Money Management

It’s important to think about the finances behind that decision. 

The decision to buy a home is a major one. In fact, it’s probably the single most significant purchase you’ll ever make in your life. But unfortunately, financial guru Ramit Sethi says it’s a decision a lot of people get wrong — and for one big reason.

When emotions guide your decision instead of numbers

Buying a home is a huge undertaking. Not only do you have to cover a monthly mortgage payment, but you also have to cover expenses like property taxes, insurance, maintenance, and repairs.

All told, the amount of money you spend to own a home might far surpass the amount it costs to rent a home. And your costs of homeownership may be far less predictable.

That’s why it’s so important to make sure you can actually afford to buy a place of your own. In a recent tweet, however, Sethi relayed the story of someone who decided to buy a home because they felt like they were throwing their money away on rent. But as Sethi went on to say, when it comes to homeownership, it’s often “about feelings, vibes, and almost never a true calculation of renting vs. owning.”

He makes an important point. Many people like the idea of homeownership. And renting makes them feel frustrated. But that’s not necessarily a good reason to buy a home.

Rather, Sethi insists, it’s essential to run the numbers and compare the cost of owning a home versus paying rent every month. You may find that homeownership just isn’t within reach because of the many added expenses involved.

How to know if you can afford to buy

If you’re going to buy a home, it’s essential that you make sure your total housing costs, including your mortgage payments, property taxes, and homeowners insurance premiums, do not exceed 30% of your take-home pay. Going beyond that limit could put you at risk of falling behind on not just your housing expenses, but your expenses in general.

Now, you’ll notice the 30% limit does not include expenses like maintenance and repairs. That’s because these expenses, unlike the others just mentioned, aren’t as predictable.

But even if you’re able to stick to that 30% threshold, you should also have a robust emergency fund to cover unexpected costs related to your home, like things that break and need to be fixed. So when you run the numbers to consider whether homeownership is affordable to you, make sure to look at the big picture.

You might prefer homeownership to being a renter. But if it’s not the right time to own, don’t take that leap. Doing so could mean setting yourself up for a world of financial upheaval — and a world of stress.

Finally, remember that when you pay to rent a home, you aren’t throwing your money away. You’re using that money to put a roof over your head. There’s a lot of value in that, even if you’re not the one whose mortgage is being paid down.

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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.
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It’s advice worth taking, especially if you’re tired of spending a small fortune on groceries and household items. 

If your credit card bills seem to be going nowhere but up despite having cut back on non-essential spending, it may be due to the fact that food costs are through the roof. Grocery prices are up 11.3% over the past year, as per the latest Consumer Price Index. And if you have a larger family to feed, you might really be feeling the strain.

Financial guru Dave Ramsey has one tip for those who are looking to save money on groceries and household essentials — start buying in bulk. But you’ll need to go about that the right way.

A good way to save, if you do it right

Ramsey insists that one of the best ways to save money on groceries is to buy in bulk. But, he says, “The trick to saving money by buying in bulk is to have a game plan before you even walk through the door of the store.”

It pays to put together a list of the items you need, rather than go to your nearby Costco and see what items it has on offer. And also, you’ll want to make sure you’re buying the right items in bulk.

A good rule to follow is that if you’re looking at buying something you’ve never tried before, don’t get it in bulk the first time around. If you wind up unhappy with the product, you’ll either be stuck with a bulk supply of it, or you’ll end up wasting your money rather than saving it.

You’ll also want to be careful about buying perishables items in bulk. In fact, Ramsey says that buying perishables is a huge gamble. “The odds are rarely ever in your favor that it’s going to spoil before you can eat all of it,” he writes.

Now, there may be some exceptions here. If you have a large family and there are certain perishable items you eat regularly in your household, then purchasing them in bulk might work out, even if they have a relatively short shelf life.

If you’re a family of five, for example, and you all take turkey and cheese sandwiches to work or school three times a week, you may want to scoop those items up in bulk even though they’ll only last for a limited period of time. Otherwise, though, Ramsey suggests limiting your bulk purchases to items along the lines of:

ToiletriesDental care itemsPaper productsBatteriesGumCerealCanned goodsRiceDry beans

These items can all last a long time, so there’s less of a risk in buying larger amounts of them.

Your personal defense against inflation

Inflation has been forcing consumers to rack up debt and raid their savings accounts for well over a year now. And while you can cut back on non-essential spending to cope with inflation, food and household items are things you can truly categorize as needs, not wants.

Buying in bulk, when done the right way, could result in a fair amount of savings. And that might make today’s higher food costs easier to manage.

Furthermore, you don’t necessarily need a membership to a warehouse club like Costco to take advantage of bulk buying. You might find plenty of bulk options at your closest big-box store or even supermarket, so it pays to explore your options before taking on the expense of joining a warehouse club.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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The best thing to do is start small and start now. 

Live longer, save money. That’s how life insurance works. The longer your life span, the longer you pay monthly premiums to life insurers. Premature deaths bruise the bottom line of insurance companies, which is why they offer discounts to healthy customers.

Here are three habits that grow your lifespan and shrink the cost of life insurance.

1. Avoid smoking

Avoid smoking for a discount on life insurance premiums and a longer life. According to research obtained during the Million Woman Study, U.K. women who smoke die at least 10 years earlier on average compared to non-smokers. Yikes.

The safest thing to do is quit, but that’s easier said than done. Consider switching to safer alternatives, if possible. GoodRX floats consuming edibles as an alternative to smoking or vaping recreational marijuana, which damages the lungs.

Use of medical marijuana may or may not result in higher rates. When in doubt, contact your insurer. Rates can be complicated. Ensure you and your insurer are on the same page so you can snag the best possible rates.

2. Drink moderately

Drinking in moderation (or not at all) lowers life insurance premiums. Heavy drinking leads to long-term health issues that raise the cost of monthly payments.

Binge drinking is a poisonous American tradition. (The USDA defines binge drinking as five drinks for men and four for women.) Keep binges to a minimum by limiting yourself to one or two drinks daily, if you must imbibe. Get into the habit of drinking like a European — sip, not guzzle.

Healthy drinking habits may translate into immediate and long-term life insurance discounts.

3. Exercise regularly

It’s common knowledge that moderate exercise is healthy. According to one study, participants who exercised for an average of 92 minutes per week (or 15 minutes per day) lived three years longer than those who did not exercise.

Some life insurers offer free or discounted exercise programs. Participants earn lower premiums and get all the anti-aging benefits of living a healthy life. Make exercise a habit, even if it’s just puttering around the neighborhood for a few minutes daily.

Start forming habits right now

Age matters, but the best time to start forming healthy habits is always right now. Today. Here are a couple of tips pulled from the NY Times bestseller, Atomic Habits, a go-to source on how to form good habits that actually stick around:

Stick to the two-minute rule. If a new habit takes two minutes or less to complete, you’re more likely to stick with it. (e.g., Start a jogging habit. Permit yourself to head home at the two-minute mark. Add 10 seconds to the next run. Repeat.)Make failure difficult. The more effort it takes to indulge in a bad habit, the easier it is to break. (e.g., Put extra beers somewhere hard to reach. Leave just enough in the fridge for you and your friends to have a couple each. Make binge drinking difficult.)

Insurance premiums are lowest when you’re young and healthy. Start now to squeeze the most benefits from life insurance policies while maximizing long-term health benefits. It’s never too late to start saving, and the best life insurance policies for seniors offer decent rates.

Term vs. whole life

Two common types are term life and whole life insurance. Both may offer health and safety discounts.

Term life insurance lasts for a set period, after which it expires. It’s typically more affordable than whole life insurance, but coverage options are limited. Typically, this is the best life insurance policy for affordable and effective short-term coverage.

Whole life insurance lasts a lifetime. It’s often more comprehensive than term life insurance, and the policy builds tax-deferred cash value at a guaranteed rate. Policyholders can access the cash. It’s sort of like a low-return investment bundled into the insurance policy.

Shop around

Shop around to find the insurance that best fits your needs. Life insurance has grown with the times, and modern technology makes no-exam life insurance possible. Combine a good insurer with healthy habits to extend your lifespan and reduce life insurance costs.

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

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