Money Management

Home prices are still elevated, as are mortgage rates. Read on to see why buyers are still interested in purchasing homes. 

There’s a reason so many prospective home buyers chose to sit out the real estate market in 2022. Last year, mortgage rates rose sharply at a time when home prices were also quite elevated.

Things aren’t all that different today. Mortgage rates are still relatively high — and they’re a lot higher compared to where they sat in 2021. Home prices, too, are elevated — though they’ve cooled nicely in many markets.

The latter factor may be fueling a recent uptick in home buyer demand. A recent tweet by Redfin said, “House hunters are wading into the market as mortgage rates and home prices decline. Our home buyer demand index hit its highest level since last May while mortgage loan applications increased for the fourth week in a row.”

Although today’s mortgage rates are definitely not a bargain, they’re not quite as high as they were during the last few months of 2022. And with home prices dipping modestly, it’s easy to see why buyer demand has increased.

But should you move forward with a home purchase now, given where mortgage rates are? The answer might boil down your personal financial situation and the price you’re able to snag on a home.

Make sure your home is affordable

As a general rule, your monthly housing costs, including your mortgage payments, property taxes, and homeowners insurance premiums, should not exceed 30% of your take-home pay. If you can manage to buy a home that allows you to stick to that limit, then you may feel comfortable buying a home, even in today’s market.

Plus, you might manage to get a relatively good deal on a home if you’re buying one in an area where inventory has picked up nicely, or if you have a motivated seller who’s willing to make concessions to find a buyer in short order. That could mean being able to purchase a home for $325,000 that would’ve sold for $360,000 one year ago.

Of course, there’s still the matter of higher mortgage rates to contend with. But as long as you’re able to keep your housing costs to 30% of your take-home pay or less, you don’t have to sweat those as much.

Mortgage rates fluctuate all the time. And while they’ve been hovering in the 6% range since the start of the year, in time, they have the potential to creep downward. Once that happens, you may be able to refinance your loan into a new one with a lower interest rate. The result? Lower monthly payments to look forward to.

Meanwhile, if you start out with monthly mortgage payments you can afford and then those payments shrink, you’ll get to a much better place. So don’t write off the idea of buying a home today just because you’re looking at a higher interest rate on a mortgage than you’d like.

Focus on home prices rather than rates

Mortgage rates are not necessarily set in stone, because the option to refinance a home loan is out there. That’s why, in the course of your search, you may want to focus on home prices instead.

It’s possible to sign a mortgage at 6.25% today and eventually knock that rate down to 4.75%. But if you buy a home today for $325,000, that’s the purchase price you’re stuck with. So you’ll need to make sure it’s one that’s both reasonable and affordable for you.

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REITs allow anybody to invest in real estate. Learn all about how REITs work and see if these are a good place to put your money. 

Real estate is a popular investment. The traditional way to do it is to buy a property that you either use for rental income or sell for a profit, but this isn’t an option for everyone. It’s time-consuming, it’s expensive, and it’s risky, since you’ll be tying up a lot of your money in the property you buy.

The good news is that there’s a much more accessible option. It’s called a real estate investment trust (REIT), and if you want to get into real estate investing, one of these could be a great addition to your portfolio.

What’s a REIT?

A REIT is a company that owns, and in many cases operates and finances, income-producing real estate. REITs have been around since 1960, when Congress established them so that any investor would have the opportunity to invest in commercial real estate.

Investing in REITs is similar to investing in stocks. They’re bought and sold in shares, and most REITs are publicly traded, meaning you can invest in them through a brokerage account.

There are many types of REITs available, including residential REITs, office REITs, retail REITs, and healthcare REITs. If you have a specific type of property or market sector you want to invest in, you can focus on that type of REIT.

Pros and cons of investing in REITs

There are several benefits of investing in REITs:

They pay high dividends, making them great for earning passive income. REITs are required by law to pay at least 90% of taxable income as dividends.They make it convenient to invest in real estate. You don’t need to worry about coming up with a big down payment to buy a property. Since REITs are bought and sold like stocks, it’s also much easier and faster to sell them.They diversify your portfolio. Real estate also tends to be less volatile than the stock market.

Like any investment, REITs have their drawbacks. They often decrease in value when interest rates rise. Performance will also depend on the REITs you invest in.

The biggest drawback to be aware of with REITs is how they increase your tax liability. They pay nonqualified dividends, which are dividends that get taxed as ordinary income. So, while you can earn lots of passive income from REITs, you’ll also owe more in taxes.

Fortunately, there’s a way around this. If you invest in REITs through an individual retirement account (IRA), you won’t owe dividend taxes each year. Here’s how REIT taxation works with each type of IRA:

With traditional IRAs, you don’t owe taxes until making withdrawals, and contributions are tax deductible.With Roth IRAs, withdrawals are tax free, but you make contributions with after-tax income.

Should you invest in a REIT?

REITs are a good investment that have performed well over the years. Over the last 45 years, they’ve had an average compound annual return of 11.4%. That’s nearly identical to the S&P 500, an index tracking 500 of the largest publicly traded companies on U.S. stock exchanges, which had a return of 11.5%.

It may not be an absolute must-have, but a REIT is worth considering to diversify your portfolio. REITs are a good fit, in particular, if any of the following are true:

You’d like to invest in real estate.You want to earn more passive income from your investments.You have a stock-heavy portfolio and you want to reduce volatility.

If you decide you want to invest, you can pick individual REITs. Or, you can look into REIT ETFs. These invest your money across multiple REITs and real estate stocks, which comes with lower risk than only investing in a single REIT.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Shop at Trader Joe’s? Read on to learn about some new products. 

One of the best things about shopping at Trader Joe’s is that you never know what you’re going to find on the shelves. Trader Joe’s is constantly rotating its lineup of products, and this month, you’ll find these exciting items worth checking out. Best of all, you can buy all of these amazing finds without racking up a giant credit card tab in the process.

1. Buffalo Style Chickenless Wings

These days, people who follow a meatless diet have more options than ever for staying well-fed. One great thing about Trader Joe’s, aside from its low prices, is that it commonly offers a wide range of vegan foods. And now, it’s introducing a creative, delicious appetizer that’s sure to tantalize your taste buds. For $4.69, you’ll get a 12-ounce package of vegan wings made of soy and pea protein, plus a packet of hot sauce for an added zing.

2. Perfectly Pickled Pups

This Trader Joe’s appetizer is most definitely not vegan-friendly. But if you don’t mind a little meat in your life, you may want to pick up a box of Perfectly Pickled Pups, which are mini beef frankfurters infused with a dill pickle flavor. Serve them with ketchup, mustard, or your condiment of choice for a fun way to kick off a barbecue, party, or regular old Tuesday night. A 6.3-ounce package will cost you just $4.99.

3. Korean Gochujang Sauce

If you love a sauce that’s sweet and spicy, consider grabbing a bottle of this Korean Gochujang Sauce. You can pour it over chicken, fish, or a medley of vegetables for a tangy, amped-up entree. Or, use it to jazz up some rice. A 9.17-ounce bottle is only $3.49.

4. Ketchup Flavored Sprinkle Seasoning Blend

For many of us, ketchup is a staple item that deserves a place on the table, whether to dip fries, onion rings, or even pasta (if you have kids, you’re no stranger to noodles a la Heinz). But let’s face it — ketchup packs its share of sugar, and too much of it can make for a not-so-healthy diet. Trader Joe’s has somewhat solved for that with its ketchup seasoning blend. Sprinkle it over potatoes, fish, or anything your taste buds desire. You can grab a 2.6-ounce jar for $2.99.

5. Blueberry & Lemon Hand Pies

Now that spring is in the air, many people are craving light, fruity desserts over denser ones. Enter these hand pies. They’re sweet, tart, and easily portable, making them a great on-the-go snack for busy parents and hungry children alike. An 8.47-ounce package costs just $4.49.

At a time when inflation is surging, many consumers are eager to add to their savings account balance and minimize their spending. And shopping at Trader Joe’s could help make that possible. It pays to pop over to your local store this month and check out what’s on the shelves. Chances are, you’ll find at least one new product that tempts you without busting your grocery budget.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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A writer often struggles with tax season. Read on to see how she gets through it. 

It’s probably fair to say that most people don’t exactly enjoy the process of doing their taxes. After all, sitting down to comb through documents, bank statements, and various financial forms is a lot less appealing than sitting down to binge-watch TV or curl up with a good book.

But unfortunately, taxes are unavoidable. And for some of us, they’re extremely stressful.

By “some of us,” I mean me, specifically.

I’m self-employed and own my own business, so that means I might have to provide more documentation than the average filer. After all, I need to give my accountant records of all of my business expenses during the year. And rounding up those business expenses, from office supplies to utility bills, is time-consuming.

I also happen to own certain investments that require special tax forms — forms that typically aren’t issued until mid-March or later. So even if I wanted to file my taxes early, most years, that’s just not feasible.

Now, I’m sure I’m not the only person for whom taxes are a big source of anxiety. But I cope with that stress by doing these things.

1. I get really organized

When it’s not tax season, I find myself busy enough juggling my job with parenting and running a household. So during tax season, when I’m carving out extra hours to deal with paperwork related to my return, I need to make even better use of my time.

That’s why I specifically get myself hyper-organized from early March through mid-April, which is when I commonly find myself focusing on my taxes. I actually block off time on my calendar for tax return purposes so I know I have those hours allocated in advance. Doing so helps me stay focused and avoid a last-minute crunch.

2. I use a seasoned accountant whose knowledge I trust

Filing my own taxes is something I would never dream of doing. There are just too many nuances and rules for me to keep track of. And in doing the job myself, I’d be nervous about claiming the wrong deductions or missing out on ones I’m entitled to.

That’s why I outsource my tax return to a professional. But I also use an accountant who’s proven to have deep knowledge of the tax code.

I probably pay more money to have my taxes done than the average person (though to be fair, that’s partly because I own a business). But I also know I’m getting someone with extensive knowledge, and who has the ability to use that knowledge to my benefit.

3. I remind myself it’s only a limited-time thing

Each year, at the start of the tax season, I commit that year’s filing deadline to memory. And when the stress gets to me, I simply tell myself, “It’ll all be over by April 18” (at least this year, since that’s the 2023 filing deadline).

I can’t take the same approach with work-related pressure — that’s just a perpetual part of my world. But with taxes, I know there’s an end date in sight. Reminding myself of that makes the stress easier to cope with.

Taxes can be a drag no matter your circumstances. But I have to admit that they’re a common cause of stress for me every spring. Thankfully, I have a game plan in place for combatting that stress — and getting through the filing process with my sanity relatively intact.

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An emergency fund should only be used in certain situations. Make sure you’re using yours for the right reason by asking yourself these questions first. 

You can’t plan ahead for everything. That’s why preparing for the unexpected is a must, and that includes unexpected financial issues. One of the best ways to protect yourself from these is with an emergency fund. By setting some money aside for emergencies, you don’t need to borrow money if your car breaks down, you get sick, or any other calamity strikes.

Personal finance advice often focuses on how to build your emergency fund, which makes sense. That’s usually the hardest part. But it’s also important to know when to tap into your emergency fund. You don’t want to drain your emergency savings unnecessarily, and then be left unprepared if a real problem arises.

Finance personality Dave Ramsey shared three smart questions to go over before using your emergency fund. By asking yourself these questions, you’ll figure out if an expense is emergency-fund-worthy, or if you should find another way to pay for it.

1. Is it unexpected?

An emergency fund is your protection against things you don’t see coming. It’s not for predictable expenses, as you should ideally be saving for these separately.

For example, a car accident is unexpected. If you need to pay for repairs after a car accident, then using your emergency fund for that makes sense. Car maintenance, on the other hand, isn’t unexpected or an emergency. You know your car’s going to need oil changes, a tune up, and replacement parts at certain intervals. Save for these ahead of time so you don’t need to raid your emergency fund for them.

2. Is it absolutely necessary?

When you’re debating using your emergency fund, think about whether the bill you need to pay is a want or a need. If it’s not essential, then you shouldn’t pay for it with your emergency savings.

It’s usually not too difficult to separate wants from needs. If you lose your job, you’ll need to pay for rent and food with your emergency fund. A new TV, a vacation, or a designer jacket all fall pretty firmly into the wants category.

The hard part is resisting the temptation to dip into emergency savings for things you want. That’s why you need to be diligent about only using it for needs. And even with true emergency expenses, be careful not to spend more than necessary. For example, if your computer dies, it’s reasonable to buy a new one with your emergency fund. But you shouldn’t raid your emergency fund to get the most top-of-the-line machine, unless it’s what you need for work.

3. Is it urgent?

Save your emergency fund for expenses that you need to pay ASAP. If it can wait, then make it a savings goal that you work towards.

Let’s say your home is going to need a $5,000 repair. If a specialist tells you that you should do it right away, then it’s clearly a good time to use your emergency fund. But if they say that the repair can wait until next year without causing any issues, then it’s not exactly urgent. You may be better off planning to do the repair later and saving what you can every month until then.

There’s nothing like the peace of mind that comes with having an emergency fund. And if you’re facing down a real emergency, then you should use that money you’ve saved for this kind of situation. Just go through those questions that Ramsey recommends first to confirm that you’re using your emergency fund for the right reasons.

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Can you let an old credit card sit unused? Read on to find out. 

There may come a point when you start to contemplate whether it makes sense to keep an old credit card account open. It may be that although you’ve had that card for years, you’ve recently gotten approved for a new one that comes with a better rewards program.

In that scenario, your first inclination may be to cancel that credit card rather than let it sit in your wallet. But doing so isn’t necessarily the best move for your credit score.

Your credit score is calculated based on different factors, but closing an old credit card could impact two of them: credit utilization and the length of your credit history.

Your credit utilization ratio speaks to how much of your total credit card limit you’re using at once. Canceling a credit card is apt to reduce your total credit limit, which could drive your utilization ratio into unfavorable territory.

Meanwhile, if you close a credit card you’ve had open for many years, it could shorten the length of your credit history. That, too, could cause credit score damage.

As such, it could be a better idea to just hang onto an old credit card rather than close your account. But if you stop using that card altogether, you might run into some issues.

When you don’t use your credit card at all

It’s one thing to hang onto an old credit card and swipe it every three to four months to keep your account active. It’s another thing to not use that credit card at all.

If you go the latter route, Experian says that you can expect your credit card company to eventually do one of two things: reduce your credit limit, or close your account entirely. Both of these things have the potential to harm your credit score, as we just discussed.

Now, there’s no standard time frame credit card companies follow for taking these steps. Yours might decide to close your account if you haven’t made a purchase on your credit card in a year. Another company might wait less time or more.

Also, your credit card company may not even give you a warning that it’s about to slash your credit limit or cancel your card. So if you’re going to leave that card unused, that’s something to be aware of.

It’s good to keep an old account active

Closing an old credit card might hurt your credit score. But not using that card at all isn’t a great solution, either. You may, instead, want to use that card every three to four months for a small purchase.

In doing so, you might miss out on the chance to snag better rewards elsewhere. But that loss may be minimal.

Say you’re hanging onto an old credit card that only gives you 1% cash back on gas purchases, whereas your newest card gives you 3% back. If you use your old card for $100 worth of gas fill-ups during the year, it means that instead of getting $3 back, you’ll get $1 back. All told, that $2 difference could help keep your credit score in good shape, so it’s probably worth making that sacrifice.

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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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