Money Management

This timeless investing wisdom will help you have long-term success. 

If you haven’t started investing yet, it’s a great financial habit to add in 2023. Investing is a reliable way to build wealth, and the sooner you start, the more time your investments will have to grow.

Personal finance enthusiast Graham Stephan frequently provides investing tips. Recently, he shared 10 principles from The Intelligent Investor by Benjamin Graham, one of the most famous books on investing. If you’re a beginner ready to open your first account with a top stock broker, or even if you have some experience, these insights will make you a better investor.

1. There is a difference between an investor and a speculator

Investors carefully consider the fundamental value of a business and make long-term decisions. Speculators focus on price in hopes of making a quick buck. When you invest, you’re making an educated analysis, whereas speculation is more like gambling. The most successful investors avoid speculating, as this is a high-risk approach.

2. An intelligent person might not be an intelligent investor

Stephan correctly points out that temperament is more important than intelligence when it comes to investing. One of the biggest investing mistakes is making emotional decisions, such as panic selling when the market is down. Being able to maintain an even keel is extremely valuable for an investor.

3. Just because a business grows, it does not mean your investment will grow at the same pace

Stock prices don’t perfectly follow the growth of a company. A growing business could have a slow-moving stock price, while another company could see its value skyrocket based purely on its potential. Don’t expect stock prices to always behave rationally.

4. The market is like a voting machine in the short term but like a weighing machine in the long term

Continuing the point above, price fluctuations depend on the current market sentiment and don’t always reflect the true value of a company. But over long periods of time, fundamentals matter. That’s one of the reasons why it’s best to be a long-term investor.

5. The intelligent investor’s primary goal is to not lose money — and that’s not easy

Beginners often want to hit a home run. This is difficult to do, and it puts you at a greater risk of losing money. If you lose money, it’s twice as hard to make it back. For example, if your portfolio loses 50% of its value, it will need to increase by 100% just to get you back to where you started.

6. Buying even the best stock only makes sense at the right price

Finding good companies is half of successful investing. The other half is determining which of those companies are a good value in relation to their current prices. Don’t pay a premium just because you like a stock. The company and the price have to be right.

7. Diversify

With so many investment opportunities out there, it doesn’t make sense to tie your fortunes to a single company or industry. A diversified portfolio should have at least 25 to 30 stocks. If you don’t have the time or desire to pick that many stocks yourself, look into low-cost exchange-traded funds (ETFs). These invest your money in a large number of stocks for you.

8. Always look for a margin of safety

If you need to be 100% right to make money on an investment, it’s probably not a good idea. Stick to investments where you don’t need to nail all your calculations to make a profit.

9. Understand your style and commit to it

Most people are either passive investors or active investors. Passive investors pick some simple investments they can make on a regular basis and get good returns, such as ETFs, as mentioned earlier. Active investors build their portfolios themselves and spend lots of time looking for stocks they can get at a good price. There are also investors who primarily stick to passive investments, but also like to pick stocks from time to time. However, most lean heavily towards either a passive or active style.

10. Your worst enemy as an investor is yourself

It takes dedication and composure to invest well. You need to invest on a regular basis and avoid stopping — or even worse, selling — during economic downturns. But if you stick with it, you’ll be rewarded with the money you make from your portfolio.

The Intelligent Investor is considered an investing classic for a reason. Stephan shared many great pieces of wisdom, but if you’d like to learn more, the whole book is worth the read.

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Pumping in extra money could benefit you in more ways than one. 

Saving money for retirement is so important. The average senior on Social Security today collects just $1,827 a month. That’s really not so much money when you consider the many different expenses you might have to bear as a retiree, from housing to groceries to healthcare.

That’s why it’s a good idea to steadily fund an IRA account. Not everyone has access to an employer-sponsored 401(k) plan. But if you have earned income, you can open an IRA and contribute up to a specific threshold that changes from year to year.

This year, IRAs max out at $6,500 for savers under 50. But if you’re 50 or older, you’re allowed to make a $1,000 catch-up contribution to one of these accounts, bringing your total to $7,500.

Now, there tends to be some confusion around the term “catch-up contribution.” You might assume that if you’re not “behind” on retirement savings, you can’t put in an extra $1,000.

But actually, to qualify for a catch-up contribution, all you need to do is reach the age of 50. That’s it. Your IRA balance has nothing to do with your eligibility. With that in mind, here are a couple of good reasons to make an IRA catch-up contribution this year.

1. You’ll buy yourself more financial freedom for retirement

Retirement could end up being more expensive than you think. Recent Motley Fool research found that average yearly expenses for adults aged 65 and older are almost $49,000.

Seeing as how the average Social Security beneficiary today only collects about $22,000 a year in benefits, it’ll take a decent chunk of savings to make up that gap. So the more money you’re able to pump into your IRA, the more spending power you’ll get to enjoy as a retiree.

2. You can save money on your taxes in the near term

If you’re saving for retirement in a Roth IRA, you won’t get an immediate tax break on the money you put in. But if you’re keeping your retirement savings in a traditional IRA, then the money you contribute will lower your near-term tax liability. And that could result in a lot of savings.

So, let’s say you contribute $7,500 to your IRA this year. That’s $7,500 of income the IRS will not be able to tax you on. And that’s a pretty sweet deal.

If money has gotten tight this year due to inflation, which is the case for a lot of people, then you may not be able to make catch-up contributions in your IRA. But if you manage to find a way to squeeze out that extra $1,000, it could do you a lot of good.

Remember, not only is that an extra $1,000 in contributions, but you get the option to invest your IRA funds and grow them into a larger sum over time. So if you put in an extra $1,000 this year, it might be worth five or 10 times that much down the line when accounting for investment gains.

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Could a universal basic income provide ongoing stimulus funds? 

Lawmakers in Oregon are currently considering launching a program that would provide ongoing $1,000 payments to certain eligible residents.

The payments would be part of a universal basic income (UBI) program, and are being compared with the federal COVID-19 stimulus checks issued during the pandemic. That’s because researchers suggest these checks were similar to a massive UBI effort because they provided cash with no strings attached.

Here’s what Oregon’s new program would look like, along with some details about who might be in line to benefit from it.

Here’s who could get $1,000 checks

Senate Bill 603 is the proposal in Oregon that would provide $1,000 checks to eligible Americans. It is being sponsored by State Senator WInsvey Campos with the support of Residents Organizing for Change, a statewide advocacy group that aims to help ensure affordable housing for Oregon residents.

Under Senate Bill 603, a total of $25 million would be set aside to create a People’s Housing Assistance Fund Demonstration Program. This would be a pilot program that enables a total of 1,000 participants to receive checks of $1,000 per month over a two-year period of time.

The checks would be available to Oregon residents who currently do not receive any housing assistance and who have incomes that are at or below 60% of the area median. The program would operate statewide, making it the first UBI program carried out on the state level.

When the funds are distributed, a comprehensive study would be conducted to assess the effectiveness of the program and its implementation. The goal would be to determine if it should be expanded to include more people going forward.

The $1,000 UBI program was one of several plans that were considered by Residents Organizing for Change, along with stimulus checks that would be deposited into people’s bank accounts or sent via check.

Could more Americans become eligible over time?

If the pilot program moves forward in Oregon and is a success, the UBI program could be expanded in the state and could also potentially serve as a model for other locations in the U.S. that hope to cut poverty and homelessness.

Stimulus checks handed out during the pandemic played a major role in reducing financial struggles for many since the checks offered an influx of cash people could use to meet whatever needs they had (rather than typical government assistance which is usually more targeted). Since the checks helped to reduce poverty and increase the savings rate, it stands to reason that offering a universal basic income would likely have the same effect.

Of course, it’s not yet immediately clear Oregon’s pilot program will launch, so even if the program is a success, it could take years before other states decide to take a similar approach to providing money to those who need it.

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“Here lies Walter Fielding. He bought a house, and it killed him.” 

Spend enough time thinking about personal finance (and writing about it), and soon enough, you’ll start finding inspiration everywhere, including movies. The 1986 movie The Money Pit stars Tom Hanks and Shelley Long as Walter Fielding and Anna Crowley, and it’s a comedic romp about a couple who get in way over their heads on a home purchase in a predictable but hilarious way.

This movie may be 37 years old, but it still offers a lot of prescient advice worth taking if you’re looking to get a mortgage and become a homeowner. Here’s what to watch out for when you buy a home, so you can avoid falling through your own second floor and being ripped off by contractors.

1. It’s never a good idea to buy a home in a hurry

In The Money Pit, Walter and Anna have to find a new place to live unexpectedly when Anna’s ex-husband returns to his apartment (where they’ve been living) with no notice. Since they live in New York City, the couple face an uphill climb to find an apartment to rent, so instead, they consider buying a house.

This is a far from ideal situation in which to buy. Ideally, if owning a home is part of your plan, it should be far enough down the road that you have time to save money for a down payment and get your credit score in good shape. You should also take the time to vet mortgage lenders and get the best interest rate possible to avoid paying more than you have to for a house.

2. If the house seems underpriced, there’s a reason why

The home that Walter and Anna buy is a million-dollar property that’s been priced to move at $200,000. This is a bargain for a mansion just an hour outside New York City (while New York has some lovely affordable cities, they are all quite far away from NYC).

The seller has a sob story for the couple; her husband has been arrested and she needs to make a chunk of cash quickly on the sale. Walter and Anna don’t visit the home for long enough to discover anything wrong with it, and the story offered by the seller sounds legitimate enough. You may encounter a homeowner who needs to sell in a hurry (say, for a job relocation) and is willing to take less money for the property than seems logical. But if you’ve got your eye on a house that is very underpriced, be suspicious.

3. Never waive a home inspection

Walter and Anna don’t get the home inspected, and as soon as they start moving in, problems begin to crop up. The grand staircase completely falls apart and collapses, the front door’s frame is insufficient to hold the door in place, and eventually the bathtub even falls through the second floor down into the first.

If you’re buying a home, never waive the inspection contingency. Even if the inspection turns up expensive problems with the home you want to buy, and you elect to buy it anyway, at least you’ll know what you’re getting yourself into. And you’ll have the chance to start putting money in your savings account for the eventual repairs.

4. Don’t borrow money to buy a house

Walter is an entertainment lawyer, and borrows $200,000 from one of his clients, a teenage pop star, to cover his initial costs. The movie doesn’t discuss how Walter covers subsequent expenses, such as the many, many contractors who come to work on the house.

This is a movie, of course, but if you can’t cover the down payment yourself (or don’t have access to gift funds from friends or family), don’t borrow the money for it. There are a lot of rules in place to ensure that money you didn’t earn and are using for a home purchase really is a gift and not a loan. A mortgage lender is unlikely to approve you for a mortgage with a borrowed down payment, as repaying that loan could impact your ability to repay the mortgage.

5. Get references for contractors you want to hire

Once Walter and Anna discover the terrible condition of their new home, they hire contractors, including a pair of brothers who are a carpenter and a plumber, to oversee the work on it. The contractors prove to be unreliable, and work that was promised to take “two weeks” ends up taking months, and subcontractors completely gut the house in the process.

If you’re going to buy a fixer-upper home and aren’t qualified to do the work yourself, you’ll have to hire contractors. It’s a good idea to shop around for quotes on the work and see if you can speak to others who’ve worked with the contractor you want to hire. If the contractor seems reluctant to give you names of satisfied customers, that’s your sign to hire someone else.

Ultimately, The Money Pit has a happy ending, but if you buy a money pit of your very own, your finances may not survive. If homeownership is in your future, apply the lessons above to save money and find happiness in your new home.

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Some boutique hotels give guests freebies, like complimentary drinks and snacks.  

Accommodation costs can make your vacation expensive — but if you stay at the right place, you can pay a reasonable price and get extra perks. As you look at accommodation options, be sure to pay attention to the amenities offered. If you stay at a hotel that offers extra perks, your money will go further. Many boutique hotels go out of their way to provide their guests with a unique experience, which may include offering valuable freebies.

1. Kimpton

All guests staying at Kimpton properties can enjoy the complimentary evening wine hour. If nearby happy hours are too pricey, this is an excellent way to save money before you head out to enjoy dinner. Kimpton also allows furry guests to stay at its properties with no extra fees for this convenience.

2. Andaz

The luxury boutique hotel chain Andaz offers a unique experience to guests. One amenity that the brand is well known for is its complimentary stocked mini fridge. While you won’t get to sip on free booze, you can enjoy complimentary snacks and non-alcoholic beverages throughout your stay. This perk could help you stay on budget while traveling.

3. Archer Hotel

Archer Hotel is another boutique hotel chain that goes above and beyond. The brand has eight locations throughout the United States. When you stay at an Archer hotel property, you’ll find bottled water, locally made caramels, and a welcome note in your room. Guests are also given a regionally inspired turn-down treat. Additionally, if you book directly through the hotel’s website, you’ll get a $25 drink + dine credit to use during your stay.

4. Drury Hotels

If you prefer a simple hotel stay but love added perks, you may want to stay at a Drury Hotels property during your next trip. Drury Hotels is known for having affordable rates and providing extra amenities. The chain offers all guests a complimentary daily breakfast and free snacks and drinks (including alcoholic beverages) every evening during its 5:30 p.m. Kickback event. You can review the current menu on the brand’s website.

Independent hotels may also offer free perks

Boutique hotel chains aren’t the only places helping travelers save money. Independent hotels also offer savings by providing valuable freebies to guests. There are many fantastic independent hotels worldwide, and often, these stand-alone hotels offer extra amenities for no additional cost. As you plan your next trip, look for hotels that offer free snacks, welcome drinks, happy hours, and events to get more out of your stay.

Don’t focus only on the nightly rate

Accommodation costs can add up quickly, so you may be searching for the best deal. When comparing hotel options for your next trip, paying attention to prices is a good idea. But don’t settle only on the price. If you do that, you may miss out on valuable amenities.

If you’re choosing a hotel based only on the nightly rate, that may not be the best strategy. By paying slightly more for the boutique hotel experience, you could take advantage of extra perks that make your stay more valuable and improve your travel experience.

Pay with a rewards credit card to earn rewards

Are you ready to book your next vacation? You may want to pay with a rewards credit card so you can earn valuable rewards. Many travelers redeem their rewards for free flights and hotel stays to make travel more affordable.

Ryan Horn, the founder of Profits and Points, notes that those new to credit card rewards shouldn’t shy away from travel credit cards with annual fees. “If you know you’ll use the benefits of a specific credit card, you can often save way more money on your travels than if you exclusively stick to $0 annual fee cards.” He also points out that it’s best to avoid carrying high-interest debt. “The points and miles you’ll be earning likely won’t outweigh the interest that you’re paying on any credit card debt.”

Review our list of the best travel rewards credit cards to learn more about the best travel card options.

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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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Ramsey says you should live on a budget — and that’s not the only great advice he’s given. 

Most people are familiar with finance expert Dave Ramsey. He has given tons of advice on a wide variety of subjects ranging from homeownership to investing and beyond. Some of his advice is better than others, though. In fact, here are Ramsey’s 10 best pieces of advice that everyone should consider following.

1. Save an emergency fund

One of Ramsey’s most important suggestions relates to having an emergency fund. Specifically, he suggests you should have money set aside in a high-yield savings account to protect you against unexpected expenses.

“If you have consumer debt, I recommend saving a starter emergency fund of $1,000 first,” the Ramsey Solutions blog reads. “Then, once you’re out of debt, it’s time to beef up that amount and save three to six months of expenses in a fully funded emergency fund.”

With the Federal Reserve Board data showing that just 68% of adults had enough cash or savings to cover a $400 expense, this advice is essential. Emergencies can happen any time and without the money for them, it’s very likely you could end up reaching for the credit cards and worsening your long-term financial situation.

To save up your emergency fund, calculate how much you want to save, then open a high-yield savings account and start transferring the money over ASAP.

2. Live on a budget

Ramsey believes it is extremely important to live on a budget.

“A budget is a plan for how you’re going to spend your money. It puts you in charge and in control of every dollar that you earn or spend,” Ramsey explained.

To get started with your budget, Ramsey says to begin by listing your income and expenses, then figure out how much money you have left over after subtracting for essential items. He also advises tracking your spending to see if you’re sticking to your plans and making adjustments as needed.

If this type of budget doesn’t appeal to you, there are plenty of other budgeting options out there. It’s important to find a system that works for you. This advice ensures you actually spend your money in the ways you value most while also accomplishing things that build your financial security.

3. Invest 15% of your income for retirement

Ramsey recommends investing 15% of your income for retirement. He believes this is crucial because your savings rate has the biggest impact on whether you end up having a secure retirement.

“The big takeaway is this: No matter how much or how little you make, investing 15% of your income will put you on track for a secure retirement,” the Ramsey Solutions blog states.

This advice is crucial to follow because Social Security only replaces about 40% of pre-retirement income. You need more than that, and having a sufficient amount of savings is key.

4. Invest in a 401(k) and a Roth IRA for retirement

Ramsey has a great suggestion for what you should do with that retirement money. He believes you should first max out your workplace 401(k) and then contribute to a Roth IRA.

A 401(k) is a company plan offered by some employers — many of whom provide matching contributions. If your company offers this option, talk with HR to find out exactly what the rules are for maxing out your match. For example, if your company matches 50% of contributions up to 6% of your salary, you’d need to invest 6% of your salary to get the full match. Sign up to do that ASAP by filling out the required paperwork with HR to avoid leaving money on the table.

Once you’ve exhausted your match, Ramsey suggests opening a Roth IRA with a brokerage firm. A Roth IRA doesn’t allow for tax deductible contributions in the year you invest, unlike a 401(k) or traditional IRA.

But, as Ramsey explains, you benefit from tax-free withdrawals, so you’ll have more money as a senior when you need it. Since tax rates are currently near historic lows and may go up in the future, many people will benefit from this deferred tax break.

5. Keep your housing costs to 25% of your income or less

Ramsey has some great home-buying advice as well. Specifically, he suggests keeping your total housing costs to 25% of take-home income or less.

This advice is crucial because if you commit to housing payments that are too big, this can prevent you from doing anything else you need to with your money. You also face a huge risk of becoming unable to make payments if anything causes your income to drop.

To follow this advice, figure out how much you bring home after taxes by taking a look at your pay stubs. Then, set your housing budget at 25% of this amount including mortgage principal and interest, property taxes, insurance, PMI if required, and HOA fees.

6. Don’t buy a house without a down payment

Ramsey has some more smart advice for would-be homeowners. He advises against buying a house without a down payment. Ideally, he suggests putting 20% down if you can, because this allows you to avoid private mortgage insurance lenders mandate you buy on low down payment loans. If you can’t manage that because you’re a first-time buyer, he suggests making a minimum down payment of 5%.

This advice is important because without a good-size down payment, your loan will cost more, you’ll have less choice of which lenders to borrow from, and you could end up owing more than you could sell your home for and becoming trapped in the house.

7. Get renters insurance if you rent

Ramsey also has some advice for renters. Specifically, Ramsey says that anyone who owns anything should make sure they have renters insurance when renting a property.

“Renters insurance is a type of property insurance that pays to replace your things if they’re damaged, vandalized or stolen while you’re renting,” Ramsey explained. “It protects you from dealing with the financial fallout of unexpected catastrophes like fires, electrical surges, sewer backups and explosions. Without renters insurance, you could end up dipping into your savings to replace everything you lost. Not good.”

Renters insurance also protects your assets in case you’re sued if someone is hurt visiting your property. This advice is critical because you could lose everything if your apartment is destroyed or if someone sues you and wins a case against you.

8. Choose the cheapest home in the best neighborhood

Ramsey also advised that home buyers “buy the least expensive home in the best neighborhood you can afford.” As he explains, “That gives your home’s value room to grow in the future. Buyers who are shopping in a $200,000 neighborhood won’t be looking for a $300,000 home.”

This is age-old advice about prioritizing location. You don’t want a house that’s been over-improved for the neighborhood as buyers won’t want to pay that premium in the future.

9. Steer clear of store credit cards

Most of Ramsey’s advice about credit cards isn’t great. He suggests avoiding cards entirely, which you shouldn’t do because you’ll lose the chance to earn rewards and build your credit score with them.

But he’s spot on about one type of credit card: store cards. As he explains, these have higher interest rates, they encourage you to spend more money, and their rewards programs are not very good. While it may seem enticing to sign up for one, there are better options out there.

10. Buy a term life insurance policy

Finally, Ramsey advises purchasing a term life insurance policy if anyone depends on you — and avoiding a whole life insurance policy. This is great advice as well.

A term life policy provides crucial protection for loved ones in case of your untimely death. But it’s much cheaper than a whole life policy, which includes an investment component and which offers lifetime coverage most people don’t need because eventually they no longer have dependents.

Ramsey suggests getting a policy with a death benefit of 10 to 12 times your annual income, which can be a good rough estimate for how much coverage you need. You should get a policy in place while you’re as young and healthy as possible so you don’t leave your loved ones facing financial disaster if tragedy strikes.

By following these 10 pieces of Ramsey advice, you can make smart choices about your finances when it comes to insurance, credit cards, and home-buying. These decisions can help set you up for a more secure future.

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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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