Money Management

Never sign a lease without reading it (and understanding it). 

Signing an apartment lease is one of those “real grownup” moments when you truly get to feel like an adult. According to data from The Zebra, 44.1 million American households are renters, so if you’re renting, you’re certainly in good company. And contrary to what some people may tell you, renting isn’t “throwing money away.” You’re paying for a roof over your head, which is definitely valuable.

Knowledge is power, and if you go into a new rental situation with eyes wide open and armed with the right information, you’ll certainly feel better about signing that lease. These are the most important points to focus on, and if you have questions about any of them, ask your landlord or property manager to explain or clarify.

The terms of your rent

It’s of the utmost importance to find out when your rent is due, how you pay it, and what happens if you’re late. It’s generally common to have rent due on the first day of every month, but not always. I rented a house several years ago, and since I moved in on the 10th, that was my rent due date for every month I lived there.

Ask how you’re supposed to pay your rent. I’ve been pretty lucky for my last few rentals in that I’ve been able to pay digitally rather than having to mail a check. If you live in a big apartment complex, you might be able to drop off a rent check to an office and save yourself the cost of a stamp.

You may be given a few days’ worth of grace period for paying rent — for example, if rent is due on the 1st, you might have until the 5th to pay it without incurring a late penalty. Be sure to ask what that late penalty may be, and strive to avoid it, as life is expensive enough without needing to tap your bank account for that extra charge.

Whether you need renters insurance

Some landlords or property management companies require tenants to have renters insurance, so you definitely need this information. I’d argue that even if it’s not strictly required, you should get a renters insurance policy anyway. Why?

While the property owner will have homeowners insurance, it won’t cover any of your belongings should something happen to the home. Plus, renters insurance can also offer liability coverage, so if someone is hurt in your apartment and you’re held liable, insurance will cover the costs incurred. If you’re worried about the cost of renters insurance, note that it is less costly than homeowners insurance (as it covers less), and you might be able to save money by bundling it with, say, an auto policy.

Who is allowed in the apartment

One of the drawbacks of renting versus owning a home is that you don’t get total say over who can be in your home. Your landlord may have a no pets policy, for example. If you’re hoping to adopt a pet after you move, this is information you need. Your landlord may allow pets but limit how many you can have, the size, or even the breed.

You might also be limited in who can spend the night in the apartment or how often. Some leases will specify that overnight visitors are only allowed a few nights per month, for example (this may be more common in big complexes where parking could be an issue if apartment residents have frequent overnight visitors).

Whether you’re allowed to renovate

It’s generally the case that when you rent, you’re not allowed to make changes to the property (or at least, not permanent ones). This varies widely, however, and you may have lucked into a rental situation where your landlord doesn’t care if you do things like paint, add wallpaper, and so on. Renovating your rental can be nice, especially if you’re intending to stay for a long time, so it’s a good idea to ask if this is allowed.

How you can break the lease

Finally, you need to know what happens if your plans change and you need to move out before the lease period is up. If your lease is month to month, you generally just need to give a month’s notice and won’t owe any additional money. In other cases, you may need to give more notice and pay the equivalent of a few months’ rent, or even continue paying until the home is rented again.

There’s a lot to consider when you’re moving to a new rental, and it’s important to be as informed as possible about how to pay rent, how to break a lease, and whether pets or other individuals are allowed in your home. Take the time to read your lease carefully before signing, and ask as many questions as you need to.

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It’s advice worth taking to heart. 

There’s a reason consumers are commonly advised to be cautious with credit card usage. You might think carrying a small balance here and there won’t harm your finances all that much. But any time you don’t manage to pay off a credit card balance in full, you start to accrue interest. The only exception is if you happen to have a credit card with a 0% introductory APR. And even then, you’re only getting that break for a limited period of time.

What’s especially dangerous about credit card interest is that it can often compound against you on a daily basis. And that could land you deep in a hole.

As a very basic example, you might start out with a $100 balance on a credit card. The next day, that balance might equal $100.15, because you’ve racked up $0.15 of interest that first day.

The day after that, when interest is calculated on your balance, it will be based on $100.15, not the original $100 you owed. So it’s easy to see why you might fall into the trap of racking up scores of interest — and landing in a situation where your credit card debt drags on and on.

Thankfully, financial guru Dave Ramsey has some great advice for avoiding credit card interest. And it’s worth listening to what he has to say if the idea of racking up interest charges doesn’t sit well with you.

Budgeting could spare you from debt

Ramsey cautions that when you use a credit card, it can be hard to know where your money is going and whether you’ll have enough to last you the rest of the month. That’s because you may not pay attention to the balance you’re accruing.

That’s why Ramsey strongly suggests following a budget. When you have a budget, you know what your various expenses cost you, and you can also better track your spending to know how much money you have left before your next paycheck arrives.

To be clear, following a budget doesn’t have to mean not using a credit card. It’s more than possible to set up a budget and use your credit card to pay your expenses. You just need to be keenly aware of what those expenses are and how much they cost.

Don’t get caught in a debt trap

A big reason so many people struggle to get out of credit card debt is that they keep accumulating interest as they work to pay off their principal balance. And it’s those interest costs that can make credit card debt spiral out of control.

Remember, if you end up carrying a credit card balance for three years, you’ll end up paying a lot more than the amount you initially charged — even if you don’t add a single dollar in principal to that balance during that time. Rather, the added costs will solely be made up of interest.

Ramsey says that having a budget can help you be in control of your money. He even goes so far as to call it a total game changer. So if the idea of racking up credit card interest is appalling to you, get ahead of that situation. Put yourself on a budget and track your spending week by week so you don’t end up with a credit card balance you can’t pay off.

And if you already owe money on your credit cards, do your best to pay them off quickly, whether by cutting back on spending or taking on a second job. The sooner you get yourself out of debt, the less money you’ll end up throwing away in the form of interest charges.

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Earning more doesn’t have to require a huge sacrifice. 

I wish I could tell you there was some secret trick to making more money at the snap of your fingers, but that’s not the world we live in. It takes time and effort, and often a healthy dose of good luck, to earn more. But sometimes a small change of mindset can make the process a lot easier and lead to more cash in your savings account. At a time when inflation is high and many people are struggling to keep up with rising costs, here’s one simple move that can help you bring in thousands of dollars more every year as a freelancer.

Build your own schedule

Between side hustles, the gig economy, and full-time freelance work, freelancing has been gaining popularity. In fact, in 2022, 39% of the entire workforce in the U.S. had freelanced. I’m currently a full-time freelancer, and I really enjoy the flexible lifestyle it affords. One aspect of that flexibility is being able to set my own hours and work as much or as little as I want. If I have a vacation coming up, I can work more leading up to it, then take the time off knowing I was able to make up a portion of those working hours I’d be missing.

A little over a year ago, I started applying that concept to my day-to-day schedule. I realized that if I worked a little bit more each day, it would add up over time to a sizable increase in my income. I’m naturally an early riser, so I began starting my work day 30 minutes earlier each morning. At the end of the year, I did the math, and my pay was about 10% higher than it was the year before. That was more than enough reason for me to keep my experiment going as a full-on routine.

A little bit more per day adds up

Let’s do some math to get more of a concrete example. The average freelancer in the U.S. makes $33.13 per hour, according to ZipRecruiter. Let’s say that’s you, and you normally work the standard 40-hour week. We should assume some unpaid time for vacations, sick days, and holidays, so let’s round down to 48 working weeks per year. If you can add an extra 30 minutes a day to your schedule, you’ll work an extra 2.5 hours a week at $33.13 per hour. Multiply that by 48 weeks, and you make an additional $3,975.60 by the end of the year.

When you think about it, 30 extra minutes a day is pretty painless. You don’t have to find a whole new gig, and you don’t have to work late nights or weekends. You may not even notice the difference in your schedule at all, but you will notice a difference in your bank account.

Several thousand extra dollars a year can make a big difference in your budget. You could use it to build up your emergency fund so you have a cushion in case you have a major expense or have to take time off work. Or you could open a brokerage account and invest that money, allowing it to grow even more over time. Or maybe you want to fund a retirement account so you’ll be set up when the time comes to leave the workforce.

Take control of what you earn

I also like recommending this tip because it’s so adaptable. You can work the extra 30 minutes in the morning, over lunch, or after dinner. Some days, you may be on a roll and work an extra hour. Maybe you’ll be encouraged to request a higher rate to increase your gains even more. But once you start taking a big-picture look at how your daily activity adds up in the long term, I hope you’ll be inspired to make a small change that can have such a big impact.

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Spend a small percentage on something fun, though. 

It’s tax season, and while the act of filing taxes is perhaps not anyone’s favorite task, it is necessary if you want to avoid getting in trouble with the IRS. Besides, you might be getting a tax refund. CBS News reported last year that for tax year 2021, three-quarters of Americans were entitled to a refund, so the odds are likely in your favor.

I’d argue that getting a refund actually isn’t ideal, and it’s better to break even, as that way, you have access to all of your own money during the year so you can use it to pay bills and improve your life. Remember, a tax refund is your money, and the government held onto it for a period of time and is returning it to you — without interest. Think of how you would have spent that money had it been part of your paychecks for the last year.

But if you are getting a refund this year, you likely already have big plans for that money, and may even be thinking of spending it all on something you wouldn’t have bought otherwise. This is a bad idea, and here’s why.

1. It could improve your credit

Last year, the average refund amount was over $3,000. As of this writing, the average refund amount for this year is a hair under $2,000, but it’s still early. This is a nice chunk of money, and one great thing you could do with it is pay down some high-interest debt. I realize this isn’t sexy, but it would improve your credit score by reducing your credit utilization ratio — and having a higher credit score can help you in all sorts of ways. If you’re hoping to buy a house or maybe take out a loan to start your own small business, you’ll score a lower interest rate with better credit, for example.

2. It could reduce your monthly bills

In addition to improving your credit score, paying off debt with your tax refund will also reduce the amount of money you spend every month on your bills. I had many years of living paycheck to paycheck, and one of the best things about getting out of debt was watching my monthly bills decrease as I paid things off. If you’re like I was, paying your bills on payday and feeling very grateful to be left with even a little money cushion in your checking account (if you’re lucky), do yourself a favor and consider paying off some debt.

3. It could give you more peace of mind

Maybe you’re not carrying high-interest debt, but your finances are lacking in another way. Do you have a solid emergency fund? Consider making your tax refund the first deposit into a brand-new high-yield savings account. It’s possible your tax refund won’t be enough to cover at least three months’ worth of bills, but it could certainly be a start on that path. An emergency fund is a wonderful thing to have, as it can help you stay out of debt when you have an unplanned bill or even a more serious issue, like getting laid off from your job.

4. It could make your life materially better

If you have an emergency fund and no high-interest debt, you might be thinking you’re in the clear to blow your tax refund on something fun. But wait just a moment. How’s your refrigerator holding up? Or your clothes dryer? If a large appliance has been limping along until you have the cash to replace it, now might be a good time. The same goes for a piece of large furniture. If your couch has seen better days, make your life better by spending some of your refund on a new one.

Spend a little on something fun

Maybe by now you’re mad at me for suggesting that you pay off debt with your tax refund or save it for the future. I’m not a complete killjoy, though. It might be nice to take a small percentage of your refund (maybe 5%-10%) and spend it on something fun. If you’re getting back, say, $2,500, and decide to spend 10% of it, consider taking a little mini-vacation to a nearby city you’ve been wanting to check out. That $250 might pay for a night in a hotel and tickets to a cool art museum.

Your tax refund is money you earned and ideally should have been paid during the year, rather than getting it back during tax season. For this reason, it pays to think of it that way, rather than as “bonus free money.” To that end, make a solid plan for how to spend it in such a way that improves your life and your financial future.

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Odds are, your children do not provide income or services to your household. 

Life insurance provides valuable financial coverage to your loved ones in the event of your death, and if you have people who rely on you, either financially or because of services you provide, it’s a good idea to have a policy. This is especially the case if you have children, as they will be impacted particularly hard if you pass away. But if you do have children, should they also have life insurance? Probably not, and here’s why.

Your kids likely don’t earn income

Since the primary purpose of life insurance is to replace income (or pay for services) that would be lost if the insured person died, it’s worth considering whether your kids contribute money to your household. If you have a child star under your roof, perhaps — but odds are, you do not have a child who is helping to pay the bills.

It usually isn’t hard for young adults to get life insurance

Life insurance policies for children are generally whole life insurance, which is permanent coverage that gains cash value. These policies are sold with the reassurance that if you insure your child, they won’t have the chance to be turned down for a policy in the future. However, whole life insurance policies are more costly than term life insurance, and many people don’t need permanent coverage anyway.

Term life insurance policies are generally affordable for young adults, especially if purchased before any serious health issues arise. And true to their name, these policies offer coverage for a certain period of time, perhaps 20 or 30 years, which is often as much as many people need.

There are better ways to save for education expenses

Another way children’s life insurance policies are marketed is with the caveat that these policies can be cashed out to pay for college. However, as finance guru Dave Ramsey points out, the return on investing in a life insurance policy is only about as much as what you’d get from a certificate of deposit (CD). Plus, these plans come with plenty of fees.

A better bet is to start a 529 plan for your child’s future educational costs. You might also consider saving for college in a Roth IRA, which gives your saved funds more flexibility for whatever life throws your way.

Alternatives to children’s life insurance policies

One instance in which you may want a life insurance policy for your child is in the sad instance you have to pay for a funeral and burial expenses. However, you don’t have to buy insurance coverage for this. Instead, consider putting aside money you would have spent on insurance premiums in a high-yield savings account. This way, you’ll earn interest and have the ability to use that money in any way your child needs.

If you truly want to insure your children, consider adding a child life insurance rider on your own term life policy. This way, your children will have some coverage at a low cost to you, and the rider could be converted to a policy of their own when they become adults.

It is unlikely that you need life insurance for your children, as you don’t need it to replace income, pay for college, or guarantee they can be insured over the course of their lives. A good savings account, a 529 plan (or Roth IRA), and perhaps a child rider on your own policy can all meet the needs of you and your child in most circumstances.

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It’s not the best time to refinance, but will that change this year? 

Although mortgage rates have been lower in 2023 than they were in the fall of 2022, they’re still pretty high, historically speaking. And that makes it harder to justify refinancing a mortgage.

Usually, the goal of refinancing a mortgage is to snag a lower interest rate on a home loan, thereby lowering your monthly payments. But when borrowing rates are high, refinancing is usually a no-go.

That might be the case today for many buyers. But will things change in 2023?

Mortgage rates could drop

The Federal Reserve isn’t done raising interest rates in an effort to slow the pace of inflation. As such, the cost of borrowing is expected to increase this year again, whether in the form of personal loans, auto loans, or credit card balances.

Mortgage rates, however, won’t necessarily follow suit. Mortgage rates, for some reason, tend to exist in their own bubble compared to other consumer borrowing rates.

This isn’t to say that general economic conditions won’t influence them. But last year, mortgage rates began to rise sharply before the Federal Reserve started to announce aggressive interest rate hikes. And early this year, they dipped compared to late 2022, despite the Fed’s continued interest in fighting inflation. As such, there’s a good chance mortgage rates will fall over the course of 2023 — especially if lenders need to drum up business.

Just look at what happened in January. Mortgage rates fell into the low 6% range, which read like a bargain compared to the rates we were seeing in the 7% range in late 2022. Not surprisingly, home sale contract activity picked up in January as buyers rushed to capitalize on a modest break on the borrowing front.

Mortgage lenders might continue to lower their borrowing rates this year, especially if they note a decline in buyer interest. And if rates fall enough, refinancing might start to make sense for a larger number of homeowners.

A reason to refinance now, despite higher rates

If your primary goal in refinancing is to lower your monthly mortgage payments, then now’s probably not a great time to move forward. However, if you’re looking for a cost-effective way to borrow against your home equity, then a cash-out refinance could make sense.

A cash-out refinance lets you borrow more than your existing home loan balance. You can use the extra money to do anything you want, whether it’s renovating your home, starting a business, or taking a vacation (though it’s generally best not to take on any sort of extra debt for the express purpose of being able to fund a getaway).

Let’s say you owe $200,000 on your mortgage but want to borrow $40,000 for a renovation project. With a cash-out refinance, you could get a $240,000 loan. The first $200,000 would pay off your existing lender, and you’d get the remaining $40,000 to use as needed.

Many U.S. homeowners have a lot of equity in the properties they own because home values are still up on a national level. So if you’re specifically interested in a cash-out refinance, now’s not a terrible time to pursue one. But if you’re simply looking to reap savings on your mortgage payments, then waiting for mortgage rates to come down from where they are today is probably your better choice.

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