Money Management

Don’t rent a home without reading Ramsey’s advice.  

If you’re renting a place to live, it’s important you make sure your housing costs are affordable. To ensure that, finance guru Dave Ramsey advises you to spend a maximum of 25% of take-home pay on your total rent payment.

When you are looking around for apartments, Ramsey makes it clear that you need to foot the bill for an additional expense beyond just the money you’re paying to your landlord. He said this additional expense should be included in your 25% calculation and you shouldn’t skip out on it.

Ramsey believes this expense is crucial for renters

Renters insurance premiums are the added cost that Ramsey thinks are a crucial part of your housing costs as a renter. “Your rent payment, including renters insurance, should be no more than 25% of your take-home pay,” the Ramsey Solutions blog reads.

There are some very good reasons why Ramsey thinks renters insurance is so essential that it should be considered a part of your required housing costs when deciding how much you can afford to pay in rent to stay below the 25% threshold.

“Having a rental insurance policy will protect you financially if your belongings are lost or damaged in a catastrophe like a fire, storm, or robbery,” Ramsey explained. “Don’t count on your landlord’s insurance — that usually only protects their property.”

Ramsey also explained that renters insurance is a pretty inexpensive form of insurance coverage. Since premiums aren’t very high and you could face serious hardship without coverage, Ramsey said this is definitely “one extra cost you should opt for,” when you’re renting a place to live.

Is Ramsey right?

Ramsey is absolutely correct that buying renters insurance is important for anyone who is renting a place of their own.

A landlord’s homeowners insurance policy will cover the structure of the building, but it does not offer any protection for tenants beyond that. And that’s a huge problem.

If you are renting an apartment, chances are good you keep just about everything you own in it. If it is destroyed for some reason, such as a fire that burns down the building, the landlord’s rental insurance would not cover any personal tenant property. This means a tenant with no renters insurance coverage would need to pay out-of-pocket to replace everything they own.

Since most people cannot afford to just rebuy all of their stuff if a problem happens in their apartment, renters should get insurance coverage to make sure this is not their fate. Renters insurance should typically include liability coverage too, which would pay for legal bills and damages if someone got hurt in the apartment (or was harmed by a renter’s dog) and it was deemed the renter’s fault.

Many landlords also require tenants to have rental insurance, so this is yet another reason to buy a policy — although those who aren’t required to have coverage should still make sure they are insured, too.

In this particular case, listening to Ramsey absolutely makes sense. Tenants need renters insurance and this cost should be factored in as part of required monthly housing costs when deciding whether rent on a particular property is affordable.

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Dealing with people can be a really frustrating experience. 

In the past decade or so, I’ve bought several properties and I have also sold several homes. While I’ve always ended up selling for more than I paid and been able to pay off my mortgage loan and walk away with a little profit, I have not really enjoyed the process.

There’s one big reason why that’s the case — and it’s something you should prepare for if you’re going to list your own property.

This is the really frustrating thing about selling a house

As a home seller, the most frustrating part of the process — and the thing I disliked the most about it — was dealing with the irrationality of potential buyers.

I’m not talking about people just acting based on emotion, since I know that buying a house is an emotional experience and you want to love the place you call home. I’m talking about potential buyers making choices that objectively speaking, do not make any sense.

Because I acted as my own real estate agent and thus received the feedback directly (via an online form) after showings, I was able to see firsthand the illogical ways in which potential home buyers acted.

For instance, with one of my previous houses, the feedback the buyer’s real estate agent provided was that they loved the home but they would not buy it because they didn’t like the furniture and couldn’t get past the “bad” impression the furniture made. Of course, the house was not being sold furnished, so the furniture shouldn’t have had any bearing whatsoever on the decision they made to buy (or not buy) the property.

In another situation when I was selling a plot of land that was 16 acres, with over three acres cleared already for a home, I received feedback from a real estate agent indicating that the potential buyers loved the lot but were concerned they would not have room to build a big enough house on the lot. With over three acres of cleared space, that would have been one heck of a house if they couldn’t fit it on the property.

These were just a few of many examples of situations where people passed up on properties they professed to love for reasons that simply didn’t add up. And as a seller who was eager to find a buyer, it was frustrating to lose out on sales for this reason.

How to stay sane during the sales process

If you’re trying to sell a house, the important thing to remember is that a lot of people simply aren’t going to come into the process with the same perspective you have. And there’s no way to convince someone of an objective reality they just can’t see.

Ultimately, you don’t want to try to convince a reluctant buyer because you’re unlikely to get the best offer from them. You just need to be patient with the process and expect it’s going to take quite a few showings before someone eventually falls in love with the space.

By keeping these facts in mind, you can hopefully stay calm and happy during the sales process and not find yourself as annoyed as I was with buyers who don’t think the way you’d expect them to.

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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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The best goals are the ones you can stick with. 

I’m not a big fan of regular New Year’s resolutions. But, I am a fan of setting actionable goals. And whenever I need some inspiration for anything around goal setting, I can turn to Reddit.

The folks in the credit card subreddits are always good for some awesome inspiration. For instance, late last year, hundreds of users shared their credit card goals for 2023.

If you’re already into the new year and still struggling to come up with your own credit goals, don’t worry. Here’s some of Reddit’s inspiration just for you!

Big travel plans

One common goal amongst the rewards card lovers was travel. If you’ve seen any headline in the last year, you know travel is back in full swing. And so far, it looks like 2023 is going to be a good time to use up all those travel rewards we couldn’t touch throughout the pandemic for some free travel.

Destinations were varied, but the very top comment was from a user excited to use their points for a trip to Japan (and back!). According to a reply, another user did a similar trip for just 150,000 points in business class. Not bad for some little old credit card points, eh?

Paying off debt

On the other end, some folks were more excited about paying off their cards than using their rewards. This is a very admirable goal. Paying off credit card debt can be a challenge (especially in our current economic landscape).

Similarly, there are a few folks who plan on watching their credit scores grow in the new year. The advice from the replies boils down to: stay disciplined. If you can pay your credit cards in full and on time every month, your credit score should grow throughout the year. Good luck!

Switching it up

For some users, the goal was to switch it up a bit. One user wants to shift from using points to focusing on a cash back strategy to make their lives simpler. And this makes perfect sense, as cash back can be much easier to use than points, especially travel rewards that require careful planning to maximize.

Multiple users want to switch up their card lineup, rather than their specific rewards strategy. A common theme was getting rid of high annual fee cards that aren’t worth it, in favor of lower-fee cards that better suit their needs. Optimizing your cards to fit your lifestyle is always a good goal!

Embracing the new

Several users mentioned looking forward to some of the new cards rumored to be slated for later in 2023. One of the most anticipated is the new luxury card that Citi supposedly has on the docket. There’s also been a host of rumors about a new American Express card, but those rumors are far more nebulous. I’m definitely in that same “can’t wait to find out!” crowd.

Taking a break

Although there’s certainly a lot of talk about what new cards everyone wants to pick up in 2023, there’s surprisingly just as much chatter about not getting any new cards this year. Commonly called “gardening,” a good number of folks plan on taking a break from new applications in 2023.

The main impetus for most “gardeners” is to get back under the 5/24 limit. This is a rule from Chase that states you can’t get a new Chase credit card if you’ve opened five or more new credit card accounts in the last 24 months. Since Chase is home to many very popular rewards cards, this limit can be a big bummer for card collectors.

Set it — don’t forget it

No matter what goals you set for yourself (and your cards) in 2023, make sure you stick to them. It can be easy to forget your desire to avoid new cards, for example, when issuers are constantly coming out with bigger and better perks and rewards.

But credit is about nothing if not discipline. So let us all try to stay steadfast and disciplined so we can achieve our goals this year.

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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. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Brittney Myers has positions in American Express. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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That’s certainly a fair characterization. 

If you’ve been trying to buy a home for quite some time now, you’re not alone. Many buyers are struggling in today’s market due to a combination of higher home values and expensive mortgage rates. And limited real estate inventory isn’t helping, either.

But if you ask one Redfin expert, today’s housing market is challenging not just due to these factors. Rather, there’s another wild card in the mix that makes it hard to predict how the 2023 real estate market will play out.

The ball’s in the Fed’s court

In a recent tweet, Chen Zhao, an economist at Redfin, said “By weekend, we usually have a good idea how a given year’s housing market will play out. But this year is anything but typical.” And the reason Zhao feels this way boils down to the potential for more

rate hikes on the part of the Federal Reserve.

“We’re not sure how much more the Fed will raise rates this year,” Zhao continued. But clearly, that lack of certainty makes it harder to nail down trends for home buyers to put on their radar.

The Federal Reserve has been on a clear mission to slow the pace of inflation. And its efforts certainly haven’t been for nothing, seeing as how we’re looking at a slower pace of inflation now than we were in mid-2022.

At the same time, January’s Consumer Price Index reading just showed a 0.5% increase in inflation from December. And that alone could spur an aggressive rate hike on the part of the Fed during its next meeting.

Now, you may be thinking, “What does that have to do with the housing market?” So here’s the deal. The Federal Reserve does not set consumer borrowing rates. It only oversees its federal funds rate, which is what banks charge each other for short-term borrowing.

But when the Fed raises interest rates, it tends to indirectly drive up the cost of consumer borrowing. And that could impact the housing market in several ways.

First, it could push more buyers out of the market due to higher borrowing costs in general. And it could also lead to higher mortgage rates — though it’s worth noting that mortgage rates commonly rise and fall independently of what the broad market is doing.

A lot of uncertainty

At this point, the 2023 housing market could go either way. Mortgage loans could get more expensive, or the cost of financing a home purchase could get less expensive as the year rolls along. And home values could continue to fall, thereby giving would-be buyers some much-needed relief.

There’s a world of uncertainty when it comes to real estate, but to be fair, there’s a lot of economic uncertainty in general to grapple with right now. So perhaps the best thing prospective home buyers can do is be patient, pay attention to trends, and do what they can to shore up their own finances so they’re in the best possible position to make an offer on a home and get approved for a mortgage.

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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 a disclosure policy.

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