Money Management

Don’t rush to make an offer just yet. 

For the past few years, home buyers have struggled with soaring housing prices. And because real estate inventory is still very low on a national scale, we’re unlikely to see a huge drop in prices across the board any time soon.

But that doesn’t mean some markets aren’t cooling off. According to a recent tweet by Redfin, median sale prices recently fell to a notable degree in these five cities for the first time in 10 years:

Austin, TexasSan Jose, CaliforniaOakland, CaliforniaSacramento, CaliforniaPhoenix, Arizona

If you live in one of these cities, or are looking to relocate to one of them, then you may be wondering if now’s a good time to buy. But while you might pay less for a home itself, that savings is apt to be largely negated by the higher cost of taking out a mortgage loan.

Higher borrowing rates are still a problem

As of this writing, the average 30-year mortgage rate is hovering in the upper 6% range. A year ago, you would’ve been looking at the upper 3% range for the same type of loan. So all told, mortgage rates are nearly double today what they were a year ago.

As such, even with a drop in home prices, a lot of buyers are apt to find that they’re unable to swing a real estate purchase due to the total cost of doing so. And you might be one of them.

What’s more, limited housing inventory could make it harder to find a suitable home in the city you’re looking to buy in. Maybe you want a larger space because you have several kids. Or maybe you’re set on living on a quiet street instead of a noisy one.

These are things you may need to compromise on due to a general lack of property listings. And when you’re talking about signing an expensive mortgage, the idea of having to compromise becomes a lot less appealing.

Waiting could pay off

If you’re itching to buy a home in one of the cities above, and you can afford to do so now that prices are down, then by all means, go for it. But generally speaking, 2023 is not shaping up to be a great year for home buyers. So if you’re in a stable housing situation at present — meaning, you can afford your rent and you have no reason to believe that your landlord won’t let you renew your lease when it comes due — then it could pay to hold off on buying for another year or so and wait for mortgage rates to come down.

Also, persistently high borrowing rates could lead to a decline in buyer demand this year. So even if housing inventory doesn’t pick up all that much, fewer buyers could lead to lower prices in time. And if prices in these cities drop further, then it may be possible to make the case to buy a home despite stubbornly high mortgage rates.

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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 only semi-positive news. 

It’s more than fair to say that life in general is a lot more expensive these days than it was a couple of years ago. And not surprisingly, many consumers have been forced to rack up credit card debt or dip into (and in some cases, deplete) their savings accounts just to keep up.

One area that’s been exceptionally troubling is food costs. Those have downright soared over the past year, and as of February, grocery prices were still up 10.2% on an annual basis, according to the Consumer Price Index.

But at least the cost of one supermarket staple is dropping. Egg prices were down 6.7% in February compared to a month prior. That said, on an annual basis, egg prices are still up a whopping 55.4%. Ouch.

If you’re struggling to afford your grocery bills, whether due to higher egg prices or higher prices overall, you should know that there are a few steps you can take to lower your costs. And that might spell a lot of relief at a time when inflation is still surging.

How to feed your family for less

Even though grocery prices are up, skimping on food is something you really don’t want to do. And the good news is that with the right strategy, you can lower your spending even at a time when grocery prices are so exorbitant.

For one thing, try to buy groceries in bulk when doing so makes sense. This doesn’t mean you have to go out and pay for a Costco membership. Rather, there’s a good chance your local supermarket or big-box store carries certain grocery staples in bulk.

If you see an item you use frequently available in bulk, crunch some numbers. If you stand to reap savings, consider buying that item — even if it means paying a slightly higher credit card bill this month.

That said, you’ll need to make sure any bulk item you buy is something you can use up before it goes bad. You may be better off buying things like cereals and grains in bulk, which tend to have a much longer shelf life than things like dairy products and eggs.

At the same time, spend a little time looking at products and prices at discount grocers like Aldi. You may find that if you’re not picky about the brands you bring home, you might manage to reap some savings on food.

Finally, don’t underestimate the importance of paying attention to sales. Stocking up when your go-to purchases are discounted could result in a lot of savings.

When will food prices start to come down?

In February, annual inflation sat at 6% as a whole, so it may be a while until food costs start to drop. In fact, food prices were a big reason the Consumer Price Index rose in February compared to January.

The hope is that as supply continues to catch up to demand, the price of all consumer goods, including groceries, will steadily drop. But it may be a while until we get there. So for now, your best bet is to do what you can to research sales, take advantage of discount grocery stores in your neighborhood, and buy in bulk when it’s an item you use all the time and you’re confident you can consume it before it goes bad.

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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 positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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For frequent Costco shoppers, an executive membership is worth the money. 

When you get a Costco membership, you have two options: gold star or executive. A gold star membership costs $60, and an executive membership costs $120. Since they both offer access to all Costco warehouses, you may wonder if it makes sense to spring for an executive membership.

There’s a good chance the answer is yes. A Costco executive membership doesn’t just get you a stylish black membership card; it also has a few big perks, and they could save you a lot of money.

1. Annual 2% reward

The most valuable perk of a Costco executive membership is the annual reward. With this type of membership, you earn 2% back on qualified Costco, Costco.com, and Costco Travel purchases. The maximum benefit amount is $1,000. It’s paid as Costco Rewards, meaning rewards that you can use at Costco.

Let’s say you spend $250 per month at Costco. That’s $3,000 per year — good for a $60 annual reward, which is enough to cover the added cost of an executive membership. If you spend $500 per month, that’s a $120 annual reward.

You can also pay with rewards credit cards at Costco and earn even more. For example, if you pay with a card that earns 2% cash back, you’re effectively getting 4% back total. Just keep in mind that Costco only accepts Visa credit cards.

2. Additional benefits and savings on Costco Services

Costco Services allows you to find service providers and take advantage of discount offers available to Costco members. Here are some examples of what you can find through Costco Services:

Auto insuranceHomeowners insuranceNew and pre-owned vehicles through the Costco Auto ProgramPet insuranceBusiness payment processing

All Costco members have access to these services, but an executive membership has more to offer. For example, executive members may get lower prices on check printing and auto purchases.

3. Extra benefits on select Costco Travel products

Costco Travel allows members to book vacation packages, flights, hotels, and car rentals. Although this is available to all Costco members, there are also benefits solely for executive members. Here are a few examples of these extras:

Resort spending creditsResort spa creditsShipboard credits on cruisesFree massages

Also, as mentioned above, executive members earn 2% on Costco Travel purchases. If you love to travel, booking trips through Costco is a great way to boost your annual reward.

One other benefit you get with a Costco executive membership is Costco Connection magazine. This has product advertisements, interviews, and recipes. It’s not a personal finance perk, but it’s a nice extra if you’d like to add some reading material to your coffee table.

Considering it only costs an extra $60, a Costco executive membership is a bargain. You’ll probably make up that extra cost with the 2% reward. You’ll also benefit more if you use Costco Services and Costco Travel. You can sign up for an executive membership online or in stores. If you’d like to upgrade your membership, you can do so online, by phone, or in-person at Costco.

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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 positions in and recommends Costco Wholesale and Visa. The Motley Fool has a disclosure policy.

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There’s no need to panic if you haven’t saved anything for retirement by your 30th birthday. 

You should expect to need retirement savings once your career comes to an end. Without personal savings, you might struggle to cover your living costs based on what Social Security pays you.

It’s a good idea to start funding your IRA account from a young age. The sooner you start saving and investing money for retirement, the more your money is apt to grow.

But it’s not uncommon to reach the age of 30 without having money in an IRA. Maybe you spent the bulk of your 20s paying off credit card debt. Or maybe you had to focus on building emergency savings so you’d have money to tap for near-term bills that pop up out of the blue.

Either way, if you don’t have money in an IRA by age 30, it’s not an ideal situation, but it’s also not a dire one. The key, however, is to start to catch up as soon as you can.

How much retirement savings should you have by age 30?

Fidelity says that it’s good to have the equivalent of your annual salary saved up by age 30. So if you’re currently earning $60,000 a year, that’s the amount you’d ideally want in your IRA.

If your current balance is $0, well, that’s a pretty far cry from $60,000. But do try to remember that if you’re only 30, it means you probably have another 30 years in the workforce ahead of you at least. And that gives you plenty of opportunity to fund your IRA and build wealth.

In fact, let’s say you were to start saving $250 a month in your IRA tomorrow, and that you continue to do so for 30 years. If your IRA delivers an 8% average annual return during that time, which is a bit below the stock market’s average, as measured by the S&P 500 index, that will leave you with a nest egg worth around $340,000.

And that assumes you’re only saving until the age of 60. Many people work into their mid-60s, late 60, or 70s. So if we increase your savings window from 30 years to 35 years, it means you might retire with around $517,000, assuming those same monthly $250 contributions and 8% average yearly return.

It pays to put the process on autopilot

If you’ve reached the age of 30 without any money in your IRA, it’s good to start carving out room for retirement plan contributions as soon as you can. Take a look at your expenses and see how much you can afford to put into your long-term savings each month. At the same time, consider setting up an automatic transfer from your checking account into your IRA so that money lands there directly each month.

If you set up an automatic transfer, that money will leave your bank account and hit your IRA before you have a chance to spend it. And that could help ensure that you get and stay on track.

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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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A month-over-month rise in inflation could make borrowing more expensive. 

Inflation has been battering consumers since 2021. But back then, many people at least had boosted tax credits and stimulus funds to ease the blow. In 2022, there was no stimulus aid to be had, and as a result, many people were forced to rack up credit card debt and deplete their savings to cope with higher costs.

Meanwhile, the Bureau of Labor Statistics just released data from February’s Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services. The index showed a 0.4% rise in inflation from January to February. The annual rate of inflation, however, fell from 6.4% in January to 6% in February. And the latter is a pretty positive development.

Still, those looking to borrow money in just about any shape or form should proceed with caution in light of February’s CPI reading. And that extends to those looking to take out a personal loan.

Borrowing could get more expensive

The Federal Reserve has been on a mission to combat rampant inflation. To that end, it’s been implementing interest rate hikes since early 2022 that have been driving the cost of consumer borrowing upward.

Now, the Fed doesn’t set consumer interest rates directly. Those are established by banks and lending institutions. But when the Fed raises its federal funds rate, which is what banks charge one another for short-term borrowing, consumer borrowing costs tend to climb as a result.

That explains why it’s more expensive to take out a personal loan these days than it was a couple of years ago. And it also explains why personal loan borrowers now need to be very careful before locking themselves into loan agreements.

The Fed might very well raise interest rates again in the wake of February’s CPI data. That could make personal loans — a once-affordable borrowing option — too expensive for a lot of people.

Don’t get in over your head

The great thing about personal loans is that they’re flexible. You can use your loan proceeds to pay for just about anything, whether it’s home renovations or car repairs. And personal loans tend to offer competitive interest rates compared to other borrowing products.

But if the Fed hikes up interest rates yet again, personal loans might become prohibitively expensive for many consumers. And one thing you don’t want to do is sign up for a personal loan whose monthly payments are a stretch for you.

Any time you fall behind on debt payments, you risk extensive damage to your credit score. And personal loans are no different. So before you sign one, run the numbers based on the interest rates you’re being offered to see what your monthly payments will look like — and make sure those work for you.

Furthermore, unless you have a pressing need to borrow money, it could be beneficial to hold off on signing a personal loan until borrowing rates come down across the board. But that may not happen for quite some time due to the current state of inflation — and the fact that despite many months of interest rate hikes, it remains stubbornly high.

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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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Don’t be shy about digging for answers. 

Opening a bank account is easy. Opening the right bank account takes more effort. What you want and need in a bank account may differ from what someone else wants and needs. That’s why asking these six questions before making that first deposit is important.

1. Are you FDIC insured?

The Federal Deposit Insurance Corporation (FDIC) was created as part of President Franklin Roosevelt’s New Deal program. Roosevelt became president during the Great Depression when banks closed, and account holders lost large amounts of money.

In response, FDIC was formed to insure account holders against loss. Insured accounts are protected for up to $250,000 by the FDIC, and you know that if the bank fails, your money is still safe.

Not all banks are FDIC insured. You can easily find out by visiting the FDIC’s Search for Institutions page.

If you’re hoping to join a credit union, it won’t carry FDIC insurance. However, they do carry equivalent insurance from an agency called the National Credit Union Administration (NCUA). You can find out if a credit union is insured by visiting this NCUA page.

Speaking of account safety, Sami from ASunnySideUpLife also recommends that those opening a new bank account ask how fraudulent charges are handled. This is vital information to know, in case your account is ever compromised by a scammer.

2. What kind of fees do you charge?

If you’re not careful, bank fees can chip away at your hard-earned money. Make it a point to ask about any fees the bank charges. The most common include:

Account maintenanceMinimum balanceOverdraftReturn depositsMoney transfersATM usageForeign transactionsPersonal check fees

Once you have a list of fees, you can compare two or more banks.

3. Does your bank offer online banking and a mobile app?

Nearly all banking tasks today can be accomplished using a financial institution’s online banking system or mobile app. Whatever needs to be done, from paying bills to making deposits, can be handled through these bank features.

4. What’s your current rate on interest-bearing accounts?

If you plan to keep money in savings or a money market account (MMA), it’s valuable to know how much interest the bank pays.

5. Where can I find ATMs?

Ideally, a bank or credit union will have enough ATMs scattered around town to help you avoid using a non-network ATM. Get an idea of how far you’ll have to travel from your regular haunts to locate an ATM.

6. Do you have a safe deposit box room, and if so, do you have any available boxes?

If you’ve moved very often, you may have noticed how challenging it’s become to score a safe deposit box. Some families hang on to their boxes for decades, and you may have to put your name on a waiting list. This is especially true if you need a particular size. If you can’t imagine being without a safe deposit box to store important documents and valuable items, be sure to ask about availability.

Finally, don’t underestimate the power of referral. When searching for a new bank, ask your friends and family where they bank and if they’re happy with their choices. Find out what they like (and don’t like) about their banking experiences. No one you care about will want to steer you in the wrong direction.

Taking time to ask questions before committing to a financial institution is the easiest way to ensure you’ll be happy once it becomes your home bank.

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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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