Money Management

That’s some good news. 

Refinancing a mortgage may not make sense for a lot of homeowners this year. But it might make sense for you.

Perhaps when you first signed your mortgage loan, your credit score was in pretty poor shape, so you didn’t qualify for a very competitive interest rate on your loan. If your credit score has since improved quite a lot, it may be possible to snag a lower interest rate on a new home loan than what you’re currently paying, even with mortgage rates being pretty elevated across the board.

What’s more, you may be interested in doing a cash-out refinance, where you borrow more than your current mortgage balance and get the rest of your loan proceeds in cash to use as you please. That’s a route that could make sense even with mortgage rates being higher now than they were a year ago.

Normally, when you do a mortgage refinance, there are certain criteria that need to be met. Your credit score generally has to be in decent shape, and your home has to appraise for a high enough value to cover the loan amount in question.

Sometimes, homeowners can run into appraisal issues when refinancing. This can especially happen when you refinance at a time when home values are down.

Right now, however, we’re in the opposite sort of housing market. And so if you’re pursuing a mortgage refinance, you’re unlikely to run into appraisal issues this year.

Higher home values could help the refinancing process go smoothly

In January, the median U.S. existing home price rose to $359,000, as per the National Association of Realtors. That’s a 1.3% increase from one year prior. But it’s also important to note that in early 2022, home prices were already up. So while a 1.3% increase might seem modest, it’s coming on top of an existing boost in home values.

Higher home prices are clearly not a good thing for buyers. But they can be very helpful for those looking to refinance a mortgage.

When home values are generally up, it becomes easier to meet the appraisal requirements needed to finalize a mortgage refinance. And so even if your home wouldn’t command the same sky-high sale price it might’ve fetched in 2021, when buyer demand was really soaring, chances are, if your mortgage is at least a few years old, your home is worth more now than it was when you first signed that loan. So all told, you’re much less likely to have issues with your home appraisal.

Some lenders might even waive your appraisal

While it’s common to have a home appraisal done as part of the refinance process, some lenders have waived that requirement over the past few years, due to the general state of the U.S. real estate market. This isn’t to say that your home won’t need an appraisal to finalize your refinance. But don’t be surprised if your lender tells you that an appraisal won’t even be necessary in the first place.

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Should you use Ramsey’s SmartTax service? 

It’s that time of year again — tax season. If you dread tax season because it means hours upon hours of tedious paperwork, then using tax filing services like H&R Block, TurboTax, or TaxSlayer can help. A whopping 94% of people e-filed their taxes through a tax pro or a self-filing tax software in 2021. With numerous programs to choose from, popular financial guru Dave Ramsey recommends only one e-file tax return service. Not surprisingly, it is his own Ramsey SmartTax, an alternative to TurboTax. Here are the details of the tax service and why you may want to consider using it.

What is Ramsey SmartTax?

Ramsey SmartTax is an online platform that was created by Dave Ramsey’s team as an alternative to TurboTax and other e-filing services. According to Ramsey’s site, it offers more benefits than TurboTax and is cheaper. The platform is designed to take the stress out of tax preparation by offering easy-to-understand guidance throughout the entire process.

How does it work?

With Ramsey SmartTax, users are guided through every step of their return with simple explanations along the way. There’s also built-in support available if you run into any issues or have any questions about your return. Additionally, there’s a suite of tools available that can help simplify your taxes even further, such as calculators that will automatically determine your deductions based on the data you provide. And if all else fails, there are experienced professionals at hand who can provide personalized advice and one-on-one support throughout the entire process.

Is it worth using?

If you find yourself overwhelmed by filing your taxes each year and how complicated it can be, it could be worth using Ramsey’s SmartTax. Both Ramsey SmartTax and TurboTax streamline the entire tax filing process. The key difference is the cost and services offered by each. Ramsey SmartTax’s Federal Classic version is $29.95 for federal filing, plus $39.95 for state filing. The Premium service is an additional $20 and offers extra support.

TurboTax is one of the largest tax filing companies and offers a free edition for those with very basic needs. TurboTax’s Deluxe version is $59, Premier is $89, and Self-Employed is $119, plus $59 for state filing. While Ramsey’s SmartTax does not offer a free version, the Classic version offers the same benefits as TurboTax’s Self-Employed version. If you pay $20 more for the Premium edition, it includes a free financial coaching session (a $200 value) and priority support. Should something go wrong or if you have any questions about your return, there are experienced professionals available who can provide personalized assistance.

If your taxes are very simple, then TurboTax’s free edition may be best for you. If you have to file more than a simple 1040 tax form, you won’t qualify for the free edition. If you have a complicated tax situation and saving money is important to you, then Ramsey’s SmartTax may be a good fit. While not as well known as TurboTax, Ramsey’s SmartTax offers all the services of TurboTax, priority support, and financial coaching at about a third of the cost.

Bottom line

Filing taxes doesn’t have to be stressful or complicated — especially when there are tools like Ramsey SmartTax and TurboTax available. Both platforms provide easy-to-follow instructions and helpful tools during every step of the tax filing process. However, Ramsey’s SmartTax offers services at a lower cost and has built-in support from experts. Whether it’s your first time filing taxes or if you’re an experienced pro looking for a simpler solution than ever before, Ramsey SmartTax might be just what you need this tax season!

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ETFs don’t have to be confusing. 

Exchange-traded funds (ETFs) can be a confusing topic for those who are new to investing. But it doesn’t have to be! Wall Street guru Vivian Tu, who uses the handle @YourRichBFF, recently compared ETFs to a charcuterie board. With this analogy in mind, let’s take a closer look at how ETFs work and why they are so popular with investors.

What are exchange-traded funds?

Put simply, an exchange-traded fund is a type of investment that tracks an index. It consists of a basket of securities, like stocks or bonds. ETFs trade on major exchanges and their prices constantly change, just like shares of stock. They offer investors diversification benefits and cost savings since they allow investors to buy into many different investments all at once. This means you are more insulated when it comes to risk, because if one company in the bunch doesn’t do well, you’re still invested in others that should help things balance out. Exchange traded funds also typically have fewer fees when compared to actively managed funds.

The charcuterie analogy explained

Charcuterie boards are a popular way to serve items like meats, cheeses, fresh and dried fruits and vegetables, olives, and nuts at a social gathering. Vivian Tu believes that the best way for novice investors to understand ETFs is by comparing them to a charcuterie board. Your favorite cheese may be brie, but you probably don’t want to eat an entire wheel in one sitting. However, if you can bring out the charcuterie board to add a variety of different foods, then you can still enjoy your brie among bites of other cheeses.

Like a charcuterie board, an ETF has a variety of different stocks, bonds, or investments all included. All these elements come together to create a more diversified mix of investments that can meet your specific needs as an investor. An ETF portfolio is not unlike building a charcuterie board — you want each component to bring something unique and interesting to the table while still working well with all the other elements.

For example, you are more insulated from risk with an ETF if something bad happens to one company. It’s a similar idea with a charcuterie board; if there’s one bad cheese that you don’t like, it’s okay because there are still plenty of other bites to enjoy on the board. And as with any good charcuterie board (or investment portfolio!), there’s no single “right” combination — it all depends on your individual goals as an investor and what types of risk you are comfortable taking on.

This analogy from @YourRichBFF makes it easier to understand how ETFs work in practice by comparing them to a charcuterie board. Each component contributes something unique, yet is different from other elements in the portfolio, so an ETF can insulate you from unnecessary risk. Building an investment portfolio can seem daunting, but using ETFs can help you confidently take your first steps towards investing success.

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It’s worth keeping in mind, given that borrowing rates are up. 

For some people, owning a vehicle isn’t a want — it’s an absolute need. If you live somewhere without adequate public transportation or have a job that’s not accessible without a personal vehicle, then you’ll need a car to earn a living and just plain function.

The problem, though, is that borrowing rates are up right now across the board on the heels of Federal Reserve interest rate hikes. That means you’re apt to pay more to borrow money whether you’re looking at a personal loan, a home equity loan, or an auto loan. And given that car prices are quite expensive these days, especially for new vehicles, you’ll need to be really careful when taking out an auto loan.

In fact, financial guru Suze Orman says the current average interest rate for a 48-month used car loan is nearly 7%. And in light of that, it’s important to stick to these tips if you’re looking to finance a vehicle purchase.

1. Apply when your credit is strong

Anytime you need to borrow money, your credit score is apt to have a huge impact on the interest rate you’re eligible for. Orman pulled data from Experian that said auto loan borrowers with a credit score of at least 780 recently snagged an average interest rate of under 4% for used car purchases. But borrowers with a credit score between 600 and 660 paid almost 10% interest on their auto loans.

If your credit score could use work and you don’t need to buy a car immediately, Orman suggests waiting until your score hits the 700 mark or higher to move forward with an auto loan application. Waiting to boost your credit score could mean snagging a far more competitive interest rate on your loan, and spending a lot less money to pay off your car.

2. Think short-term

Any time you drag loan payments out over a lengthy period of time, you pay more interest than you do for a shorter-term loan. Seeing as how borrowing rates are generally up these days, Orman suggests taking out an auto loan with a fairly short repayment period — ideally, 36 months or fewer. And she insists that you should not be paying off an auto loan for longer than 48 months.

Of course, sticking to this sort of time frame might mean having to purchase a less expensive car. That’s not necessarily a bad thing, though, especially if money is tight.

There’s obviously something to be said for owning a car that’s loaded with great features. But remember, the vehicle you buy today isn’t necessarily the one you’ll be stuck with for the next 15 years. And you can always try to sell your car and upgrade to a nicer one if your financial situation improves.

Buying a car is an expensive prospect these days. If you need to finance a vehicle, it pays to follow Orman’s advice, even if that means having to wait on a car purchase or adjust your expectations a bit.

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Older Americans clearly are not immune to credit card debt. 

Americans on a whole aren’t strangers to credit card debt. And the average consumer today owes $6,320.98 on their credit cards, according to New York Life’s latest Wealth Watch survey.

Baby boomers, however, owe considerably more. Their average balance is closer to $6,785. And while that’s not the highest balance among different age groups — that dubious distinction goes to members of Generation X — it’s clearly higher than $6,320.98.

The reality, though, is that any amount of credit card debt is dangerous for baby boomers. Here’s why.

It’s hard to owe money when your income shrinks

Many baby boomers are either retired or on the cusp of retirement. And that means they may be limited to a fixed income — one consisting of monthly Social Security benefits and modest withdrawals from an IRA or 401(k) plan.

In fact, it’s often the case that retirees end up living on less income than they did while they were working. But when your income takes a hit, managing credit card debt payments can be difficult. And it puts you at risk of never paying off that debt in your lifetime.

To be clear, dying with credit card debt won’t necessarily leave your heirs responsible for it individually. But if you have assets you want to leave behind to the people you love, your creditors will generally have the right to go after your estate to get repaid. So if you don’t manage to pay off your credit card debt in your lifetime, those companies could get their money one way or another.

How to tackle credit card debt when you’re older

If you’re a baby boomer and are able to shed all of your credit card debt before retiring, that’s great. If not, you may want to consider some creative ways to drum up cash and knock out that debt as quickly as possible.

One option is to become a participant in the gig economy. That could mean driving for a ride hailing service or moonlighting as a personal chef.

Another option is to see if your home could help you drum up cash. Many older people downsize their homes once they stop needing so much space. But if you didn’t go that route, it may be possible to rent out an area of your home and use that income to pay off your credit card debt.

Keep in mind that you don’t have to commit to a full-time tenant to monetize your home. If you live in an area that’s touristy, you can rent out your home for a couple of weeks out of the year when you’re not using it yourself.

Credit card debt is something that’s best avoided at any age, but it’s especially important to try to avoid it during retirement. And if that ship has sailed, your next best bet is to do what you can to shed that debt quickly. The sooner you do, the less money you’re looking at losing to interest charges.

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Like you, the Tooth Fairy is spending more money in 2023.  

If you feel like everything costs more lately, you’re not alone. Inflation has come for all of our wallets. Even our cherished gift-giving legends are paying more than they were in years past. A recent poll shows that the Tooth Fairy is paying much more per tooth due to inflation. While this is likely welcome news for kids with lost teeth under their pillows, the study’s findings further highlight that we’re all battling higher costs.

The average value of a single tooth in 2023 is $6.23

Most of us are paying more for groceries, gasoline, rent, utilities, clothing, and everything else. The Tooth Fairy is also giving more generously to keep up with inflation. A recent poll from Delta Dental shows the average value of a single tooth is now $6.23, an increase of 16% in the last year. In 2022, the average value of a single tooth was $5.36.

The study also found the average tooth value varied by location. Here are the U.S. regional tooth value averages for 2023:

In the South, the average value of a lost tooth is $6.59.In the West, the average child is receiving $6.25 per tooth. In the Northeast, the average tooth value is below the national average at $6.14.In the Midwest, the average child finds $5.63 under their pillow.

With this data in mind, the Tooth Fairy may want to assess its financial goals to ensure they’re on track. It’s good practice for all consumers — even those with wings, to review their budgets occasionally and make necessary adjustments. Without a budget, it can be easy to overspend and rack up debt, which could worsen your financial situation and hurt your credit score.

Now is a good time to teach your kid about saving

There’s one positive side to the results of this study. Many kids are being given more cash for their lost teeth. If your child is starting to lose teeth and has been getting visits from the Tooth Fairy or is receiving an allowance, it’s not too early to educate them on the importance of saving. Teaching your child about money early in life can set them up for success in adulthood.

If your child has been earning money, it may be time to consider opening up a savings account. They can earn interest on their savings and keep their money safe until they’re ready to use it for a future purchase. It’s a good way to help your child develop positive money management habits.

An emergency fund can offer added protection

Many Americans are struggling to keep up with rising living costs. If you’re finding it harder to manage your money during this time, you’re not alone. One thing you can do to protect yourself is create an emergency fund. Even if you can only contribute a small amount of extra money each month, it will add up over time and make a difference.

An emergency fund can save the day when a costly unexpected bill comes your way or when higher prices make your life more expensive. If you’re forgetful, you can automate the savings process, so money is regularly transferred to your emergency fund. Check out these personal finance resources to learn more about essential money management topics.

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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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