Money Management

It could be a good investment, but not always. 

When you think about buying a home, it’s easy to imagine a detached house with a fence, a yard, and plenty of space to roam around. But if you’re looking to buy a home in a city, then you may have to limit yourself to an apartment. And in some cases, that could mean buying a studio apartment, depending on housing prices in the city you’re looking at.

Now, the cost of a studio apartment will vary based on your local market. In New York City, the average studio cost is $553,734, according to data from Miller Samuels. But in a smaller or less expensive city, you might spend a lot less.

The upside of buying a studio apartment is clear. You might pay less for your home and have lower monthly mortgage payments to work into your budget. But there are a number of downsides to buying a studio, so you’ll need to proceed with caution.

The problem with owning a studio

It’s one thing to rent a studio apartment when you’re single or live alone, you want city access, and you don’t particularly need a lot of space. Also, rentals, by nature, tend to be temporary. You may decide you can deal with a studio for a year or two if doing so makes it possible to spend less on rent and bank some savings.

But buying a studio apartment is a very different story. Any time you buy a home, you’re making more of a commitment to staying put. That’s because it can take some time to recoup the costs of putting a mortgage into place, so you generally shouldn’t buy a home unless you think you’ll live there for a handful of years before selling.

Meanwhile, living in a studio apartment for years on end may be less than ideal. You might come to resent the lack of space and start hating the idea of staring at the same few walls day in, day out. And if your family situation changes — say, you partner up with someone and/or have a baby — you might quickly run out of space.

Even more problems might arise when you decide to sell your studio apartment. As you might imagine, studios don’t tend to be as high in demand as larger spaces. So you might really struggle to find a buyer.

Does buying a studio apartment ever make sense?

If you’re buying a studio apartment in a market where housing demand seems perpetually strong, and where smaller living spaces are the norm, then that’s a move that might work out well for you. New York City is a prime example here. Those who opt to dwell in NYC often go in with the understanding they’re not going to get much square footage for their money. But they’re willing to pay a premium for access to theater, restaurants, and other amenities.

In a city like that, you might have no trouble selling a studio apartment once you’re ready to move on. But be careful when buying a studio in a smaller city, because selling in that situation might end up being more of a struggle.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

It’s still a good idea to have enough savings to cover three months’ worth of bills. 

Between the unemployment crisis of 2020 and rampant inflation, the events of the past three years have taught us all — in some cases, the hard way — how important it is to have a solid emergency fund. A recent SecureSave survey found that 67% of U.S. adults don’t have the money to cover a $400 emergency. But if you’re in a similar boat, it means you’re likely to end up with costly debt — most likely of the credit card variety — if you were to lose your job and the paycheck that covers your bills.

In fact, it’s for this reason that people are advised to have enough money in a savings account to pay for three months of bills. But does that rule apply when you’re part of a dual-income household? The answer is, absolutely. Here’s why.

It’s a matter of being able to pay your bills

When you’re single, the idea of having to save enough to cover three months of bills might make sense. After all, it can easily take three months to find a new job after losing one. So if you don’t have at least that much cash in the bank, you might run into problems with debt fairly quickly.

But what if you’re married and are part of a dual-income household? In that situation, you might assume you don’t need to save enough to cover three months of bills, because what are the odds of you and your spouse losing your jobs at the same time? In some cases, the odds might be low. But that doesn’t make them zero.

First of all, let’s say you and your spouse both work in the same industry, and that industry takes a notable hit — like the way the hospitality industry got hammered in 2020, when the COVID-19 pandemic shut everything down. In that case, it’s more than conceivable that you and a spouse might lose your jobs at or around the same time, even if you work for different companies.

But even if you and your spouse work in completely different industries, the reality is that all it might take is a general economic downturn for layoffs to hit both of you simultaneously. And you can’t assume that won’t happen, even if it’s not the most likely scenario.

That’s why having that three-month emergency fund is crucial. Let’s say you spend $5,000 a month on essentials and manage to save $15,000. If only one of you loses their job, and it takes three months to find another, it means you probably won’t end up depleting your savings completely to cope with that situation. But in case you both lose your jobs at overlapping times, it’s important to have that much money tucked away in the bank.

Won’t unemployment benefits come to the rescue?

If you and your spouse are salaried workers and you lose your jobs through no fault of your own, you may be entitled to unemployment benefits. But depending on what you’re earning, those benefits may not come close to replacing your missing paychecks in full.

Going back to our example, let’s say you spend $5,000 on bills each month, and you each contribute $2,500 toward that total. If you were to both lose your jobs, you might each be entitled to $1,200 a month from unemployment. That’s apt to help. But it won’t come close to replacing your missing wages completely.

Now, you could argue that if you’re eligible for unemployment, you don’t really need a three-month emergency fund, since those benefits can pay for some of your expenses. But remember, it could take you more than three months to find a new job. So you’re really better off sticking to that three-month guidance, regardless of how many paychecks flow into your household.

In fact, you should know that three months’ worth of living expenses is really the minimum emergency fund you should aim for. So if you’re able to save beyond that threshold, it could make the loss of a job much easier to manage — whether it’s just one of you who’s been laid off or both.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Do this immediately to get back on track with your taxes. 

Being behind on your taxes is stressful. You may be worried about penalties, accruing interest, or the possibility of an audit. While it’s natural to feel anxious, don’t panic! There are several steps you can take to get back on track with the IRS and avoid any serious consequences. Here’s what to do when you realize that you’re behind on your taxes.

Understand penalties and interest accrual

The first step in getting back on track with your taxes is understanding how penalties and interest work. When you file your tax return late, you’ll be charged interest on any unpaid balances and you may also be subject to failure-to-file and failure-to-pay penalties.

The IRS will assess a penalty for each month or partial month during which a tax debt remains unpaid. That penalty accumulates until the debt is paid off in full. The late payment penalty is 0.5% of the tax owed after the due date and caps out at 25%. Interest accrues on the unpaid balance and compounds daily until you pay the balance in full. The interest rate for taxpayers other than corporations is the federal short-term rate plus 3%.

Since the amount of both penalties and interest depends upon your tax liability, it’s important to make sure you understand how much you owe as soon as possible. This will help you work tax payments into your budget. Making payments immediately will help you minimize the amount of accrued penalties and interest.

File your returns on time and set up a payment plan

If you’ve already missed a filing deadline, then it’s important that you file your tax returns as soon as possible to minimize any potential penalties for late filing. If necessary, file for an extension to give yourself more time if needed. In addition to filing your returns, setting up a payment plan with the IRS can help keep your debt under control. This will allow you to pay back what you owe in installments over time instead of lump sum payments all at once.

You can apply for an online payment plan online through Form 9465. Once you submit your application, you’ll receive immediate notification of whether your payment plan has been approved without having to call or write to the IRS. Online payment plans are processed more quickly than requests submitted with electronically filed tax returns. There are two types of payment plans:

Short-term payment plan: The payment period is 120 days or less and the total amount owed is less than $100,000 in combined tax, penalties, and interest.Long-term payment plan: The payment period is longer than 120 days, paid in monthly payments, and the amount owed is less than $50,000 in combined tax, penalties and interest.

Offer-in-compromise

If you still can’t make your payments, then call the IRS immediately at 800-829-1040. The key is to make sure you promptly notify the IRS of your situation and keep the agency abreast of any updates. It may reduce the monthly payment to reflect your current financial condition. You may be asked to provide proof of changes in your financial situation, so have this information available when you call.

In some cases, the IRS may forgive part of your tax debt through an “offer-in-compromise.” This allows you to settle your tax liability for less than what you owe. According to the IRS, you may be eligible if you:

Filed all required tax returns and made all required estimated paymentsAren’t in an open bankruptcy proceedingHave a valid extension for a current year return (if applying for the current year)Are an employer and made tax deposits for the current and past two quarters before you apply

If you still need help with your tax debt, consider hiring a tax attorney to negotiate with the IRS. There are also certain tax-relief resolution companies that offer to help resolve tax debt. However, many state attorneys generals have issued warnings about tax-debt resolution scams. Be especially careful to avoid tax-relief companies that charge you money to help you. Hiring one may end up making a bad situation worse. It is important to do your research before hiring an attorney or using any of these services.

Being behind on your taxes can be nerve-wracking, but there are steps that taxpayers can take to get back on track with the IRS without accruing high amounts of interest or being audited. First, understand how penalties and interest works so you know how much money you owe at any given time. Next, file your returns promptly, even if you need to request an extension. Set up a payment plan with the IRS and hire a tax attorney if you need more help. Be careful when using a tax-relief company, as many may be scams. With these steps in mind, taxpayers who are behind on their taxes should have no problem getting back into good standing with the IRS before too long!

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

It’s a situation you really don’t want to land in. 

It’s hardly a secret that inflation has been surging since the latter part of 2021. That’s forced a lot of people to deplete their cash reserves completely in order to keep up with their bills.

If your savings account balance has been whittled down to $0, you should do your very best to bring it back up as soon as you can. That’s because having a $0 balance could have several negative consequences.

You may be charged fees

Many banks impose account maintenance fees on customers. These can apply to both checking accounts and savings accounts.

In a lot of cases, those fees will be waived once you meet a minimum balance requirement. But if your savings account gets down to $0, then you may start getting charged fees by your bank.

You’ll risk debt in an emergency

In 2020, millions of Americans lost their jobs as the country shut down to deal with the initial phase of the COVID-19 pandemic. Now that was a very extreme situation, and hopefully, one we won’t ever have to face again in our lifetime. But the reality is that you never know when an economic recession might lead to a large uptick in job loss. And if you don’t have any money in savings in that scenario, you might immediately be forced into debt to cover your expenses in the absence of a paycheck.

Even during periods when the broad economy is nice and stable, you never know when your specific job might end up on the chopping block. And it’s important to have money in savings to cope with that scenario.

Furthermore, even if you don’t lose your job, you might need savings to bail you out of a jam if you run into a costly car or home repair, or if you need medical treatment that leaves you responsible for a whopping set of copays. With $0 in savings, you’re once again looking at debt in a situation like that.

How to build up your savings

Whether you’ve depleted your savings due to inflation or another reason, it’s important to try your best to build back up as quickly as possible. To that end, take a look at your budget and try to cut a few expenses, even if they might seem like minor ones. When you have $0 in savings, canceling a streaming service and putting the $15 you’re not spending into the bank is a big deal.

Next, consider getting a side hustle. Today’s gig economy is strong and healthy, so there’s ample opportunity to pick up additional work. And since the work you’re doing on the side of your main job won’t be earmarked for existing bills, you should be able to save a nice chunk of it (keeping in mind that as is the case any time you earn money, the IRS gets a cut of it in the form of taxes you pay).

All told, having no money in savings is a really dangerous situation. So if that’s the boat you’re in, try your hardest to replenish your account. You may not go from $0 to $1,000 overnight, or even in a month. But the key is to start by saving something and work your way upward.

These savings accounts are FDIC insured and could earn you 13x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

Would you go to the same extreme? 

Many Americans have been feeling the strain of inflation. And if you spent the better part of 2022 dipping into your savings account and racking up credit card debt to cover your bills, well, you’re in good company, for better or worse.

But the impact of inflation is perhaps driving job seekers to go to the extreme of lying to get hired at new jobs. And if that’s a route you choose to take, you should know that it could backfire on you in a very big way.

More than half of Americans would lie to get a job

A recent study by StandOut CV found that 57% of Americans are prepared to lie in the course of getting hired this year. That could mean embellishing their resumes or not being truthful during an interview. Worse yet, 55% of Americans say they’ve already lied at least once in the course of getting a job.

A mistake you might sorely regret

Lying on a job application could have serious consequences if you get caught. And chances are, you will get caught one way or another.

Let’s say you list on your resume that you graduated from college, when in reality, you never finished your degree. That’s a fairly easy thing for a prospective employer to check, and lying about it could cost you the chance to get the job you want.

Meanwhile, let’s say you lie about things that aren’t as easy to verify — say, you claim to have experience with a certain task or in a certain area when in reality, you’re quite rusty. That may be the sort of thing you can pull off long enough to land a job offer.

But here’s what’s apt to happen next. If you claim to have skills you don’t actually possess, it’s likely to become clear early on once you start your new role. And once you’re caught, that new job might be taken away.

It’s better to tell the truth

A new job could be your ticket to a higher paycheck — and the opportunity to boost your income and finally stop living off of your credit cards. But if you want to increase your chances of getting a job offer, or getting a job you actually get to keep, then be truthful from start to finish.

If you never finished college, be upfront about it. You never know when an employer might not consider it a deal-breaker, or might be sympathetic to the fact that, say, you dropped out your last year to care for an ailing parent and never managed to get back to your studies.

What’s more, if there’s experience or skills you lack, own that — but talk up the fact that you’re a fast learner who’s willing to work really hard to get up to speed. An employer might be willing to take a chance on you if you’re missing a few skills, but you present yourself as a confident job candidate with a can-do attitude.

Lying generally isn’t a great thing to do in life, and it’s certainly not a wise move when you’re looking to get hired. So resist the urge to do it, even though more than half of Americans are seemingly willing to not tell the truth.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More