Money Management

There’s a reason dividend stocks are a favorite investment of mine. 

The great thing about owning stocks is that in time, their share price has the potential to appreciate in value (especially if you hang onto quality stocks for many years). That gives you a prime opportunity to sell your shares at a higher price than what you paid and walk away with a profit.

But share price appreciation isn’t the only way to make money in the stock market. If you own stocks that pay dividends, you have a prime opportunity to score some extra income along the way.

Now, not all stocks pay dividends. But it’s estimated that more than 80% of the companies that comprise the S&P 500 index pay dividends to shareholders, according to Titan Global Capital Management.

To be clear, paying dividends is not a requirement. Publicly traded companies can opt to take their earnings and reinvest that money in their respective businesses, or share some of the wealth with stockholders. Those that opt for the latter will pay dividends, and they might even increase their dividends over time (or not — the choice is theirs).

Meanwhile, I own a number of dividend-paying stocks in my brokerage account. And here’s why that works out really nicely for me.

1. I get extra money without having to earn it or do extra work

As a freelance writer, the more hours I work, the more I get paid. But boosting my income often means sacrificing precious downtime (and, in many cases, much-needed sleep). The great thing about dividend payments is that I get the money without having to do any extra work — other than researching those stocks initially to determine whether they’re a good fit for my portfolio.

2. I get more financial flexibility

There are months when my bills are higher than expected — even if I’m doing my best to spend cautiously. The awesome thing about collecting dividends is that I can cash them out when I need to and use the money for expenses like food and medical bills. That means not having to raid my savings account when I don’t want to.

3. I get an opportunity to grow my portfolio without having to contribute more of my own money

The more cash I pump into my brokerage account, the more money I have to invest with. It’s pretty simple. But freeing up cash to invest isn’t always easy, especially when my bills end up increasing through no fault of my own (thanks, inflation). That’s why I try to make a point to reinvest my dividend income. It basically feels like getting free cash in my brokerage account I can use to grow even more wealth.

There are plenty of quality stocks you can buy that don’t pay investors a dividend. But it pays to research that companies that do pay dividends and see if any are a good fit for your portfolio. You might benefit from that extra income stream, as well as the opportunity to reinvest your dividends to grow your portfolio through the years.

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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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Act soon to potentially get a great deal. 

There are many benefits to buying new construction. For one thing, you get to move into a house that’s in perfect condition (or at least it should be). You might also, depending on the situation, get an opportunity to customize certain features of your home — for example, choose your kitchen countertops, your bathroom cabinets, or the colors of the walls.

Also, when you buy new construction, you often get to avoid costly near-term repairs. That’s because many appliances, like water heaters, come with warranties, so you’re not likely to have to shell out money for repairs for at least a few years.

But there’s a downside to buying new construction — the cost involved. When you buy new construction, you’ll generally pay more for your home than you will for a property that’s been lived in. And you often have to make a larger down payment on a new construction home. Granted, that could help keep your mortgage payments manageable, but it’s a challenge nonetheless.

Another issue with buying new construction? Delays in the building process. That could cost you in different ways, not to mention add some upheaval to your life.

But right now, you might be able to get away with spending less on a newly built property. So if you’ve been interested in new construction, you may want to act quickly.

Builders are lowering prices

It costs a lot of money to construct a home, especially these days, what with inflation impacting the construction industry. But in February, 31% of builders reduced home prices, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index. That’s down from 35% in December and 36% in November.

If that trend continues, the percentage of builders offering price reductions might shrink even more as the year goes on. So if you want to buy new construction, you may want to act soon. Wait too long, and you might miss out on the chance to get a discount.

Will new construction pick up this year?

Builder confidence in the market for newly built single-family homes is up, according to the NAHB/Wells Fargo Housing Market Index. And now that supply chain backlogs are becoming less of an issue, builders might have an easier time ramping up on new construction.

An uptick in new construction could help solve the inventory shortage the real estate market is plagued with at present — but not immediately. It takes time to build a home. On top of the construction itself, permits need to be issued and inspections need to be carried out.

All told, new construction certainly has its perks. If you can afford the higher price tag that comes with a newly built home, you might appreciate owning a place no one has lived in before. But be sure to budget extra money for a newly built property purchase. And also, budget extra for upgrades you may want to make. Even though builders are lowering prices, that doesn’t mean you won’t end up spending more than anticipated.

Our picks for the best credit cards

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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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With so much to love, it’s no wonder why so many shoppers are Trader Joe’s loyalists.  

Most shoppers are looking for ways to keep more money in their checking accounts. If your grocery spending is getting out of hand, you may want to try shopping at a different store. You may find a new-to-you retailer with better product offerings and lower prices. Many people with Trader Joe’s stores in their community prefer to shop there to keep their spending in check. If you’re new to the brand, here are some of the perks of shopping at Trader Joe’s.

1. Generous return policy

Not all grocery stores have a generous return policy, but Trader Joe’s does. If, for some reason, you’re unhappy with a purchase, you can take advantage of the retailer’s return policy. Most products can be returned for a refund — even if you already opened the item. Keep this in mind if you’re a first-time shopper.

2. No need to wait for sales

Many grocery stores have weekly sales. Shoppers can plan their shopping trips by browsing the sales flier before filling their carts. One perk that makes Trader Joe’s stand out is the retailer doesn’t have sales. You can expect similar product pricing every time you shop. That means you won’t have to worry about missing out on a big sale.

Plus, sticking to a weekly grocery budget can be easier since you’ll have a better idea of what prices you’ll pay after shopping there regularly. If you like to review prices before you go to the store, you can use the Trader Joe’s website to check prices for the products you plan to buy.

3. Everyone is welcome

Unlike some retailers like Costco, you don’t need a membership to shop at Trader Joe’s. Many households struggle to afford rising food costs, and paying a yearly membership fee for lower prices is a deal breaker. But anyone can shop at Trader Joe’s to take advantage of the many deals.

4. Most products are store-brand

Most of the products sold at Trader Joe’s are its own brand. One benefit is that choosing what items to put in your cart can be easier as you’ll have fewer brands and prices to compare. Selling store-brand items helps Trader Joe’s keep prices low. If you don’t need to buy name-brand products and like to get a good deal, shopping there may be a good way to save more money.

5. Fun atmosphere and friendly staff

Trader Joe’s is also known for its welcoming atmosphere and friendly staff — which can be a rarity. You may want to visit your local Trader Joe’s store if you’ve had poor customer service experiences at other stores. I always leave the checkout line at Trader Joe’s in a better mood.

6. Get a great deal

Trader Joe’s has a reputation for its affordable prices. While not every product sold at the store is a steal of a deal, many are. Exact prices can vary by location, but below are a few impressive deals you can score by shopping here:

Individual Greek yogurt cups cost $0.99 each Many spices and seasoning mixes are priced at $2.99 or less Bananas cost $0.19 each

7. Meal planning is easier

Planning out what you’ll cook can be beneficial as you make your weekly grocery list. Doing this can help you spend less and reduce waste. Trader Joe’s takes the stress out of meal planning thanks to its Fearless Flyer. This free newsletter is filled with product recommendations, recipes, and meal ideas so you can spend less time planning and more time living.

Give Trader Joe’s a try

If you have a Trader Joe’s store in your community and have yet to shop there, now is the perfect time to visit to see what you’re missing. You may find it’s easier to stay on budget and honor your personal finance goals by shopping at this fun and affordable grocery chain.

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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.Natasha Gabrielle 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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It’s a group you don’t hear about all too often anymore. 

Average credit scores vary quite a bit by generation. In fact, there’s a difference of more than 80 points between the generations with the highest and lowest average credit score, according to an analysis by Experian. Here’s what it found and which generation comes out on top.

The average credit score by generation

Experian found that the average FICO® Score across the United States is 714. Just to be clear on the terminology, FICO® Score is the type of credit score that’s most widely used by lenders.

Here were the averages by generation (the current age group for each generation is included in parentheses):

Generation Z (18–25): 679Millennials (26–41): 687Generation X (42–57): 706Baby boomers (58–76): 742Silent Generation (77 and older): 760

These scores all fall into at least the “good credit” category, which ranges from 670 to 739. Baby boomers and the Silent Generation are in the “very good credit” category from 740 to 799. That’s great news, as it shows that a large portion of adults are managing credit well.

As you can see, the average credit score rises by generation. Why is that? Age doesn’t have a direct impact on your credit score, but it can have an indirect impact on the factors that determine your score. Here are the factors used to calculate your FICO® Score and how age can sometimes play a role:

Payment history (35%): Your record of on-time and late payments. Older adults have had more time to build up a long history of on-time payments.Amounts owed (30%): How much you owe on credit accounts, and especially on credit cards. Younger adults sometimes need to take on more debt since they’re just starting out in their careers and making entry-level salaries.Length of credit history (15%): The amount of time you’ve been using credit. Age plays a clear role here, since the only way to improve this is with time.Credit mix (10%): Your mix of revolving credit and installment loan accounts. Older adults sometimes have a more diverse credit mix of loans and credit cards, although this isn’t always the case.New credit (10%): Your recent applications for new credit accounts. Younger adults may be more likely to apply for new credit, whereas older adults already have the credit cards and loans they need.

This doesn’t mean you can’t reach a high credit score if you’re young. You can, and it’s not that difficult, either. You just need to know how to do it.

How to build your credit score

Even though your credit score might seem complicated, improving it and getting a good one isn’t. There are only a few things you need to do for a high score that will qualify you for the best credit cards and the lowest interest rates on loans.

Step one is getting a credit account. To build your credit score, you need to borrow money and pay it back. A credit card or loan will work here, but a credit card is the best option, for a few reasons:

You can use a credit card without paying interest. If you pay the bill in full every month (which is the best way to use a credit card) you don’t get charged any interest on your purchases. A loan, on the other hand, will have interest charges.You can keep using your credit card indefinitely. You’ll eventually pay off a loan. With a credit card, you can use it every month, pay the bill in full, and continue building your credit, year in and year out.

If you don’t have a credit card yet, check out starter credit cards. Since these are intended for consumers just starting out, you don’t need a credit history to get approved for one.

Once you have a card, here’s how to use it:

Make at least one purchase per month with your credit card.Don’t overspend. This puts you at risk of credit card debt and increases your amounts owed, which can lower your credit score. A good rule of thumb is to keep your balance below 30% of your credit limit.Pay your credit card’s full statement balance by the due date every month.

If you follow those steps, you’ll build a good payment history and keep your amounts owed on the low side. Those two factors make up the bulk of your credit score. And as time goes on, your credit history length will increase as well. No matter how old you are, this approach will allow you to build and maintain a high credit score.

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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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If you can snag a tax break in the course of investing, you may want to go for it. 

When you’re saving for a far-off goal like retirement, you may have different options for investing your money. You could open a traditional IRA and get a tax break on the money you put in. Or, you could open a Roth IRA and get a tax break on your investment gains and the money you take out.

Another option is to simply invest your money in a regular brokerage account. But if you ask Dave Ramsey, that might be a mistake.

A mixed bag

Taxable investment accounts, like regular brokerage accounts, have their benefits. These accounts give you complete control over your money. There are no annual contribution limits you need to pay attention to, and you can cash out your investments and withdraw funds from your brokerage account at any time without penalty.

Now, this doesn’t mean you can withdraw funds at any time without taking a loss. If you invest $10,000 and the market tanks, leaving you with $8,000, cashing out completely will mean losing $2,000. The point, however, is that your account itself won’t come with rules that restrict what you’re able to do.

IRAs, on the other hand, penalize you for withdrawing funds prior to age 59 1/2. And there are annual contribution limits that change yearly you need to stick to.

But while taxable investment accounts give you more flexibility, you lose a very key feature — tax breaks. And that could be costly.

Let’s say you decide to invest $5,000 in a traditional IRA. If you put that money into an account this year, the IRS won’t tax you on $5,000 of your 2023 income. That’s a pretty neat deal. But if you put $5,000 into a regular brokerage account, there’s no tax benefit to reap at all.

Now, let’s say you decide to put $5,000 into a Roth IRA this year. That won’t exempt any of your 2023 income from taxes. But, let’s say that over time, your Roth IRA balance grows from $5,000 to $10,000, not because you’ve added money, but because you’ve been a savvy investor. In retirement, you can withdraw your $10,000 tax-free, and you won’t pay taxes on that $5,000 in gains.

By contrast, let’s say you invest $5,000 in a taxable brokerage account and it grows to $10,000. You’ll be liable for capital gains taxes on your $5,000 profit. And, depending on how long you’ve held your investments, your capital gains tax rate could end up replicating your ordinary income tax rate. This will apply if you sell investments before having held them for a year and a day.

Don’t pass up a chance to save on taxes

Taxes can be a huge burden — both during your working years and during retirement. While there are benefits to investing in a regular brokerage account, losing out on tax breaks could mean burdening yourself with a higher IRS liability.

If you want to retain some flexibility with your money, consider dividing your investment dollars between a tax-advantaged retirement plan and a regular brokerage account. That should give you the best of both worlds.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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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