Money Management

It’s an option worth looking at. 

The whole purpose of investing your money is to grow it into a larger sum. After all, if it weren’t for that upside, you wouldn’t take on the risks associated with buying assets like stocks, whose value have the potential to fluctuate from one day to the next. Instead, you’d perhaps keep all of your money in a savings account and call it a day.

But while your goal may be to grow your assets into a larger sum, one thing might get in the way of doing that — fees. You may not realize it, but different investments you choose come with fees. Mutual funds, for example, pay fund managers to make investment decisions. That cost is passed onto the people who put their money into those funds.

Also, if you have a 401(k) plan through your job, you may have the option to invest your money in a target date fund. These funds are often the default investment choice for a 401(k), so if you don’t choose funds of your own, your money will commonly land in a target date fund automatically. But target date funds are known for charging their share of fees, and those could eat away at your returns.

If you’re eager to grow your money while minimizing your fees, there’s one investment it pays to focus on, whether you’re investing in your IRA or a regular brokerage account. Opting for it could not only help you keep your fees way down, but also, diversify your portfolio nicely.

It pays to look at ETFs

ETFs, or exchange-traded funds, are funds that allow you to buy a batch of different stocks with a single investment. What makes them different from mutual funds is that they’re passive funds that simply track different benchmarks.

If you buy shares of an S&P 500 ETF, for example, it’s like putting your money into the 500 largest publicly traded companies in the market today. If you buy shares of an energy ETF, you’ll be adding a whole bunch of energy companies to your portfolio without having to go out and research each and every one.

ETFs are a great option for people who are seeking to diversify their holdings. But they’re also great for people who don’t want to pay fees. And the reason you’re not paying hefty fees is because people aren’t being hired to devise an investing strategy. ETFs are far more passive.

An option to consider for your portfolio

A recent Schwab survey found that 60% of ETF investors cite cost as the most important factor when choosing an ETF. If the idea of losing some of your hard earned money to fees doesn’t sit well with you, then you may want to consider loading up on ETFs, whether you’re saving for a far-off goal like retirement or are investing your money for other purposes.

As an added perk, ETFs trade publicly. You can track their share price from day to day, and you can even, in many cases, buy shares of ETFs on a fractional basis. This means that if you can’t swing the cost of a full share, you can buy a portion of a share to keep growing your portfolio even during periods when money is tight.

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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. Maurie Backman 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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Without one, you might seriously land in hot water. 

There’s a reason some people prefer to rent a home than own one, even if they can afford a down payment and an ongoing mortgage payment. They don’t want the financial and logistical responsibility of owning property. Rather, they’d prefer to write a single rent check each month and call it a day.

Owning a home offers many benefits. You get certain tax breaks and the chance to build equity in a place of your own. Plus, when you buy a home, you get to make the rules, and you don’t have to listen to a landlord. That means you can finally get the 90-pound dog you’ve been looking to adopt.

But when you own a home, there’s the potential for a lot to go wrong through the years. And it’s important to be prepared for that financially. If you don’t prepare, you might end up in serious debt. And you might even regret your decision to buy in the first place.

Don’t buy a home unless you have a solid emergency fund first

When you buy a home, you need funds for a down payment, money to cover your closing costs (unless you’re rolling them into your mortgage), and cash to pay your movers. But on top of that, it’s important to have money in savings to pay for home-related emergencies.

Financial and real estate expert Graham Stephan agrees. In one of his newsletters, Stephan wrote, “Just like you should have an emergency fund for yourself and your family, you should have one for your home too.”

Even if you buy a home that seems to be in great shape, you never know what issues might be lurking. And also, if you’re buying a home, you may have plans to stay there long term. But over time, different appliances and systems can succumb to wear and tear. Your roof might need to be replaced. Your heating system might give out on you (most likely in the middle of winter so you need to scramble to get a new one).

Even small repairs, like broken faucets and loose fence panels, might put a strain on your budget. So it’s important to have money in savings you can pull from to address issues with your home. If you don’t, you might easily land in debt.

You don’t want to bemoan your decision to buy

Many people end up regretting buying homes because they underestimate the total costs involved. So when you’re in the process of looking for a home, realize that your mortgage payment is only one of several expenses you’ll have to grapple with. And build in room in your budget for things like maintenance and repairs.

At the same time, make sure to have a decent chunk of cash in savings in case major repairs pop up that your regular paycheck has no chance of covering whatsoever. A good rule of thumb is to save enough cash to cover at least three full months of living expenses. The idea there is to get yourself through a period of unemployment, but cash reserves that robust should also be able to cover a larger issue with your home that arises.

Having a solid emergency fund could give you more peace of mind as a homeowner. And as Stephan himself says, it pays to “plan ahead and save enough so that it doesn’t become a financial burden.”

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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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We’re down to the wire. Here’s some valuable advice if your tax return still isn’t complete. 

Back in January, when the 2023 tax-filing season began, it may have seemed like you’d have plenty of time to complete your 2022 return. But alas, we’re about to enter the month of April, and your return isn’t yet complete.

If you fell victim to procrastination this year, you’re no doubt in good company. Or maybe you didn’t procrastinate. Maybe some of your tax forms were delayed, or your accountant kept blowing you off.

Either way, there’s not a ton of time to get your taxes done by this year’s April 18 filing deadline. So if you’re down to the wire, here are some tips you might find helpful.

1. Don’t rush the process

At this stage of the game, you clearly can’t afford to spend too much time finishing your taxes. But you don’t want to rush through the process, either. If you do, you might make a mistake that costs you money, either in the form of a lower tax refund or a larger check you’re sending the IRS.

2. Don’t assume you can’t get help

At this point, many tax professionals will indeed politely turn you down if you ask for help in filing your return by April 18. But that doesn’t mean you can’t get help at all.

Reach out to your network of friends, neighbors, and colleagues, and see if anyone knows of a tax professional who can squeeze another client in. Outsourcing your taxes could not only take some of the stress off, but result in a larger refund or a lower IRS bill.

3. If you can’t make the deadline, request an automatic six-month extension

If you’re due a refund from the IRS and you’re late submitting your tax return, you’ll be punishing yourself in that it will take that much longer for that money to hit your bank account. But the IRS itself won’t penalize you for being late.

The rules are different, however, when you owe the IRS money. In that case, failing to file your tax return by the deadline will result in a penalty equal to 5% of your unpaid tax bill per month or partial month your return is late, up to 25% of that total. That’s a penalty you really don’t want to get stuck with.

As such, if it’s looking increasingly unlikely that you’ll have finalized your tax return by April 18, request an automatic extension. That will give you an extra six months to get the job done, and you won’t face the aforementioned penalty.

Do keep in mind, though, that a tax extension won’t give you more time to pay any taxes you owe from 2022. If you don’t pay your tax bill in full by April 18, you’ll face interest and penalties on that unpaid sum — but the penalties won’t be as steep as the penalty for failing to file your return on time.

Many people wind up in a crunch on the tax front come early April. If that’s the situation you’re in now, these tips might help you keep your cool at a time when you may be on the verge of panic.

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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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