake we made was that we never got around to putting our agreement in writing. That’s come back to bite us big time. One of us wants to move out and we have very different recollections of the conversations we had years ago.

Get everything in writing

Making a legal agreement between friends can be awkward and time consuming. It’s easy to put it off for a day that never comes, particularly when times are good and you trust the other person. But when times are not so good, you’ll kick yourself for not tying down the details.

What’s more, there’s value to the process of transferring a verbal conversation into a written agreement. It may highlight areas where you’re actually not on the same page that got glossed over in conversation. The discussion process itself can help avoid any misunderstandings and clarify your thinking.

Here are a few of the points to consider:

If one of you decides to sell, how will that work? Could one person buy out the other? How would you agree on a fair price? What notice would you need to give one another? Having a clear exit strategy will make a big difference when the time comes.What happens if house prices fall and you have to sell at a lower price? On the other side, if you make money, how will you handle any capital gains on the property? How will you manage utility bills and maintenance costs? Will you share any renovation costs equally?What homeownership structure do you want to use? There are different types of joint property ownership, so it’s good to understand your options. Related to that, consider what would happen if one person died. What would happen to their share of the house?

If I were doing this again, I’d also get legal advice. You might be able to hammer things out over the kitchen table, but a lawyer might think of things that haven’t occurred to either of you. Plus, they might know about local laws or tax considerations that impact your situation.

Bottom line

Whatever type of relationship you have, breaking up can be painful. And sadly, the good intentions people have when they embark upon a project don’t always hold through to the end. Getting things in writing avoids a lot of misunderstandings and can at least minimize some of the financial ramifications. Sure, one side may still try to renege on the deal. But a legal agreement makes that harder to do.

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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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You may be liable when you’re underbilled for property taxes. Read on to learn more. 

In New Jersey, where I live, the median property tax bill is $8,928. Compare that to Alabama, which has a median property tax bill of $742, and it’s a wonder that people actually manage to afford to live here.

But for many people, New Jersey is a gateway to the higher salaries offered by companies based in New York City — only without having to live in a cramped apartment the size of a glorified shoebox. As such, my family has called New Jersey home for more than a decade, even though owning a house in the Garden State can be a significant financial burden.

Now to be fair, home prices in some parts of the state aren’t actually so outrageous. What tends to be more of a problem is the property tax bill that comes with your home. Even if you manage to sign an affordable mortgage, your taxes might end up costing more than your monthly mortgage payment, depending on the part of the state you reside in.

When my husband and I bought our current home about 14 years ago, we knew to set aside plenty of money in our budget for property taxes. And we also knew to boost our savings account balance before buying our house. That ended up being a really good thing, because we faced a very unpleasant property tax surprise our second year living in our home.

When your property tax bill is wrong — and you end up paying the price

The home my family lives in today is a home we watched get built from the ground up. And while there were pros and cons to buying new construction, one downside didn’t make itself obvious until our second year of living in our house.

When we first moved into our home, we were given an assessment of its value, and our property tax bill was based on that assessment. We paid our property taxes in full and figured that was that.

A year later, we got a notice from our township saying that because we’d purchased new construction, they hadn’t gotten a chance to assess our home properly. Because of that, we were underbilled for property taxes our first year in our home. And as such, our township demanded a few thousand dollars extra from us almost a year after we were finished paying the previous year’s property tax bill.

My husband and I were shocked and outraged. We didn’t see how on earth we could be expected to have to pay that bill retroactively when it was our township that billed us incorrectly. But we also figured that if we were to try to get a lawyer and fight that bill, we’d spend more money on legal fees than the amount we were being asked to pay. So in the end, we dipped into our savings, wrote that extra check, and just dealt with it.

Be careful when buying new construction

There are different surprise expenses you might encounter when buying a new construction home, like having to pay a premium for upgrades and finding out there are certain features your builder isn’t including (we had to buy our own towel rods and bathroom lighting, for example). But also, don’t be surprised if your initial property tax assessment ends up being inaccurate.

To this day, I’m still not totally convinced that our township had the legal right to go after us for higher property taxes a year after the fact. But I’m also still, to this day, not in the best position to determine that since I’m not a real estate lawyer and don’t wish to pay for one to simply satisfy my curiosity.

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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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A $10,000 monthly mortgage could buy you a home with a $1.45 million sticker price. Read on to see what that looks like in five hot housing markets. 

What could you buy with a $10,000 monthly mortgage?

According to our mortgage calculator, a $10,000 monthly mortgage is roughly what you’d pay on a $1.45 million home — assuming you put down 20% ($290,000), took out a 30-year mortgage, and got a 7.5% mortgage rate.

A $1.45 million home may sound like a lot of space. But depending on where you choose to live, $1.45 million could mean a luxury house in the suburbs or a 2 bedroom condo in a big city.

What could $1.45 million buy in some of America’s most popular cities? Let’s take a look at what’s available on Zillow and see.

1. New York City (Manhattan)

Bedrooms: 1–3Bathrooms: 1–3Square footage: 600–1,500Median sale price for New York City: $788,000

A 600 to 1,500 square foot apartment in Manhattan will cost you roughly $1.45 million. That’s about 83% less space than what you could buy in Buffalo (around 7,750 square feet) for about half the price ($650,000).

2. Honolulu (Waikiki Beach)

Bedrooms: 1Bathrooms: 1Square footage: 700–800Median sale price for Honolulu: $590,000

Buying real estate near Honolulu’s iconic beach will mean sacrificing space for volcanic views, white sand beaches, and turquoise waters; a $10,000 monthly mortgage will get you about 700 or 800 square feet. At that price, you’re paying roughly $1,812 to $2,070 per square foot.

Of course, if you want free cleaning service, you could also take your hypothetical down payment ($290,000) and live at the Waikiki Beach Hilton Hotel at $200 per night for roughly 4 years.

To be sure, it isn’t just Waikiki Beach’s real estate that’s valued so highly. Housing shortages and spiked demands have made it difficult to find housing pretty much anywhere in Hawaii, especially if you’re trying to own and not rent. For example, if you were to buy in Honolulu itself, you could get 900 to 1,000 square feet with $1.45 million.

3. San Francisco (Union Square)

Bedrooms: 2Bathrooms: 2Square footage: 1,200–1,500Median sale price for San Francisco: $1.4 million

No matter where you buy in San Francisco, you’re going to spend roughly $1 million to get anything more than 1 bed and 1 bath. With $1.4 million to play with, you could get 2 beds and 2 baths — if you’re lucky. Competition there is still fierce, and any homes that start at $1.4 million will likely get bid up higher.

4. Los Angeles (Hollywood)

Bedrooms: 2Bathrooms: 1–2Square footage: 1,500–2,000Median sale price for LA: $978,000

Los Angeles was voted the fourth most expensive city in the world, tied with Hong Kong. Studio apartments here go for about $2,000 a month, and luxury homes can value in the multi-millions. But what could you buy with a $10,000 monthly mortgage?

Let’s look at one of the most famous places — if not the most famous place — in the world: Hollywood.

There, a $10,000 monthly mortgage could buy you a 2 bedroom, 2 bath with 1,500 to 2,000 square feet, which comes out to around $725 to $966 per square foot. That’s not bad, considering your neighbors’ houses are valued at $2 to $5 million.

5. Washington D.C (Capitol Hill & Penn Quarter)

Bedrooms: 2–3Bathrooms: 2–4Square footage: 1,300–2,300Median sale price for D.C: $643,000

A $10,000 monthly mortgage in the nation’s capital could buy you a 1,300 square foot condo in Penn Quarter, or roughly 2,000 to 2,300 square feet of home on Capitol Hill.

Of course, you could just pop over the Anacostia River and buy the same square footage (roughly 1,500) for a home that’s more than half the price ($500,000).

How can you buy more home for less?

Step one: Buy a home outside of big cities, specifically those that have limited land, low housing supply, and unsustainably high demand.

Step two would be to save more down payment, take steps to increase your income, and look for buying opportunities like foreclosures and short sales. If buying a home isn’t urgent, you might also want to wait and see in what direction the Federal Reserve takes its rate-hiking campaign. Even shaving a few basis points off your mortgage could help you buy more home than at today’s rates.

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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.Citigroup is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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