Money Management

It’s a tall order, but it’s doable. 

Buying a home is something a lot of people don’t get an opportunity to do until they’re a bit older. That’s because younger workers, by nature, don’t tend to earn as much as their older counterparts, and that can make buying a home difficult.

It’s therefore encouraging to see that 72% of Americans aged 25 to 34 are planning to buy a home in the next five years, according to a recent survey by Compare The Market. But is that goal realistic given the state of the real estate market today?

Today’s housing market is far from buyer-friendly

Home buyers today face a host of challenges. For one thing, home prices are still elevated on a national scale. And while home price gains have been slowing, buyers are still looking at expensive mortgage loans for one big reason — borrowing rates are up.

Mortgage rates rose sharply in 2022, and at this point, they’re still up. So between higher home prices and borrowing costs, buyers are facing major affordability issues.

Plus, housing inventory is extremely limited these days. As of the end of January, there was only a 2.9-month supply of available homes on the market, according to the National Association of Realtors. It generally takes a good 4- to 6-month supply of available listings to adequately meet buyer demand.

When housing inventory is low, it causes two distinct problems for buyers. First, it allows sellers to charge a premium knowing there’s not a lot of competition. But also, it means buyers are more likely to have to compromise on things like home features, square footage, and location. These aren’t such easy things to do when you’re talking about the place you might be living for the next five, 10, or 20 years.

Things could get better

At this point, home prices are more likely to go down than up. That’s the first bit of good news. The second bit is that in time, housing inventory is likely to increase. That should not only help with affordability, but also make it easier for buyers to find suitable homes.

As far as mortgage rates go, well, it’s hard to say what direction they’ll trend in. Rates started to dip earlier in 2023 but have more recently risen. So home buyers will need to sit tight and see how things go.

But either way, there’s a good chance that in a year or two, we’ll be looking at less-expensive mortgage rates on top of cheaper home prices across the board. And that means that people in their mid-20s to mid-30s who plan to buy a home in the next five years might indeed have a great chance at getting to do just that.

That said, younger buyers might face certain other challenges, such as earning lower salaries that make it harder to qualify for a mortgage. So those who are serious about buying a home should be budgeting carefully to carve out as much money as possible for their down payments.

It’s also important to have a solid emergency fund before diving into homeownership. There are many costs associated with owning property, and if you’re on more of a starter salary (which may be the case if you’re only in your mid-20s), you may not have much wiggle room. If you go into homeownership with some money in a savings account, that cushion could come in handy when your bills inevitably begin to mount.

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 

That’s a pretty unsettling thought. 

It’s easy to see why some people may be feeling optimistic about the U.S. economy. Unemployment is reportedly at a 54-year low, and jobs are supposedly nice and plentiful.

Or at least that’s what many people are choosing to focus on. The reality, though, is that today’s economic picture isn’t as rosy as some might think it is. And Suze Orman cautions that a lot of people may be in for a rude awakening in the coming months.

In fact, she warns that consumers could be in for a “financial tsunami.” Here’s why.

Economic conditions could decline broadly and individually

The U.S. economy might seem like it’s in great shape, but in reality, things have the potential to deteriorate pretty quickly this year. For one thing, layoffs have already started. We’ve already heard about many large employers reducing staff in an effort to cut costs ahead of a potential recession.

And speaking of recessions, the Federal Reserve’s aggressive interest rate policies have the potential to drive us into one. As borrowing gets more expensive, consumers may be forced to cut back on spending. If that happens to an extreme enough degree, it could be enough to fuel a broad economic downturn.

But even if the broad economy doesn’t tank, a lot of people’s personal finances might worsen over the next year. And a big reason boils down to higher living costs and expensive borrowing.

Orman worries that many people don’t understand the consequences of paying higher interest rates on products like credit cards, HELOCs, and loans. As such, payments and expenses are going up for a lot of people because of inflation and rising interest rates, and most consumers don’t have enough money in savings accounts to give themselves a cushion.

In fact, a recent survey by SecureSave found that 67% of Americans do not have the money in savings to cover a mere $400 expense. It’s these people who risk falling behind on their debt payments and bills even if their income holds steady. And if people in that boat wind up losing their jobs, the results could be downright catastrophic.

Be careful with borrowing, and aim to build some cash reserves

We don’t know what sort of turn the economy will take in 2023. Maybe things will be perfectly fine, or maybe we’ll see an uptick in layoffs and a rise in the national jobless rate.

The best thing consumers can do individually to protect themselves is to build up emergency savings. Having money in the bank could make it possible to get through a layoff with less long-term financial damage.

Those with high-interest debt should also do their best to pay it off as quickly as possible. Products like HELOCs and credit cards come with variable interest, which means these debts in particular can become more expensive over time.

It’s not necessarily a bad thing to be optimistic about the economy. But it’s important for consumers to shore up their finances in case conditions worsen rapidly.

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 

Time off is vital to your well-being. 

Depending on your industry and the type of job you have, you might get paid time off work. The Bureau of Labor Statistics found in March 2021, workers in private industry got an average of 11 paid vacation days per year after a year of service (the figure was 13 days for government employees). After always having vacation days in my previous jobs, I became a full-time freelancer at the beginning of this year, and as a result, I no longer get paid time off.

Despite the fact that any time off I take will be unpaid, I recognize that it’s a good idea to do it anyway. I’ve booked a few trips for this year, so I can get a change of scenery and a little break from work. Here’s why you should prioritize time away from your job — especially since failure to do so could end up costing you more in the end.

Your work could suffer

When life piles on and you feel overwhelmed by how busy you are, you’re at risk of burnout. WebMD defines burnout as exhaustion caused by excessive and prolonged stress. There are many aspects of life that can stress us out, but work is a notorious culprit. If you’re under constant stress at work, you may find yourself less and less able to complete your tasks in a timely manner. You might have a shorter temper, and you may have sleep troubles (either sleeping excessively or not enough).

All of these symptoms could leave you less productive at work, and given enough time, you could even lose your job if you’re no longer performing it at your usual capacity (or are taking out your stress on colleagues/clients). Ironically, if you avoid taking vacation time because you fear the impact on your job, it could become a self-fulfilling prophecy in a way you didn’t anticipate.

Your health could be at risk

If you don’t take steps to mitigate burnout (such as taking time off), you may notice larger impacts on your mental and physical health. As the American Psychological Association notes, chronic stress can result in depression, headaches, heart disease, stroke, and more. It will definitely impact your checking account if you are forced to take a significant amount of time off and pay medical bills to deal with a stress-related medical problem.

In short, letting your work stress build to this point is a terrible idea. For the sake of your health, use your vacation time. Remember, if you don’t choose the time to take off, your body may just choose it for you — and its timing will probably be a lot less convenient.

A few tips for taking time off

If you struggle with unplugging from work, I sympathize. Here are some ways to set yourself up for time away from your desk.

Get coverage for your work: Get organized and find colleagues to take over your ongoing projects in your absence. Make sure that your team knows you’ll be away so they can plan around it, too.Prioritize certain tasks: You’ll likely never be able to leave with a completely empty inbox, but it’s a good idea to focus most of your energy on tasks and projects that are due sooner. This way, you won’t be immediately flattened by upcoming deadlines when you come back from vacation.Make a plan for lost income: If you’re in the freelance boat and will be taking time off unpaid, calculate how much money you’ll be losing and decide how to make at least some of it up. This could mean working more and stashing extra money in your savings account ahead of time, or working more hours when you return. If you have a plan, you’ll feel better about taking a break.

You work hard, and you deserve to rest. It might be difficult to unplug, but it’ll be worth it when you come back to work feeling relaxed and refreshed.

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 

Suze Orman says you should take advantage of this retirement account. 

Financial guru Suze Orman says you should have more than one retirement account to ensure a secure retirement. What does she mean by that? Orman, a financial advisor for over 40 years and host of the podcast Women & Money, believes that if your employer offers a Roth 401(k) option, then you should take advantage of it. Here’s why.

Benefits of Roth accounts

The greatest benefits of a Roth IRA is its tax-free growth and tax-free distribution. This means the money in a Roth account grows tax-free, and unlike a traditional IRA, you can withdraw money from the account in retirement (after age 59½) without any taxes.

Let’s say you are in the 32% tax bracket and have $1 million in an IRA. If it’s in a traditional IRA and you withdrew all of the money at once with no itemized deductions, you would pay close to $300,000 in taxes! That same pot of money in a Roth IRA would be tax-free, saving you $300,000. These generous tax advantages make Roth IRAs one of the most attractive retirement accounts available today.

There are some rules you have to be aware of when contributing to a Roth IRA. You can’t contribute if you make more than $153,000 ($228,000 if married), and you can only contribute a max of $6,500 a year ($7,500 if you are over 50). There are penalties if distributions are not qualified, and you don’t get the tax deduction upfront. However, a Roth 401(k) offers several advantages a Roth IRA doesn’t. Here are four reasons Orman says you should switch from a traditional 401(k) to a Roth 401(k).

1. No income limit

If your income disqualifies you from contributing to a Roth IRA, you can still invest in a Roth 401(k). Anyone can contribute to a Roth 401(k) regardless of income level.

2. Higher contribution limits

The amount individuals can contribute to a Roth 401(k) plan is about 4 times higher than a Roth IRA. An IRA is capped at $6,500, whereas the contribution limit for a Roth 401(k) is $22,500 for 2023, up from $20,500 for 2022.

3. Tax-free distributions

As mentioned before, all contributions made into a Roth 401(k) are done on an after-tax basis. This means that when it comes time for you to retire, any withdrawals from your account will not be subject to income taxes. This can help significantly lower your taxes in retirement and potentially save you hundreds of thousands of dollars.

4. More flexibility

Unlike other types of accounts like traditional IRAs, Roth 401(k)s do not require you to take out minimum distributions (RMDs) each year once you reach age 70½. This can be especially helpful if you want to delay taking Social Security benefits until later in life or if you want to pass down more money to your heirs.

Suze Orman has some great reasons why everyone should consider investing in a Roth 401(k). From tax-free growth to no income limits and higher contribution amounts, there are countless advantages associated with this type of investment vehicle. So if you’re looking for ways to save more money for retirement without having to pay more taxes, then investing in a Roth 401(k) might just be the perfect solution.

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.

 Read More