Money Management

Homeownership certainly isn’t for everyone, and it may not be right for you. 

Owning a home may have been a dream of yours at one point. And you may have pushed yourself really hard to come up with a down payment on a place of your own.

But just because you’ve owned a home for quite some time doesn’t mean you’re stuck with it. You may reach a point where renting becomes a better option. If these signs apply to you, it may be time to look at putting your home up for sale — and becoming a renter instead.

1. You’re struggling to keep up with your costs

You were no doubt aware when you bought your home that you’d be on the hook for more than just a monthly mortgage payment. But sometimes, the costs associated with owning a home can rise over time — and at a faster pace than expected. That could put you in a position where your home becomes very difficult to keep up with.

Maybe your property taxes have risen exponentially since you made your home purchase. Or maybe you keep getting stuck with expensive repairs that are forcing you to drain your savings account.

Either way, if you’re struggling to keep up with your homeownership costs, then it may be time to look at renting instead. When you rent a place to live, your costs are more predictable, since you’re basically just writing the same check to your landlord every month. You don’t have to worry about things like property tax hikes or unplanned repairs, because those are your landlord’s financial responsibilities.

2. You don’t have the time to commit to maintenance

It takes more than just money to keep up with homeownership; it also takes time. You have to mow the lawn, stain the deck, and clean out the gutters regularly. And even if you’re able to outsource these tasks, you still need to deal with setting up the right service and paying invoices after the fact. If that’s work you just don’t have the time or capacity to deal with, then renting could be a better choice.

3. You’re spending so much on your home that you’re not meeting your other savings goals

It’s not unusual for housing to be someone’s greatest monthly expense. This holds true whether you rent or own. But if you’re spending such a large chunk of your paycheck on housing that there’s little to no room left over to put aside for other goals, like retirement, then it may be time to look at renting.

As of 2021, 65.5% of Americans owned their homes, according to the National Association of Realtors. But just because the bulk of Americans own homes doesn’t mean you have to.

If owning a home is causing you financial stress and it’s just not working out, then there’s nothing wrong with selling your property and renting for a while instead. You can always go back to homeownership when your financial situation improves, or when you have more time in your schedule to deal with maintaining a property.

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Do kids really need so much new stuff? 

As a parent of two toddlers, I’ve come to realize many times over the past few years that kids can be a lot more expensive than you may expect — even if you plan for their care costs. Surprise expenses seem to crop up all the time and can put a real dent in your bank account.

That’s why I generally try to be mindful about what I spend on my children. Unfortunately, that’s not always easy, and I realized recently that I was giving my credit cards a little too much of a workout buying toys for my kids. Once I saw what I’d been spending and surveyed their overfull playroom, I decided to swear off buying toys for them in 2023.

This doesn’t mean I’m going to turn into the Grinch, though. Here’s what we’ve decided to do instead of hitting the toy aisle and buying new things.

Focusing on experiences, not things

The biggest change I’m making to avoid buying more toys is focusing on experience gifts instead. This has become my top priority because I realized that when I think about my childhood, I can’t really remember that many toys I played with, but I do remember amazing family vacations and outings.

To put this into practice, I gave my son Seaworld passes for his third birthday, and we’re going camping at Fort Wilderness in Disney for my daughter’s first birthday. My kids were super excited to hear about all the adventures we’d be having, and my son now has the Sea Lion and Otter show memorized after about a dozen trips there, so he’s already had way more fun than he would have with any toy we’d have bought him.

We’ll be doing different experiences for every holiday and special occasion this year, so instead of unwrapping more stuff, we’ll get to make special memories as a family.

Organizing a toy swap

While I want to primarily give my children the gift of activities, I realize sometimes a toddler just wants to unwrap a toy. So, I’ve organized some toy swaps with other mom friends. We will each bring a toy or two our kids no longer play with and trade them for another item that we can give as a gift or special treat.

This helps everyone save money and get rid of clutter while giving our kids something new.

Rotating toys

We have also started the practice of rotating the toys that we have. I’ve made up about six different plastic bins of items that are stored in the basement. Every week or two, we switch out the bins and my kids get a brand new one to play with. This makes all of their toys seem new again — and it also helps me keep my house cleaner since there aren’t so many toys out all at once.

With research from the Toy Industry Association revealing that the average American child gets more than $6,500 worth of new toys in their lifetime, I’m very glad I won’t be contributing to that total this year. Hopefully, my plan to swear off buying new toys this year will work out well and I’ll be able to continue it into 2024 and beyond.

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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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Whatever you do, don’t ask a loyalist about their favorite warehouse club! 

While the oft-ignored BJ’s Wholesale Club has its small following, the big names in warehouse stores are undoubtedly Costco and Sam’s Club. They have larger footprints, more members, and far more press.

But of the two, which is the best? And, more importantly, which is the best for you?

As you may guess, this isn’t a straightforward question. There are a ton of variables in choosing a warehouse club, from the fees to the food court. When you get into it, though, many of these features are the same, or very similar, in both stores.

The things that are too close to call

Right off the bat, we need to ignore a few personal finance-related questions that are often considered important — but that actually don’t make as much of a difference as you’d think.

For example, which club has the better membership fees? Costco charges $60 a month for a basic membership. Sam’s Club’s base membership fee is $45. That $15 difference must be a factor in your decision, right?

If you’re only going to shop at these stores sporadically, then yes, that difference can be big. But if you’re not going to shop these stores enough to get your membership fee’s worth — and then some — it’s probably not worth joining either club in the first place.

Similarly, you might wonder which store will save you the most money. This is another question that, while it seems important, isn’t the “gotcha” it sounds like. Why? Because the prices in each store are so close.

Most comparisons between the two show minor differences, at best. You may get a better price on eggs at Costco, for instance, but pay less for meat at Sam’s Club. It really comes down to what you typically buy. What’s more, those prices change regularly, and they can even vary from store to store within the same retailer.

So, with the basics so similar, how do you choose? Here are a few things to consider.

Which is more convenient?

No matter how great a store is, if it’s a pain in the rump to visit — I’m not going. As such, the first point of comparison is convenience. Which retailer has locations that are nearby and easy to access?

If you only have one club within a 15-minute drive, you’ll probably want to go with that option. Unless you live in a fairly rural area and are already used to driving 30+ minutes to the store, chances are good you won’t regularly drive that far just to shop at one warehouse club over another.

When both retailers have nearby locations, it comes down to the peripherals. Who has the better parking lot? I’ll avoid a store that doesn’t have enough parking, or that has a parking lot that’s impossible to escape.

Consider the crowds, too. Is your local Sam’s Club full of feral masses every Saturday morning? Might be worth driving an extra minute to the Costco if it means your stress levels don’t spike when you walk in the door.

Do you prefer to shop online or in-store?

One of the major differences between Costco and Sam’s Club is their online functionality. In other words, Sam’s Club has it — and Costco mostly doesn’t.

Sam’s Club more or less encourages you to shop online. You can place an online order to pick up in store, or you can have many non-perishable items shipped right to your door. And either option gives you (most) of the same prices you’ll see in the store.

Costco, on the other hand, has a very limited inventory of items available online. You can’t place an online order to pick up in store. You can’t even see in-store prices online. And the few items you can have shipped to your door all come with a huge markup for the privilege.

So, if you’re someone who likes the ease and convenience of shopping online, Sam’s Club is the obvious choice. If you don’t mind — or even enjoy — browsing in person, then Costco is still in the running.

Store brand showdown

One of the major reasons we shop at warehouse stores is to save money. (Why else would you be buying a gallon of mayonnaise?) As part of that goal, many warehouse club shoppers are happy to pick up the store brand products to save even more.

But which store has the better store brand?

Costco’s Kirkland Signature line of products is well known for its high quality. Indeed, many Kirkland products are actually name brands in disguise.

However — the same can be said about Sam’s Club’s Member’s Mark products. Many of these items are also name-brand products hidden behind those Member’s Mark labels.

In the end, the choice between the two brands is all about you. Which brand has the better olive oil? It’s down to your own tastes. Similarly, only your own tushy can decide whose store-brand toilet paper is best.

Show up to find out

Since the data seem split, choosing between the two warehouse brands comes down to your needs and wants. If there’s no obvious winner, you may need to visit each store to figure out which is better for you and your family.

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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.Brittney Myers 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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There’s actually a pretty simple way to find out. 

If you’re been looking to buy a home, you’re no doubt aware that U.S. property values have been elevated for the past couple of years. Throw in the higher mortgage rates that emerged in 2022, and it’s easy to see why so many prospective buyers have struggled.

In February, the median existing home sold for $363,000, according to the National Association of Realtors. But many U.S. homes are worth a lot more money than that. In fact, citing Census data, Today’s Homeowner reports that the number of million-dollar homes has more than doubled between 2015 and 2021. And now, at least one-third of homes are valued at $1 million or more in 14 cities.

If you earn an average salary, then a million-dollar home may be out of reach for you. But if you’re a higher earner, you may be able to swing one. Here’s how to know.

It’s a matter of crunching the numbers

It’s often the case that home prices are notably elevated in metro areas where salaries are higher. So if you’re looking at a million-dollar home, you’re not necessarily looking at a mansion. In some areas, $1 million won’t buy you much more than a starter home.

But no matter what type of home you’re looking to purchase, it’s important to not get in over your head financially. The last thing you want to do is take on a mortgage you risk falling behind on.

To see if you can swing a million-dollar home, you’ll need to see if it’s possible to pay for one along with any peripheral housing expenses without exceeding 30% of your income. That’s the general rule of thumb for home purchases.

So, let’s say you bring home $15,000 a month in your paycheck. That means you can pretty comfortably spend up to $4,500 a month on housing expenses, provided you don’t have any other notably large expenses. If you can only afford to put down $200,000 on a $1 million property, and you’re looking at a 30-year fixed mortgage at 6.5%, then your monthly principal and interest payments alone will surpass $4,500.

But let’s say you have $400,000 available for a down payment. Maybe you’ve been saving for years, or you have a starter home to sell that you have a lot of equity in. In that case, you’re looking at around $3,800 in principal and interest on a 30-year fixed mortgage at 6.5%. So in that case, you might be able to swing a million-dollar property if the local real estate taxes and homeowners insurance rates aren’t too high.

Don’t get in over your head

It can be harder to sell a million-dollar home than one that’s more moderately priced. So it’s important to really run those numbers carefully before committing to a home purchase.

The last thing you want to do is buy a million-dollar home only to find yourself perpetually cash-strapped. And don’t kid yourself — that can happen even if you earn a high salary.

Also remember that a million-dollar home might require more maintenance than a less-expensive property. Be sure to leave room for those expenses so your budget isn’t thrown completely out of whack.

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

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It’s an important thing to know. 

“Gear up for a 2023 recession.”

“Boost your savings account now.”

These were some of the warnings being hurled at consumers during the second half of 2022, when inflation was surging and the Federal Reserve was aggressively raising interest rates in an effort to cool it down.

But what exactly is a recession, and what does it mean for jobs? Let’s take a closer look.

What’s a recession, anyway?

There are different metrics that can be used to measure a recession. Investopedia says it’s defined as two consecutive quarters of negative gross domestic product (GDP).

But there’s a little more to the story than that. A recession is basically a period of widespread and notable economic decline. It’s possible to technically reach recession territory based on GDP alone without consumers feeling the pain all that much. But when consumer spending drops to a notable degree, that’s the sort of recession people tend to feel.

Now, recessions can be mild or extreme. They can also be short-lived or prolonged. There’s no single, specific pattern recessions follow.

It’s also worth noting that stock values don’t always plunge during a recession. Neither do home prices. But one thing that does tend to happen during a recession is that job loss activity picks up. And that’s something you’ll really want to prepare for.

The importance of emergency savings

During a recession, less money is being pumped into the economy. That commonly forces employers to make cuts, leading to widespread unemployment.

It’s difficult to find yourself out of work even during the best of economic times. But the problem with getting laid off during a recession is that jobs don’t tend to be abundant. So you might face the double whammy of losing your job and having a hard time finding another.

That’s why it’s so important to prepare for a recession by having a solid emergency fund. Without one, you could end up in a situation where you’re forced to charge your bills on your credit cards, thereby landing yourself deep in debt.

As a general rule, it’s a good idea to make sure you have enough money in savings to cover at least three full months of living expenses. But during a more intense, prolonged recession, it might take a lot longer than that to find a new job after becoming unemployed. So for even more protection, you may want to aim for six to 12 months’ worth of bills in savings.

Now, the good news is that when you lose a job through no fault of your own (such as when your company has to make cuts during a recession), you’re generally entitled to unemployment benefits. That can put some money in your pocket, though it usually won’t come close to replacing your paycheck in full (though you may remember that in 2020, when lawmakers boosted unemployment benefits to cope with the pandemic, some workers were made whole on their missing paychecks thanks to enhanced jobless benefits).

Lawmakers have also, in the past, turned to stimulus checks during recessions. That’s not something to count on, but it’s a possibility.

Will there be a recession in 2023?

Even at this point, we still don’t know. The Federal Reserve’s interest rate hikes (more of which are expected to happen this year due to lingering inflation) might result in a major decline in consumer spending, which could lead to a recession. But if the Fed manages to strike the right balance and consumer spending doesn’t drop to an extreme, a recession may be avoidable.

At this point, it’s anyone’s guess. Some financial experts have scaled back the dire recession warnings they were issuing during the latter part of 2022. But your best bet either way is to prepare for a recession by growing your savings so you have a backup plan in case your job ends up on the chopping block.

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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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