Money Management

Hint: It’s not a small number. 

Home prices have been elevated for quite some time now. That, combined with higher mortgage rates, has forced many recent buyers to take on expensive monthly housing payments.

In January, the average monthly mortgage payment was $1,964, according to the Mortgage Bankers Association. That’s up from $1,920 in December.

Now, what’s somewhat surprising is that mortgage rates dropped between December and January. In spite of that, homeowners are on the hook for higher monthly mortgage payments. And some may be in danger of falling behind.

Post-purchase affordability issues could arise

Many people struggle to buy a home in the first place — they can’t qualify for a mortgage or they can’t scrounge up a large enough down payment. But just because buyers manage to overcome those hurdles doesn’t mean it’s smooth sailing once they become homeowners officially.

Given how high the average monthly mortgage payment is today, it wouldn’t be surprising to see an increase in delinquencies on the home loan front — especially when we throw in general inflation and the fact that just about every expense has been rising at a rapid clip.

Make sure you don’t get in over your head

It may be that a monthly mortgage payment of $1,964, or something in that ballpark, is doable for you. But before you sign a mortgage, make sure to run the numbers.

As a general rule of thumb, your monthly housing costs should not exceed 30% of your take-home pay. So if you bring home $5,000 a month after taxes and deductions, it means you shouldn’t be spending more than $1,500 on housing. And that $1,500 would need to include not just mortgage payments, but also, costs like homeowners insurance and property taxes.

Of course, what’s interesting is that median income in the U.S. was just $70,784 in 2021, the most recent year for which this data is available via the U.S. Census Bureau. That amounts to about $5,900, but that’s on a pre-tax basis. A married couple with that income would’ve had a 12% marginal tax rate in 2021, thereby whittling that $5,900 down to more like $5,200 a month in post-tax income, assuming no other deductions.

When we do the math, 30% of $5,200 is only $1,560. So clearly, there’s a huge disconnect between the average monthly mortgage payment and recent median income, assuming we want to stick to that 30% threshold.

That said, there’s a big difference between medians and averages when we dig into different sets of data. When we talk about an average monthly mortgage payment of $1,964, it’s quite possible that a small percentage of wealthy Americans with very high mortgage payments are inflating that number.

But even so, it’s clear that many Americans — especially those with average incomes — cannot afford a home based on today’s prices and mortgage rates. And anyone in that boat should strongly consider waiting to purchase a home rather than committing to a set of expenses they risk falling behind on.

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It’s something many parents are holding out hope for. 

In 2021, the Child Tax Credit got a major boost as part of the American Rescue Plan, the massive stimulus bill that also put $1,400 stimulus checks in Americans’ bank accounts. President Biden initially hoped to keep the expanded credit in place for 2022, but that didn’t end up happening. And not surprisingly, many households with children struggled financially once the Child Tax Credit reverted to its former value, especially in light of rampant inflation.

But President Biden just revealed his new budget proposal, and one of its provisions includes an expansion of the Child Tax Credit yet again. And while his proposal is pretty unlikely to go through, the fact that he hasn’t given up on the boosted Child Tax Credit should give struggling parents a reason to be hopeful.

A boost so many parents miss

Biden’s budget proposal includes an expanded Child Tax Credit with a maximum value of $3,000 for children ages 6 and over, and $3,600 for children under 6. These are the same maximum values the credit had in 2021, when it not only increased, but got partially paid in the form of monthly installments so parents didn’t have to wait to file their taxes to get their money.

Right now, the Child Tax Credit maxes out at $2,000 for eligible children of all ages. So Biden’s increase, if it were to go through, would no doubt help many parents shore up their finances and better manage their expenses, especially at a time when living costs have risen to such a drastic degree.

In addition to boosting the Child Tax Credit, Biden’s budget also looks to make health insurance premium tax credits permanent, strengthen Medicare’s ability to negotiate drug prices so savings can be passed along to enrollees, and expand Medicaid home and community-based services. To achieve all of these goals, though, Biden is seeking to raise taxes. And that’s where things get hairy, namely because many lawmakers are apt to be opposed to that idea.

Specifically, Biden is seeking to impose a 25% minimum tax on the nation’s wealthiest earners and a 28% corporate tax rate. He’s also looking to impose a top marginal tax rate of 39.6% on single tax-filers earning more than $400,000 a year and married couples earning more than $450,000 per year. Right now, the top marginal tax bracket is 37%.

What if Biden’s proposal fails?

Let’s be clear — Biden’s budget proposal is unlikely to pass in a Republican-controlled House. But that doesn’t necessarily mean a boosted Child Tax Credit is off the table.

Many lawmakers have been advocating to bring the enhanced version of the credit back since it went away at the start of 2022. And they’ll likely continue to do so. So while it’s unlikely that lawmakers will approve a budget that hinges on so many drastic tax proposals, it doesn’t mean parents won’t one day see the Child Tax Credit get a nice boost — one that helps them manage the ever-rising cost of raising kids.

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That’s money you shouldn’t be giving up. 

If you’ve ever dropped the ball on a birthday or holiday present, a gift card may have come to your rescue. And similarly, you may have received your share of gift cards through the years.

Gift cards are an easy gift to give because there’s no brainwork involved. And in many cases, they’re a great gift to receive because you get the freedom to use your money as you please.

If you get a $50 Target gift card, you can use that money to buy groceries if need be. And if you get a $50 Amazon gift card, you can use it for essentials like socks and underwear if you’re not in a position to spend it on items that are more fun.

The problem with gift cards, though, is that they can be easy enough to forget about. And if you neglect to spend yours, it’s basically like throwing money away.

Consumers have billions of dollars in unspent gift cards

A recent report by Credit Summit, as summarized by CNN, revealed that almost two-thirds of U.S. consumers have at least one unspent gift card. And all told, Americans have a whopping $21 billion in gift cards they’ve yet to redeem.

Now, to some degree, that’s pretty surprising. After all, inflation has been wreaking havoc on consumers for well over a year, forcing many to rack up scores of credit card debt just to stay afloat. It would stand to reason that consumers would be more motivated to use their gift cards so as to be spending less out of pocket.

That said, in many cases, gift cards cannot be used to cover essential expenses. Sure, you could use a Target or Walmart gift card to buy food. But if you receive a gift card to a local craft store or book seller, that’s not going to address an essential need for you. And so a gift card like that might easily get filed away in your desk drawer, only to be forgotten about.

The good news is that often, gift cards do not expire or lose value over time. But some do. So it’s important to read the fine print on the back of your gift cards to avoid losing out.

You should also know that if you don’t spend a gift card, and the issuer goes out of business, you could end up out of luck. So that’s all the more reason to spend your gift cards rather than save them.

Put those gift cards to good use

If you’re sitting on a bunch of gift cards, a good bet is to make a list of the ones you have and how much value each card has on it. From there, you’ll need to determine if you’re likely to use each gift card or not. If you were given a Starbucks gift card but you’ve sworn off caffeine, you may not get great use out of that particular piece of plastic.

Any gift card you’re unlikely to use is one you should seek to swap or exchange for cash. A simple internet search should bring up a list of sites that allow you to do this.

Keep in mind that if you’re looking to unload a $50 gift card for cash, you might only walk away with $35 or $40. But you’re better off getting $35 or $40 to stick in your bank account than hanging onto a $50 gift card you’re very unlikely to use.

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Image source: Getty Images
What happenedGeneral Motors (GM) is looking to reduce costs by asking employees to take a severance package and voluntarily leave the company instead of doing a round of layoffs, the company announced Thursday. The decision follows GM eliminating hundreds of salaried jobs earlier in March.“By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market,” a GM spokesperson said in a statement.The voluntary severance program is offered to all U.S. salaried employees who have worked at the company for at least five years and global executives with at least two years of service, CNN has learned.So whatGM recorded a record annual profit for 2022. In spite of that, the company is looking to reduce its costs by $2 billion over the next two years.GM has 167,000 employees globally, with 124,000 in North America — including more than 42,000 members of the United Auto Workers union.”We’re not planning layoffs. We are limiting our hiring to only the most strategically important roles and will use attrition to help manage overall headcount,” GM CEO Mary Barra told investors earlier this month.Now whatMany companies have announced plans to lay off staff, or have implemented layoffs, since the start of 2023. So the fact that GM isn’t forcing workers to leave is a positive thing at a time when layoffs are starting to pick up.The details of GM’s voluntary severance package aren’t yet public record, so it’s hard to know exactly what benefits workers who leave voluntarily will receive. But job site Indeed reports that the typical severance agreement offers one to two weeks of pay for every year of employment. And voluntary severance agreements tend to be more generous than those offered upon termination.So all told, GM employees who leave the company might receive a sum of money they can put into their savings accounts. They might also be entitled to extended health insurance coverage and compensation for accrued time off.GM may not be the only company to ask workers to leave voluntarily this year. So if you wind up in a situation where your employer offers a voluntary separation, you may want to look into the details. If the payday is high enough, it could be worth it to take the money and use the opportunity to explore a new career path if that’s something you’ve been thinking about.That said, one thing you should know about a voluntary separation from your employer is that it may render you ineligible for unemployment benefits through your state. If you’re getting a generous payout as part of your separation, that may not be an issue. But before you assume you’ll be able to double dip, you may want to talk to an employment lawyer who’s familiar with your state’s rules.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If 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 reviewWe’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. 

What happened

General Motors (GM) is looking to reduce costs by asking employees to take a severance package and voluntarily leave the company instead of doing a round of layoffs, the company announced Thursday. The decision follows GM eliminating hundreds of salaried jobs earlier in March.

“By permanently bringing down structured costs, we can improve vehicle profitability and remain nimble in an increasingly competitive market,” a GM spokesperson said in a statement.

The voluntary severance program is offered to all U.S. salaried employees who have worked at the company for at least five years and global executives with at least two years of service, CNN has learned.

So what

GM recorded a record annual profit for 2022. In spite of that, the company is looking to reduce its costs by $2 billion over the next two years.

GM has 167,000 employees globally, with 124,000 in North America — including more than 42,000 members of the United Auto Workers union.

“We’re not planning layoffs. We are limiting our hiring to only the most strategically important roles and will use attrition to help manage overall headcount,” GM CEO Mary Barra told investors earlier this month.

Now what

Many companies have announced plans to lay off staff, or have implemented layoffs, since the start of 2023. So the fact that GM isn’t forcing workers to leave is a positive thing at a time when layoffs are starting to pick up.

The details of GM’s voluntary severance package aren’t yet public record, so it’s hard to know exactly what benefits workers who leave voluntarily will receive. But job site Indeed reports that the typical severance agreement offers one to two weeks of pay for every year of employment. And voluntary severance agreements tend to be more generous than those offered upon termination.

So all told, GM employees who leave the company might receive a sum of money they can put into their savings accounts. They might also be entitled to extended health insurance coverage and compensation for accrued time off.

GM may not be the only company to ask workers to leave voluntarily this year. So if you wind up in a situation where your employer offers a voluntary separation, you may want to look into the details. If the payday is high enough, it could be worth it to take the money and use the opportunity to explore a new career path if that’s something you’ve been thinking about.

That said, one thing you should know about a voluntary separation from your employer is that it may render you ineligible for unemployment benefits through your state. If you’re getting a generous payout as part of your separation, that may not be an issue. But before you assume you’ll be able to double dip, you may want to talk to an employment lawyer who’s familiar with your state’s rules.

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You may be surprised by which one it is. 

Saving for retirement is essential. Without personal savings, you might struggle to pay your bills once your senior years roll around.

But prioritizing your savings isn’t the easiest thing to do when you’re fairly young. That’s because you might have more pressing goals to address, like paying off your credit cards or building yourself an emergency fund. And given the way inflation has surged over the past year and change, you may be having trouble finding money for your IRA account or 401(k) because you’re spending your entire paycheck on things like rent, utilities, and food.

It’s therefore surprising — in a good way — to learn that members of Gen Z have seen their retirement account balances increase more so than any other generation over the past quarter. And if younger workers keep up the great work, they could set the stage for a very comfortable retirement.

Younger generations are pushing to save

Fidelity recently reported that the average IRA balance as of the end of 2022 was $104,000, while the average 401(k) balance was $103,900. And while Gen Zers, because of their age, tend to have smaller balances than their older counterparts, their balances increased 23% from 2022’s third quarter to its fourth — a higher rate of increase than any other age group.

What’s even more notable is that retirement plan balances among Gen Zers are up 14% compared to the end of 2021. And that makes Gen Zers the only generation to be seeing positive growth in their retirement savings over the past year.

Now to be clear, the reason so many retirement accounts are down is none other than 2022’s volatile stock market — a market that sorely underperformed. But the fact that Gen Zers’ retirement plan balances are up is likely due to them ramping up their contributions. And that’s a very positive thing.

Prioritize your retirement savings if you can

If you’re struggling to keep up with your bills these days due to inflation, then you might have to temporarily pause your retirement plan contributions to get caught up. But if you’re in a good place financially and can manage to make IRA or 401(k) plan contributions, do it now — even if you’re a good 40 years or more away from retirement.

The longer you give your money to grow, the larger a nest egg you stand to accumulate. And so making an effort to sock away even as little as $100 a month in a retirement plan could make a huge difference over time.

In fact, let’s say you contribute $100 a month to an IRA or 401(k) over the course of 40 years, all the while investing that money at an average annual 8% return, which is a reasonable return for an investment window that lengthy. All told, you stand to accumulate about $311,000 in your lifetime — and that assumes you never increase your $100 monthly savings rate.

Now ideally, your savings rate will go up as your salary increases. The point, however, is that saving for retirement over a long window could do you a world of good. And so it’s great to see that Gen Zers are ramping up on retirement savings — even though that milestone isn’t anywhere close.

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You may be able to capitalize on additional savings opportunities. 

Credit cards can help you build credit and improve your credit score when used with care. Rewards credit cards can also earn you cash back, points, and miles. But that’s not all. You could get a discount on eligible purchases or earn bonus rewards by using credit card offers made available to you through your credit card issuer. If you’ve never explored these offers, you’re missing out.

Introducing credit card offers

Many credit card issuers partner with other companies to provide discount opportunities to their cardholders through credit card offers. These discounts function as cash back and, in most cases, are awarded as a statement credit to your credit card account.

Sometimes cardholders can earn bonus rewards in addition to the regular rewards earned with their card with bonus reward offer opportunities. Credit card offers make saving money and boosting your rewards potential simple, without requiring much extra work. To use an offer, you’ll need to activate it. It’s quick and easy to look for offers and activate the ones that interest you.

Make sure that you review the terms and conditions of each offer, as there may be some restrictions. It’s also worth noting that most offers have expiration dates. Most card issuers add new offers regularly, so check back often so you don’t miss out on a good deal.

What kind of offers are available? Here are some examples of offers that you may see:

Get 2% back on Dyson purchases of up to $250Spend $500 or more, and get $100 back at select Mandarin Oriental propertiesGet 10% back at Five GuysGet $5 back on a Showtime subscription when you spend $10.99 or moreEarn $25 cash back on The Farmer’s Dog purchases of $25 or more

The following credit card offer programs are worth your attention.

Chase Offers

Those with Chase credit cards can save money and earn rewards through the Chase Offers program. You can find and activate offers through the Chase website or mobile app. Once you make an eligible purchase with a participating merchant, you’ll earn cash back as a statement credit — which will make your next credit card bill cheaper.

Citi Merchant Offers

Citi also has a cash back program called Citi Merchant Offers, which is available to targeted Citi cardholders. You’ll find a variety of travel, dining and entertainment, shopping, and health and wellness offers. If you see an offer you like, you’ll need to add the offer to your account and make an eligible purchase. For cash back earnings, you’ll get a statement credit.

Amex Offers

American Express has an offer program called Amex Offers. You’ll find cash back opportunities and bonus rewards offers. You can view and activate offers through the Amex website or mobile app. Some deals are available for both in-store and online purchases, but some are only for online or in-person spending. Cash back earnings are rewarded as a statement credit.

Bank of America AmeriDeals

The Bank of America AmeriDeals cash back rewards program is available to those with Bank of America debit cards and credit cards. You can browse available offers through the website or mobile app. Once you find an offer that interests you, activate it and use your card to make a purchase. Cash back earnings are automatically added to your account within 30 days.

Don’t let your credit card benefits go to waste

Credit cards are a valuable personal finance tool, and they can provide many perks. Ensure you get the most out of your credit cards by using all the available benefits. Credit card offers can help you keep more money in your pocket and earn rewards on your spending.

At the same time, make sure you don’t ignore your budget. Spending money on unnecessary purchases to redeem an offer is never a good idea. But if you already planned to spend money with a participating retailer and see an offer that can get you a better deal — that’s a win for your wallet.

If you want to apply for a new credit card, check out our list of the best credit cards.

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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. American Express is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America, JPMorgan Chase, and Target. The Motley Fool has a disclosure policy.

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