Not all of your unwanted items are welcome at donation centers. Golubovy / Shutterstock.com
Next to shopping, decluttering seems to be America’s favorite pastime. Heck, minimalist gurus like Marie Kondo have made entire careers out of helping people tidy up and let go of belongings that no longer “spark joy.” All that conscious purging is good news for charity-run resale stores such as Goodwill and Salvation Army. But clutter-busters take note: Not every unwanted item is welcome at…
Just say no to useless cards.
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I talk a lot about regularly auditing your credit cards. As our lives and financial needs change, so should our credit cards. But what are you supposed to do with those cards that don’t make the cut?
For cards with no annual fee, the answer may simply be: nothing. Stick the card in a drawer and let it wallow. At best, you may find a use for it down the line. At worst, the issuer will cancel it for non-use and you saved yourself a phone call. (Just make sure to check it now and then for fraud or other anomalies.)
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When the card is no longer worth its annual fee, however, something must be done. Because who wants to pay for a card that isn’t pulling its weight?
In this case, you have two options: cancel — or downgrade. Downgrading a card is when you switch it out for a card in the same family that has a lower annual fee. Why should you bother? Well, there are a few cases when it can be worth downgrading instead of canceling.
The most common reason people downgrade a card instead of cancel it is to hang on to the credit line. When you downgrade a credit card, you’re changing the product type, but it usually keeps the same credit limit.
What’s the benefit to this? It can be good for your credit score.
One of the big factors that goes into calculating your credit score is your credit utilization. This is the ratio of your credit card debt to your available credit. It’s essentially a measure of how much of your potential credit you’re actually using.
Credit scoring models look at your individual utilization rates — that is, the utilization rate for each individual card — but they also look at your overall utilization. So if your total available credit decreases (say, because you closed a credit card account), your overall utilization rate could rise. If you keep your credit line intact, it won’t affect your utilization rate.
In general, utilization rate only matters if you carry balances. Folks who pay in full each month will have low to no utilization, so the reduced credit availability will have much less of an impact.
If you don’t want to downgrade but still want to keep your credit line, you may be able to transfer it to another card from the same issuer. Not all issuers will let you do this, but it may be worth a call into customer service to see if it’s an option.
Another reason to downgrade your unused cards is if the less-expensive card product offers some of the same rewards or perks. This can let you still enjoy a rewards card, but without the high fee.
For example, say you’re paying $95 a year for a card that earns 4% cash back on groceries, but there’s a card in the same card family that earns 3% back and has no annual fee. You may not get enough out of the $95 card to make it worth the fee, but you may still want to earn grocery rewards. In this case, downgrading to the no annual fee card could be a perfect solution.
Whether this is a good option will of course depend on the specific card options. Make sure to do the math to see if the new card will really fit into your rewards maximization strategy.
While downgrading can be a great way to cut the fee without losing your credit line or rewards, it isn’t always the right move. For one thing, it’s not always available. Some cards simply don’t have downgrade paths.
The biggest downside, however, is that downgrading a card generally won’t earn you a sign-up bonus. As such, you’ll miss out on any sign-up bonus offered by the card to which you may downgrade.
While low- or no-fee cards tend to have smaller bonuses than their more expensive siblings, these bonuses can still be valuable. You’ll need to decide if forgoing the bonus is worth it if you decide to downgrade.
That being said, canceling a card can also impact your ability to earn a sign-up bonus for that card or other cards in its family. Many issuers now have rules that limit whether you can earn a bonus based on when you last opened or closed a card in that family.
In the end, the decision of cancel vs. downgrade is very specific to your own needs and wants. Regardless of what you choose, remember that getting rid of an expensive card is almost always better than paying for a card you’re not using.
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Here’s how to ensure you get the most money back this year.
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No one enjoys doing their taxes, but most people at least have a refund check to look forward to at the end of it. How much you get depends a lot on your annual income and which tax deductions and credits you qualify for. But it can still be useful to look at the average refund amount so you have some idea what to expect. Here’s what typical tax refunds look like for the 2022 tax season so far.
As of Feb. 24, 2023, nearly 46 million Americans had filed their taxes, according to the latest filing statistics available from the IRS. That’s up from the number of returns filed at the same point last year. But average refunds are actually down quite a bit.
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The average refund so far is $3,079. That’s down over 11% from last year, when the typical taxpayer received $3,473 back from the government.
There’s no way of pinpointing why tax refunds are down, and only time will tell whether they’ll increase over the remaining weeks. But there are steps you can take to get your largest tax refund possible.
Here are a few things you can try to boost your 2022 tax refund and beef up your savings account.
If you’re a single adult with no dependents, choosing a tax filing status is pretty straightforward. But for others, it can be more complicated. Married couples will have to choose between filing jointly or filing separately. Jointly is usually the way to go, but there may be some cases where separate is better. Your accountant or tax filing software should ask you some questions to determine which is the better filing status for you.
If you’re single with dependents, you will probably do better filing as head of household. This status enables you to earn more income before you move up to the next tax bracket than the single filing status.
There are two types of tax breaks you could receive: tax deductions and tax credits. Tax deductions reduce your taxable income for the year. For example, if you earned $50,000 and qualified for a $1,000 tax deduction, the government would only tax you on the remaining $49,000.
Tax credits reduce your tax bill. So if your annual tax bill was $10,000 and you qualified for a $1,000 tax credit, you’d only owe $9,000. The more tax deductions and credits you qualify for, the larger your refund will be.
You could qualify for tax deductions and credits for things like:
Having a child in 2022Paying for large medical bills or higher education expensesMaking contributions to tax-deferred retirement accounts, like a 401(k)Making charitable donationsPutting money in a health savings account (HSA)
That’s not an exhaustive list. Your tax preparer or tax filing software should ask you questions to determine which tax breaks you qualify for. Just make sure you have documents to back it up. You don’t have to submit these with your tax return, but if the government audits you and you can’t prove your claims, it could disallow your deductions.
Those with extra money lying around could boost their tax refund and prepare for their future by making prior-year HSA or IRA contributions. The process is more or less the same as making a current-year contribution to one of these accounts. But you may need to follow up with your account provider to ensure it’s applied to 2022 instead of 2023 if you want to claim the tax break now.
You cannot exceed the account’s annual contribution limits for 2022 unless you want to pay penalties. IRAs, for example, only allowed you to contribute up to $6,000 in 2022 or $7,000 if you’re 50 or older. So make sure your contributions throughout 2022 and your prior-year contributions don’t exceed these limits.
It’s easiest to complete these contributions before filing your 2022 tax return. If you wait until after, you’ll have to file an amended return in order to claim this tax break.
If you take the above steps, you can feel pretty confident that you’re getting the largest refund possible. But more important than that is ensuring your taxes are done properly. You don’t want to spend any more time dealing with the IRS than you have to, so take your time and get help if you need it.
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I’m a millionaire several times over. I got here the same way you can — by following these simple steps. Akarawut / Shutterstock.com
I’ve been offering financial advice professionally for many decades. I’m also a millionaire several times over. During my time in the trenches, I’ve heard every conceivable piece of financial advice, acted on many and offered some of my own. Following are the best of the best — a few simple sentences you can follow that will absolutely, positively make you richer.
Just because it’s common advice doesn’t mean it’s a good idea.
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When you’re trying to get better at saving money, a popular recommendation is to cut your spending wherever you can. Spend less on groceries, going out with friends, streaming services, travel, and everything in between.
Expert Ramit Sethi is never afraid to go against the consensus with personal finance advice. He’s notably not a fan of budgets or saving so much money that it negatively affects your life. And when it comes to cutting spending, Sethi says “one of the worst things you can do is try to cut back a little bit on everything.” For those open to trying something different, Sethi also proposes a great alternative.
Before we get into what Sethi recommends, let’s look at why he says cutting back a little bit on everything isn’t a good idea. There are a couple of big potential problems with this approach.
The first is that you run the risk of overdoing it and cutting too much. This might not seem like a drawback. After all, you’re saving more money. But as Sethi has explained many times, if you cut spending too much, you’ll be miserable. Nobody’s dream life involves never taking a vacation and constantly turning down coffee with friends because you’d rather save $5.
The other issue is that some expenses undoubtedly matter more to you. It doesn’t make sense to try to cut back on all of them as if they’re all equally important. If you’re a foodie who loves checking out new restaurants, that should be the last area you’d cut back, and only if it’s absolutely necessary. That’s just going to lower your quality of life. You’re better off spending less in areas that don’t matter as much to you.
Instead of a strict budget, Sethi advises following a spending plan where you put portions of your income toward expense categories. Here are his recommendations on the four spending categories to use and how much of your take-home pay to allocate for each one:
Fixed costs (essentials such as rent, debt, groceries, etc.): 50% to 60%Investments (retirement plan and brokerage account contributions): 10%Savings goals (vacations, your emergency fund, etc.): 5% to 10%Guilt-free spending (anything you want!): 20% to 35%
Those are just the percentages he suggests, and you can adjust them if you want or need to. Some people have higher fixed costs and need to reduce the amount they spend in other categories accordingly. Or, if your fixed costs are low compared to your income, you could put more in your savings account, invest the extra money, or use it for more guilt-free spending.
Sethi also has a smart philosophy on how to spend money. He says “spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.” When you put your money toward whatever makes you the happiest and avoid wasting it on things that don’t make an impact, you get the most bang for your buck.
Let’s say travel is one of your favorite things in the world. You’d set aside a solid chunk of your income so you can travel more. And, if you’re not much of a car person, that’d be an area where you cut back as much as possible. That could mean sticking to affordable cars over luxury vehicles or even going car-free.
Saving money anywhere you can may seem like a smart move. While it could work for some people, it doesn’t make sense to give up things you love to save a few bucks. Make sure you’re hitting your saving and investing goals, and if you are, don’t be afraid to spend on things that make you happy.
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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.
Rental prices continue to rise nationwide — but some metros are quickly becoming incredibly unaffordable.
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There are many incredible areas in the United States, but unfortunately, housing costs continue to rise nationwide. In many metropolitan areas, increasing rental prices mean it’s no longer affordable to be a renter. For many Americans, high rental costs further delay their dreams of homeownership, as they cannot save aggressively to buy a home.
Moody’s Analytics recently published its 2022 4th Quarter Housing Affordability Update, which examined recent rental costs nationwide. The organization found that the national average rent-to-income ratio reached 30% for the first time in more than 20 years. Based on the findings, the 10 U.S. metro areas below are where rent is the least affordable, from least to most costly.
Rent-to-income ratio: 29.7%
With so many people moving to the Orlando metro, rent is no longer affordable for most. But if you like warm weather and want to visit Mickey Mouse often, this could be a fun place to live. While renters spend significant money on housing costs, they benefit from fewer tax responsibilities. That’s because Florida residents don’t pay individual state income taxes.
Rent-to-income ratio: 29.8%
Next up on the list is San Francisco. Renting isn’t cheap. It’s also worth noting that the cost of living is high overall in this metro, so in addition to high housing costs, other living expenses cost more. But if you like mild weather and the cool coastal breeze, this is the place for you.
Rent-to-income ratio: 29.8%
Another Florida metro with high rental costs is Tampa-St. Petersburg. Many residents like living here because they spend much of their free time in the water. Boating, fishing, and kayaking are popular activities. If you don’t mind paying more to be near the water, renting here may be worth it. But if you’re looking for cheap rentals, they’re hard to come by.
Rent-to-income ratio: 32.9%
The next metro on the list is Boston. Residents like living here because the area is full of history, and much of the city is walkable. But rent is not cheap. One factor that has led to a rise in rental costs here is the limited number of available homes. Because of the lack of homes, residents are forced to pay more. You may want to live here if you don’t mind cold winters and can afford the living costs.
Rent-to-income ratio: 33.3%
Have you been considering making a move to northern New Jersey? If so, you should expect to pay a lot for rent. Many workers choose to live here and commute to New York City to save on housing and everyday living expenses — but it’s still not a cheap place to live. However, living in this metro is a good choice if you want to be in close proximity to other cities.
Rent-to-income ratio: 33.6%
If you plan to move to the Palm Beach metro, you should expect to pay more for rent. But with over 40 miles of coastline, this metro is paradise if you like to spend a lot of time soaking up the sun at the beach. Palm Beach is also known for its many impressive golf courses. If you’re not into golf, you can keep busy boating, parasailing, or relaxing at the beach with a book in hand.
Rent-to-income ratio: 35.6%
Another costly place to live and rent is the Los Angeles metro. Here, residents enjoy the beautiful year-round weather, impressive beach and mountain views, and plentiful dining and entertainment options. But to enjoy these benefits, you’ll pay high living costs, including expensive state income taxes.
Rent-to-income ratio: 36.7%
Another metro on the list is Fort Lauderdale. This city is known as the “Venice of America” because of its extensive canal system. You’ll find many beaches, shops, and restaurants in this part of Florida. But you should know that no matter how much income you bring in, high rental costs will negatively impact your checking account balance if you live here.
Rent-to-income ratio: 41.6%
The second-most rent-burdened metro is Miami. Many financial experts suggest spending 30% or less of your income on rent, so you would be spending much more than recommended to rent here. But if you can afford the expensive rent, you’ll appreciate the gorgeous beaches, incredible food scene, and impressive nightlife and entertainment options found here.
Rent-to-income ratio: 68.5%
Likely no surprise to most, New York City is the least affordable metro for U.S. renters. Living in and around the Big Apple comes with many fantastic perks — walkability, plentiful transit, delicious global eats, and world-class entertainment — but those amenities come at a high price. If you move here, expect to spend much of your income on housing and living expenses.
If you’re feeling unsatisfied in your current town or city and are ready for a change, you may be exploring new places to live. But don’t settle down somewhere new without first considering how your cost of living will change. You may need to pay more to live the life you want.
Housing is the most costly monthly expense for most Americans. You want to ensure you can afford rent or mortgage costs in your new area. Before packing your bags, we suggest doing the following to prepare for the financial impacts of a move.
Calculate your income and current living expenses: Before considering a move, make sure you know how much income you’re currently earning and how much you’re spending on current living expenses. These calculations can help determine how much you can spend on everyday living costs in your new home.Compare housing and living costs in other areas: Next, you’ll want to research living costs where you’re considering moving, such as average utility bills. Redfin recently partnered with WattBuy to display estimated energy costs on eligible home listings. While this service is currently only available for homes for sale (not rentals), it may help you gauge utility costs in a new-to-you part of the country.Set a budget and stick to it: Following a budget can help you avoid falling into debt. As you look at new places to live, set a realistic budget and don’t stray from it. Budgeting apps can be helpful if you need assistance managing your budget.Consider ways to earn more or save more: If you’re moving somewhere with high housing costs, figure out if there are ways for you to earn more or save more. If you can qualify for a raise and continue to work remotely or get a new higher-paying job, that could boost your income. If you want to save on rental costs, you may want to consider living with a roommate or renting a smaller apartment to reduce your housing expenses.
The good news is there are parts of the country where housing costs are still reasonable. Check out our list of the 10 most affordable cities with high salaries and low costs of living for inspiration. As you research places to move to, don’t forget to compare housing costs so you can honor your budget and avoid financial difficulties. By finding a metro with affordable rental costs or home prices, you can better stick to your personal finance goals.
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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. Natasha Gabrielle has positions in Apple. The Motley Fool has positions in and recommends Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.
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