Money Management

You may be surprised how big of an impact rising rates have had. 

During the COVID-19 pandemic, mortgage rates repeatedly hit record lows. In fact, according to Freddie Mac, the weekly average mortgage rate was 2.65% for a 30-year fixed-rate mortgage during the week ending Jan. 7, 2021. This is lower than rates have ever been since Freddie Mac began its reporting.

This trend began to reverse as the pandemic waned, though. In fact, as the Federal Reserve began raising interest rates to try to combat the inflation that began surging as post-pandemic demand soared, rates have crept up dramatically. As of the week ending March 2, 2023, Freddie Mac reported that the average rate for a 30-year fixed-rate loan was 6.65%.

This is obviously a dramatic increase, but just how much has it impacted housing affordability? Here’s what you need to know if you’re thinking about buying a house and want insight into how mortgage rates will impact your costs.

Here’s how housing affordability has been affected by rising rates

Data from Redfin shows the impact that this dramatic increase in mortgage rates has had on home affordability.

According to Redfin’s market insights, a home buyer who is able to afford to make a monthly payment of $2,500 could afford to purchase a $384,000 home at the current mortgage rates available in 2023 (6.5% at the time Redfin analyzed the data).

By contrast, if a buyer was purchasing a home at 3% — a common rate in 2021 — that same buyer would have been able to buy a $518,000 property with that same monthly payment. Monthly payments have gone up so dramatically due to the increase in rates. Buyers are also finding themselves unable to qualify for loans they may have before, since the higher monthly payments push up their debt-to-income ratios (this is the ratio of housing costs and other debt payments relative to earnings, which most lenders put a cap on).

Now, home prices did surge during the early stages of the pandemic — in part spurred on by record low mortgage rates increasing demand at the same time as the number of homes for sale declined and reduced supply. And, in some markets, there’s evidence prices are returning to normal — so, it may be possible for home buyers to find less expensive houses now that they can still afford, even at today’s higher rates.

But, the bottom line is, a dramatic increase in interest rates is going to have a huge effect on monthly interest costs and thus on the amount that home buyers can afford to pay for properties.

Should you wait to buy a house due to high interest rates?

It’s tempting to think you should wait it out and not buy a house until interest rates fall. But, the reality is, rates are still reasonable by historic standards if you look at the entire history of mortgage rates. It’s also impossible to know when rates will actually decline or what will happen to the housing market at that time. You could wait years to purchase a property and property values could go up in the meantime, so you may not end up better off even if you can get a lower rate later.

You also have the option to refinance your mortgage if rates do fall, so it’s not like you’re locked into your current high rate forever if you get a mortgage now.

Ultimately, if you are in a good financial position to purchase a property now and you can buy one you like while keeping your housing costs below about 25% to 30% of your take-home pay, then there’s no reason not to move forward, even though rates have made monthly payments less affordable than they were a few short years ago.

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If you’re a woman who feels stressed about money, you’re not alone. 

What word would you use to describe your feelings about money? Is it positive or negative? A recent study by Fidelity Investments found that women and men express their feelings surrounding money differently. It turns out that, overall, men are more confident about their finances when compared to women.

With March being Women’s History Month, it’s the perfect time to examine these differences and encourage continued education around important money management topics so both women and men can thrive financially.

46% of women feel stressed about money

Fidelity Investments recently conducted its Women’s History Month 2023 Survey to examine the current state of women’s finances in the United States. The study also compared how men and women differ regarding finances. It turns out there were some pretty stark differences.

For one portion of the poll, women and men were asked to describe their feelings about money. Respondents were able to choose multiple words. ‘Stress’ was the No. 1 word women used to describe how they felt about money. In contrast, ‘hopeful’ was the most common word men used to describe how they felt about money.

Here are some notable stats of the poll:

46% of women used the word ‘stress’ to express their feelings regarding money.34% of men used the word ‘stress’ to express their feelings regarding money.42% of men used the word ‘hopeful’ to describe their feelings surrounding money.38% of women used the word ‘hopeful’ to describe their feelings surrounding money.23% of women used the word ‘discouraged’ to describe how they feel about money.14% of men used the word ‘discouraged’ to describe how they feel about money.

The study found that financial fears differed, too

Respondents were also asked to share their top financial concerns. Similarly, the answers differed. The poll found that women were most concerned about the cost of living and inflation. On the other hand, men were most concerned about not having enough savings.

This finding isn’t exactly surprising, seeing that there continues to be a noticeable wage gap between men and women. According to the U.S. Census Bureau, women earned $0.83 for every $1 made by men in 2020. While the gender pay gap has narrowed somewhat, women workers are still at a financial disadvantage, and a gap in pay impacts their financial security.

It’s no wonder it’s a struggle for many women to keep up with rising living costs. As a whole, women make much less than their male counterparts do — but they still have to pay the same higher prices as men. It’s understandable why many women are concerned and less optimistic about money when they likely have more meager checking account balances.

It’s never too late to boost your personal finance knowledge

These findings show the importance of personal finance education. Many women feel less knowledgeable about critical financial matters. But it’s not too late to learn more about money. If you’re a woman with financial fears, boosting your knowledge may help you feel more confident and prepared to make decisions. Luckily, there are many free educational resources available. Check out these free personal finance resources to learn about essential money matters.

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

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Protecting your money is certainly an important thing. 

The money in your bank account is money you probably worked hard to earn or save. And so it’s natural that you’d want to protect it.

Now, you might think that your best bet is to spread your money across different checking or savings accounts. That way, if one bank gets hacked or goes down, you won’t lose all of your money.

Generally speaking, keeping your money in the same bank might make your life easier. But you may want to maintain a second account for peace of mind.

You’re protected in case your bank fails

It’s pretty rare these days for a major banking institution to fail without any warning signs. But as long as you keep your money in an FDIC-insured bank, that won’t be something to worry about.

With an FDIC-insured bank, your deposit of up to $250,000 is guaranteed, even if your bank goes under. And while well-known banks are generally FDIC-insured, if you want to make sure that’s the case for your bank, you can use this tool to look it up.

You should also know that if you have a joint bank account with a spouse/partner or relative, that $250,000 limit is per person. So in that case, you’d be protected for up to $500,000 in deposits. And let’s face it — most people don’t have anywhere close to that amount of money tucked away in the bank.

What about a breach or fraud?

At least 79 U.S. financial services companies reported data breaches in 2022, according to American Banker. In some cases, that could mean having a criminal gain enough information to steal money from your account.

But in that case, you’re protected, too. If funds leave your bank account in an unauthorized manner (such as them being stolen), and you notify your bank within 60 days, your bank must investigate within 10 days. And if it takes longer than that to resolve the issue, your bank must issue a temporary credit to your account (minus a maximum of $50) while it keeps working on the problem at hand.

A good reason to maintain a separate bank account

While you certainly could keep all of your money at the same bank, it may not be a bad idea to maintain a separate account with a small amount of cash. The reason? You never know when an accidental freeze might be put on your account, and it could take time to get the issue resolved. So in that case, having a second account would mean you’re not barred from accessing your personal funds completely.

Let’s say someone with a similar name or bank account number to you has their bank account frozen due to a court judgment. If your account gets locked out by accident, it might take a few days to clear things up. So that way, you’d at least have a different checking or savings account to access for near-term money.

It’s easy to see why you might feel the need to have more than one bank. For the most part, you should feel pretty secure keeping all of your money in one bank that’s FDIC-insured, and that could make it easier to track. But it’s also easy to make the case that maintaining a second backup account isn’t a bad idea.

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That doesn’t bode well for those signed up for short-term payment plans. 

Whether you do most of your shopping online, in stores, or a combination of the two, you’ve probably come across an opportunity to sign up for a Buy Now, Pay Later plan, or BNPL plan. BNPL plans let you pay for purchases over time rather than part with a larger chunk of cash at once.

Say you’re buying a $200 kitchen appliance. It might be hard for you to cover that purchase in one fell swoop, so a BNPL plan will let you pay for it over what’s usually a three-month period instead. And the upside of using one of these plans, as opposed to putting your purchase on a credit card, is that as long as you stick to your installment payment schedule, you won’t rack up interest. With a credit card, paying off a balance over three months will mean paying some amount of interest on what you’ve bought.

But while BNPL plans may be convenient, they’re not the best choice for everyone. And if you have debt already, you may want to steer clear of them.

BNPL plans and existing debt don’t mesh well

A recent report by the Consumer Financial Protection Bureau found that BNPL plan borrowers had significantly higher usage across other loan products compared to those who aren’t signed up for BNPL plans. But what’s really alarming is that 18% of those with BNPL plans had at least one reported delinquency in another personal loan or credit account, compared to just 7% of non-borrowers.

Now, this isn’t to say that signing up for BNPL plans is causing borrowers to fall behind on other financial obligations. Rather, it may be that people who are comfortable with debt (or resigned to it) may be more inclined to sign up for a BNPL plan. But if you’re already in debt, these plans are actually not the best choice.

The great thing about BNPL plans is that they give you more financial flexibility to pay off your purchases. But if you already have debt, it means you probably shouldn’t be making non-essential purchases until your loan or credit card balance is whittled down.

Of course, you might use a BNPL plan to cover an emergency purchase, and that’s a little different. But if you’re already struggling to keep up with existing debt obligations, then it stands to reason that you might fall behind on your BNPL plan payments, too. And once that happens, not only do you risk being slapped with interest and fees, but you also risk credit score damage.

Sign up with caution

The problem with BNPL plans is that they often push consumers to purchase things they don’t need and can’t actually afford. Sure, there are exceptions to this generalization, but often, people who are doing okay financially don’t need to spread out a $200 purchase over three months. It’s really all the same to them to pay for something like that in full.

Rather, BNPL plans, by nature, tend to appeal more to consumers who don’t have a lot of cash at the ready and who don’t have a lot of wiggle room in their budgets. But it’s these same consumers who need to be really cautious about spending money on extras. So if you already have an existing loan or credit card balance you’re trying to pay off, or, worse yet, you’re behind on one, then it’s probably best that you avoid signing up for a BNPL plan unless it’s an expense you truly can’t put off or avoid.

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It took me an hour to sign up, from start to finish. 

Making money fast isn’t easy. Side hustles can help. Americans know this, so 40% of Americans have a side hustle. Last year, I worked five jobs. Two were side hustles, including a gig delivering food for Doordash.

Regarding side hustles, Americans have a buffet of options to choose from. Here’s a brief sampling of potential part-time jobs:

Food delivery (DoorDash, Uber Eats)Dog walking (Rover)Clothing resale (eBay)

I’ve done all three. I’ve found the fastest way to start a side hustle — to start making money right away — is to deliver food. Here’s why delivering food for companies like DoorDash is one of the fastest ways to begin a side hustle, and three reasons to consider alternatives.

Quick sign-up

Setting up a food delivery account with Uber Eats or DoorDash is fast. You download the app and follow the on-screen instructions. Some things you’ll need:

Identity verification for a background checkClear lighting so you can take a picture of your faceAt least 30 minutes to complete the sign-up process

It took about 45 minutes to complete my DoorDash application and be approved. Just 15 minutes later, I hopped in my car and started making deliveries. That’s about an hour of work from start to finish, and I was able to begin delivering immediately.

Compare that to signing up for Rover, the dog-walking app. While Rover is a great way to make money, your services as a dog walker or pet sitter aren’t always in demand. Unlike DoorDash, you must create a compelling profile so people will hire you to care for their pets.

Fast payouts

Food delivery pays fast. DoorDash offers you two payment options: a weekly transfer to your checking account or an immediate transfer to your DasherDirect account. I opted for weekly transfers to easily route earnings from my bank to my stock brokerage account.

If you want immediate payments, you must apply for a DasherDirect account. DoorDash sends you a virtual prepaid Visa linked to your DoorDash earnings. It’s the fastest way to spend money you make on DoorDash, but there are limits.

Compare food delivery platforms to resale platforms like eBay. eBay only pays you once per month. And you’re limited by what you manage to sell. After signing up for DoorDash, you can start delivering immediately.

Reasons to consider alternatives

DoorDash isn’t for everyone. Here are three reasons to consider alternatives:

Stranger danger. You may have to contact strangers when handing off food.Gas fees. If you own a gas-guzzling car, that will cut into earnings.Limited demand. You may struggle to earn income in areas with weak demand.

Stranger danger is a genuine concern. Customers may ask you to hand off food personally or drive to a sketchy neighborhood. While all drivers have the right to refuse delivery, doing so hurts their ratings, and they make less money. Alternatives like Rover and eBay don’t penalize you for refusing service.

Consider gas fees. DoorDash doesn’t pay for gas. However, some states like California require apps like DoorDash and Uber Eats to make minimum payments to delivery drivers based on gas prices and minimum wage. When I delivered food for DoorDash for two weeks, I made more than $20/hour. But had I driven a gas guzzler, my earnings would have dropped.

DoorDash gives new Dashers special privileges. One of those is the ability to deliver food whenever you want. But you lose that flexibility if you don’t deliver often or accrue poor ratings. I stopped delivering as often when DoorDash started limiting my delivery windows. I’m lucky enough to live in Los Angeles, so demand is usually high, but other Dashers might not be so fortunate.

Should you try food delivery?

Try food delivery to make money fast with quick sign-up and fast payouts. But consider other side hustles if you don’t want to contact strangers, your vehicle gets poor gas mileage, or you don’t live in a heavily populated area like Los Angeles.

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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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash, Uber Technologies, and Visa. The Motley Fool has a disclosure policy.

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