Money Management

It’s really only one factor of many to consider. 

When we think about paying taxes, we often associate it with owing money to the federal government. But the state you live in could have a huge impact on your overall tax burden.

State tax rates can range from mild to burdensome, and some states don’t actually have an income tax at all. You may be inclined to move to a state with no income tax to save yourself some money and keep more of your wages. But before you do, you’ll need to look at the big picture.

The eight states with no income tax

There are eight U.S. states that do not impose state taxes on income:

AlaskaFloridaNevadaSouth DakotaTennesseeTexasWashingtonWyoming

Additionally, New Hampshire does not tax earnings from a job, but it does impose taxes on interest income in savings accounts and dividend income you might collect in your brokerage account.

Should you move to a state with no income tax?

You might think that moving to a state with no income tax is a good idea. After all, why part with a chunk of your earnings if you don’t have to? But before you make the decision to uproot your life and relocate, ask yourself these important questions.

1. What’s the cost of living like?

Some of the states on the list above have expensive property values, property taxes, and living costs. So while you might save yourself some money in the form of not having your wages taxed, you might pay up in the form of taking on a costlier mortgage loan and paying more for things like groceries and childcare.

2. What’s the job market like?

It’s nice to not have your earnings taxed. But if you move to a state where jobs aren’t plentiful in general or within your industry, then you might struggle to earn a decent wage in the first place.

3. Will I have access to the amenities I want?

Maybe you’re someone who really appreciates having access to eateries, museums, and theater. If you move to a state where those amenities aren’t so abundant, it might impact your quality of life.

4. How’s the weather?

It’s more than fair to say that winters in Alaska and Wyoming can be brutal, and that summers in Texas and Florida can be one drawn-out sweat-fest. It’s perfectly okay to factor in climate when deciding where to live. And it’s okay to subject yourself to state income taxes if it means getting to settle in an area that’s more physically comfortable.

5. What support network will I have?

Relocating to a new state could mean abandoning your social network and having to start anew. That’s something you may not be up for, and it could impact your kids if there are children in the picture. Think about what it might mean to move someplace where you don’t know a soul before making your choice.

It’s easy to see why living in a state with no income tax might tempt you. But make sure to really think things through if you’re considering a move to one.

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You may want to pick these up the next time you go to the store. 

One of the great things about shopping at Trader Joe’s is its low prices. Buying food at Trader Joe’s will often mean racking up a lower credit card tab than you’d end up with at a different supermarket.

Plus, Trader Joe’s is known for the practice of constantly introducing new products into its usual lineup. And so not surprisingly, this month, you may spot some items on the shelves you’ve never seen before. Here are a few that could be worth scooping up.

1. Sriracha Sprinkle Seasoning Blend

Sriracha sauce has been hard to come by in recent months due to shortages. But Trader Joe’s has you covered with this seasoning blend. It’s a mix of garlic, cayenne pepper, and other tasty spices that’s sure to enhance any meal. Stir it into rice, soup, or even sprinkle it over fries to give them a kick. You can pick up a 2.5-ounce jar for $2.99

2. Strawberries & Cream Gelato

Many people use the terms ice cream and gelato interchangeably. In reality, they’re not the same. Gelato tends to be thicker and creamier — think of it as a frozen dessert that eats more like a meal. If that sounds like your jam, and you’re a fan of strawberry, consider picking up this Trader Joe’s concoction. You can score a full pint for $3.49, which is less than what you might pay for other premium ice cream pints.

3. Vegetarian Meatless Cheeseburger Pizza

If you’re someone who enjoys both cheeseburgers and pizza separately, then this amalgamation of the two might serve as a great weeknight meal. And when you’re too busy to cook, it’s nice to have something you can simply pop in the oven to prepare. Not only does this Trader Joe’s entree combine two already popular dishes, but it features plant-based protein that any vegetarian can enjoy. A 16.68-ounce pizza will cost you just $5.99, which is cheaper than takeout.

4. Chhurpi Puffs Dog Treats

Who says it’s just humans who get to indulge in Trader Joe’s products? Now, you can spoil your dog with a unique, tasty snack courtesy of this new offering. If you’re not familiar with chhurpi (and you wouldn’t be alone), it’s a hard cheese native to the Himalayas, traditionally made from yak’s milk or buttermilk. Trader Joe’s version is made with both, and you can pick up a 4-ounce bag for just $5.99.

5. Slightly Coated Dark Chocolate Almonds

Sometimes, you need a snack that packs some protein but also gives you the sweet fix you crave. These chocolate almonds fit the bill. They’re salty and have a dusting of cocoa powder so you don’t have to feel too guilty about eating them. A 10-ounce bag will cost you just $4.99.

While it’s great that Trader Joe’s is perpetually offering up new products, some of them may only be available for a limited time. So if any of these sound tasty to you, head on over to your local store before they disappear from the shelves. And remember to bring a credit card that offers you a generous amount of cash back on grocery purchases so you can benefit even more.

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I’ve made a lot of money mistakes, but this wasn’t one of them. 

If you don’t work in personal finance, it’s likely you don’t think about credit scores too terribly often. Your credit score can have a major impact on your financial life, however. With a good one, you’ll be eligible for lower interest rates on mortgage loans, personal loans, and auto loans. You may save money on insurance. You’ll also be able to take advantage of credit cards with the best rewards, like a nice rate of cash back or points. The converse of this is that if your credit score is on the low side, you’ll pay more in interest — and have a harder time getting approved for loans and credit cards.

I spent 2022 climbing out a massive pit of debt thanks to a career change I wish I had pursued sooner and taking on freelance work. Despite being in debt, my credit score at the time was still over 700. What’s up with that?

How does a credit score work?

There’s a lot to learn about credit scores and how they’re calculated. The FICO® Score is the industry standard and is used in a majority of lending decisions. It’s made up of five different factors, in varying percentages:

Payment history: 35%Amounts owed: 30%Length of credit history: 15%New credit: 10%Credit mix: 10%

Each of these has an impact on your score, but as you can see, some of them matter more than others. The two biggest percentages, payment history and amounts owed, are especially important to pay attention to if you’re trying to rebuild your credit.

In my case, my credit utilization ratio was very high (remember, amounts owed relative to available credit makes up 30% of your credit score). “Credit utilization ratio” is the term for the percentage of credit extended to you in the form of revolving credit (such as credit cards) that you’re actually using. Ideally, lenders like to see a credit utilization ratio of under 30%. This means that if you have a credit card with a $10,000 limit, you’re keeping your average balance below $3,000. And it’s always a better move to not carry a balance from month to month at all, if you can avoid it, because credit card interest is not cheap.

On-time payments saved my credit score

At the time I was struggling with debt, I hadn’t made a late payment on any of my accounts in a very long time. My experience with short-selling my house had resulted in some damage to my credit score (which wasn’t all that great at the time anyway), and I had resolved to improve it. The easiest way for me to do that at the time was to get very good about making on-time payments. I was sometimes making only the minimum payments on different accounts, but I never incurred any late fees or pointed reminders from my creditors that I owed them money.

I started rolling my debt snowball in 2022, and by the time I was out of debt, I had watched my credit score climb from the low 700s (in the “good” range for FICO®) to over 800 (“exceptional”). This gain of more than 100 points was likely due to my credit utilization ratio shrinking to a very low percentage.

Keep making those on-time payments

If you’re working your way out of debt or looking at a less-than-great credit score and feeling overwhelmed, remember those percentages from above. Even if you have to carry debt for a while, getting into a routine of making every payment on time will have a positive impact on your score.

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A loss is hardly something to celebrate, but it might benefit you tax-wise. 

It’s fair to say that 2022 was a pretty rocky year for investors. The S&P 500 index, which is generally used to measure the stock market’s performance on a whole, lost around 18% last year. And that means a lot of investors may be looking at lower balances in their brokerage accounts.

If you took a loss in your brokerage account last year, you may be stressed out about meeting your financial goals. But while capital losses are not a good thing in theory, they can become a positive one in practice.

How to use an investment loss to your advantage

Maybe you had to sell some assets in your brokerage account at a loss last year to drum up cash to cope with inflation and avoid credit card debt. If so, try to brush it off. Just because you took a loss one year doesn’t mean you’re not going to meet your long-term financial goals.

Also, a capital loss in your brokerage account might serve as a nice tax break this year. You’re allowed to use capital losses on investments to offset capital gains. And if you have a capital loss that exceeds your gains, you can use the remainder to offset some ordinary income.

So, let’s say you took a $5,000 loss in your brokerage account last year because you bought stocks at $8,000 and sold them when they were only worth $3,000. If you happened to also make $5,000 in gains last year, that $5,000 loss will cancel out your gains so you don’t owe the IRS any tax on your profits.

But let’s be real — a lot of investors didn’t have many gains to take in 2022 due to the state of the stock market. So, let’s say you’re sitting on a $5,000 loss and only have $2,000 in gains. In that case, you can use your remaining $3,000 loss to offset $3,000 of ordinary income.

But to be clear, $3,000 is the maximum amount of ordinary income you can offset with capital losses in a single year. So in our example, let’s say you have a $5,000 loss and no capital gains whatsoever. In that case, you’d take your $3,000 ordinary income loss and then carry the remainder of your capital loss into the following tax year.

You can only claim an actual loss

While a capital loss in your brokerage account could serve as a tax write-off for you, you’ll need to have actually sold off investments to get that tax benefit. If the value of your portfolio has fallen from $8,000 to $3,000, but you didn’t actually sell assets at a loss, then you can’t claim a tax break for what can only be deemed a hypothetical loss.

If you’re not sure about the rules of capital losses, consult a tax professional. They can help guide you through the nuances and help you benefit the most from a tax perspective.

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Read this before deciding where to invest your money.  

Recently, finance expert and YouTube personality Graham Stephan posted a chart on Twitter comparing the performance of several different investments, including the Fidelity Magellan Fund, an actively managed mutual fund (a fund manager chooses investments). Fidelity’s fund seeks capital appreciation and primarily invests money in large U.S. companies.

The purpose of this chart was to explain why Stephan believes that investing in $SPY is going to be the best bet for most investors, rather than picking any particular fund to put money into. $SPY is an exchange-traded fund designed to track the performance of the S&P 500, which is a financial index comprised of shares of around 500 of the largest companies in the U.S.

Here’s what Stephan had to say about why the $SPY could be a better option for the money in your brokerage account.

This is why Stephan likes $SPY

Stephan’s chart showed the hypothetical growth on your investment portfolio if you invested $10,000 in either the Fidelity Magellan Fund or in a Vanguard 500 index investor fund. In addition to showing the growth over these different investment options over time, he also explained that while the Fidelity Magellan Fund provided a 29% return for 15 years, “the average investor in it would have lost money.”

While this seems difficult to believe, Stephan gave a simple reason: “The average investor in it would have lost money because they bought in bull markets and sold during market panic.”

In other words, no matter how well a fund performs over a period of time, if you try to time the market, you’re likely to end up losing money because it’s too easy to panic and sell when you shouldn’t. It’s also too easy to buy near a peak because you feel like you’re missing out.

Rather than focusing on finding the perfect fund, Stephan says you’re better off simply investing in the S&P 500 over the long-term and staying invested. Since the S&P 500 has an extremely consistent track record, you don’t have to worry about timing the market — you can buy, leave your money alone, and have confidence in your investment performance over time. If you do this, you’re likely to end up better off.

Is Stephan right?

Stephan is right that most people absolutely end up better off if they just consistently invest in an S&P 500 fund and leave the money alone.

Of course, any time you take money out of your savings account and put it into the market, there’s a risk of loss. That risk is minimal, though, when you’re betting on the performance of 500 of the largest and best-known companies in the entire country. You’re essentially making a bet on big business in America as a whole, and history has proved that’s a great bet to make.

If you simply buy and hold the S&P 500, you can help avoid financial stress and know what you’re going to get — without worrying so much about how an actively managed fund will perform in different market conditions (or paying the fees that go along with active management). So, if you aren’t sure what to invest in, $SPY could be a great option for you to consider.

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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.Christy Bieber 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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These cars can save you thousands at the pump! 

Fuel efficiency is becoming increasingly important as gas prices hit all-time highs — they reached over $5 a gallon last summer. In fact recent surveys show that fuel efficiency is the most important factor when purchasing a car. While fuel prices have tapered off since then, prices are still hovering near its highs, hitting Americans’ budgets hard. As a result, many car buyers are looking to buy a car that won’t break their budget.

Fuel efficiency has improved since 1975

Since 1975, the average CO2 emission for new cars has dropped from close to 700 CO2 grams/mile (g/mi) to 347 g/mil, the lowest on record. Fuel economy has also hit record numbers, in a good way. In 1975, the average car got 13 miles per gallon (MPG). We have come a long way since then, with the average car in model year 2021 hitting a record high of 25.4 MPG.

Since 1975, here are the cars with the best fuel efficiency, including hybrid and electric vehicles:

Since 2000, the most fuel-efficient cars have been hybrids, fuel cell vehicles, or electric vehicles. Before then, car manufacturers were able to increase fuel efficiency by making the cars smaller and lighter. However, this also impacted the car’s horsepower. With the introduction of hybrids and electric cars, manufacturers have been able to increase fuel efficiency without sacrificing power.

Since 2004, advancements in technology have helped car manufacturers increase fuel economy by 32% and horsepower by 20%. More companies are switching to producing EVs, with some pledging to go all-electric in the next 10 to 20 years. This will help drive down the cost of batteries, improve the technology, and help the environment.

5 most fuel-efficient cars (including EVs)

In recent years, Tesla’s Model 3 has been crowned the most fuel-efficient vehicle. But in 2022 Lucid’s Air Pure edged Tesla out with an equivalent combined MPG of 140. Here are the more fuel-efficient cars overall:

2023 Lucid Air Pure: 140 MPG; MSRP from $87,4002023 Tesla Model 3: 132 MPG; MSRP from $43,4902023 Chevrolet Bolt EV: 120 MPG; MSRP $25,600 to $28,8002023 MINI Cooper SE Hardtop: 110 MPG; MSRP $29,900 to $33,9002023 Porsche Taycan GTS: 82 MPG; MSRP $134,100

5 most fuel-efficient cars (excluding EVs/hybrids)

The price of EV cars have gone down significantly since first being introduced, but according to KBB, the average EV still costs $16,000 more than a gas-powered vehicle. Even with electric vehicle tax breaks, EVs are considerably more expensive than gas-powered cars. Here are the most fuel-efficient gas-powered cars:

2023 Mitsubishi Mirage: 39 MPG; MSRP from $16,2452023 Hyundai Elantra: 37 MPG; MSRP $20,500 to $26,3502023 Honda Civic: 36 MPG; MSRP $24,650 to $29,6502023 Kia Rio: 36 MPG; MSRP $16,550 to $17,4902023 Toyota Corolla: 35 MPG; MSRP From $21,550

If you’re in the market for a new car, there are many options with great fuel efficiency available, ranging from traditional gas-powered vehicles to fully electric models that offer great mileage. EVs like Tesla and Lucid Air Pure and gas-powered vehicles like Toyota and Hyundai are all great options for those looking for maximum efficiency at a reasonable price point.

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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 positions in and recommends Tesla. The Motley Fool has a disclosure policy.

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