Money Management

Saving for a home is hard, but with the right strategy, you can speed up the process. 

Buying a home isn’t something everyone wants to do. After all, when you own a home, you’re responsible for not just a mortgage payment, but also, added expenses like property taxes and homeowners insurance. You’re also responsible for maintaining that home and addressing repairs.

But even if you’re willing to deal with all of those things, you may find that the road to signing a mortgage loan isn’t all smooth. In a recent Insuranks survey, 48% of millennials and Gen Zers said that saving up to buy a home is the toughest part of being an adult.

If you’ve been struggling to save lately so you can buy a home, well, there are probably a few good reasons. First of all, home prices have been elevated for the past few years, so it takes more money to come up with a sizable down payment.

Also, inflation has been surging since 2021, and it’s been making everyday bills more expensive. It’s hard to sock funds away for a home down payment when you’re handing over extra money to cover everything from food to gas to utility bills.

Still, there are steps you can take to make good progress on your savings efforts. Here are a couple worth employing.

1. Make sure you’re really on top of your spending

Budgeting is something you may not have felt compelled to do in the past. But if your goal is to buy a home sooner rather than later, then you may need to get more serious about it.

Once you have a budget in place, it should be easier to see exactly where your money is going month after month. And from there, you might be able to identify spending areas to cut back on.

2. Boost your income with a side hustle

A second job is something you may not want to maintain forever. But if you’ve been having a hard time making progress saving your down payment for a home, then taking on a side gig for a year or two is something worth considering. The earnings you bring home won’t be earmarked for your existing set of bills, so you can use that money to boost your down payment funds.

In fact, having a side hustle is a good thing for new homeowners, because often, when you first move into a home, there are lots of things to address that can add up in cost. Replacing the carpet, buying living room furniture, and repairing a deck railing may not bust your budget individually. But collectively, they could. So if you get into the habit of working a side hustle, you may find that the extra money really comes in handy once you actually buy a home and realize there’s a lot more work to be done than you realized initially.

If you’re frustrated over the amount of time it’s taking you to save up a home down payment, you’re not alone. But if you stick to a strict budget and pick up a side gig, you may find yourself signing a mortgage sooner than expected.

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It’s a hard figure to pinpoint, but here’s how inflation might play out. 

If you’ve been struggling with sky-high living costs since the start of 2022 (or even before), you’re in good company. Inflation ran wild last year, and as a result, many consumers had no choice but to raid their savings accounts and rack up scores of debt on their credit cards just to do things like put food on the table and keep the lights on.

And we’re definitely not done with rampant inflation. As of December, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods, was up 6.5% on an annual basis. Now that’s a vast improvement from June’s CPI reading, which saw inflation peaking at 9.1%. But for context, a rate of inflation around the 2% mark is considered a more “normal” one. And we’re clearly worlds away from that point.

But will inflation continue to dip in 2023? There’s a good chance it will. The question is, how low will it go?

A positive trend

Since peaking in mid-2022, the pace of inflation has slowly but surely been cooling. And so there’s reason to believe that will continue into 2023.

In fact, the Federal Reserve is doing its part to make sure inflation levels continue to drop. The central bank has been raising interest rates since early 2022 in an effort to encourage a pullback in consumer spending.

These days, it costs more money to borrow money in just about every shape or form, whether it’s a credit card balance, a personal loan, or an auto loan. And if consumer spending drops to a modest degree, the Fed might get the best of all worlds — lower inflation without driving the economy into a recession.

But so far, consumer spending has not declined notably on the heels of the Fed’s recent interest rate hikes. So there’s reason to believe we might avoid a 2023 recession after all.

As far as inflation goes, without a crystal ball, we can’t say how steeply it will drop over the course of the next 11 months. But could we see inflation dip into the 4% range this year? That’s certainly within the realm of possibility. And if that were to happen, many consumers would no doubt enjoy their fair share of relief.

How to cope with lingering inflation

It may be quite some time until inflation levels drop back down into the “normal” range. So a good bet until then is to be very careful with your spending. Try to limit non-essential purchases, and make sure they only comprise a small portion of your total spending so you don’t risk falling behind on non-negotiable bills like your rent or mortgage payments.

At the same time, you may want to consider picking up a side gig if you haven’t explored that option already. The U.S. economy is in solid shape these days, so you may find that it’s pretty easy to get yourself a second job. And that extra income could be enough to get you through many months of lingering inflation without subjecting yourself to undue stress, or worse yet, costly debt.

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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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Take a deep breath and don’t despair. 

It’s been a difficult time for many Americans, as we have all struggled with higher costs due to rampant inflation from mid-2021 to now. Thankfully, prices are starting to come down, as the Consumer Price Index Report from Jan. 12 showed that inflation had fallen to 6.5% from 12 months prior — down from a peak of 9.1% in June 2022. In short, if you’ve been struggling with money and affording higher bills, you’re not alone.

If you’ve been forced to lean harder on your credit cards lately and now find yourself in a position where you can’t afford to make at least your minimum payments, you’re likely beginning to panic. Take a deep breath and read on for the steps you should take to remedy this situation.

1. Go through your finances

First things first. Sit down and run your numbers again to make sure you haven’t overlooked some extra money in your checking or savings account that you could use to pay your credit card bill. It might be useful to sit down with your bank statement from the last month to see how you ended up short on cash to make this payment. Maybe you had a surprise bill and the money you normally would’ve sent to your credit card company went to repair your car instead.

If you are truly tapped, is there a way you can scrounge up some extra money in a hurry? Is there a friend or family member you can ask for a small loan (ensure that you establish how and when you will pay this kind person back for their generosity)? Resist the impulse to take out a payday loan or rely on another form of predatory lending, as you could end up in an even worse situation as a result.

2. Contact your card issuer

If you can’t manage to make at least the minimum payment you owe on your credit card, it’s time to call the card issuer and explain your situation. I promise you, the friendly customer service representative on the other end of the line has definitely heard it all before. And it’s in your card issuer’s best interest to work with you so it can keep you as a customer.

Tell the person you’re speaking with that you’ve come up short, and explain what you need as far as help is concerned. Maybe you need a lower monthly payment, or to be able to skip this month so you can get back on top of your finances. Some credit companies have a hardship program you might be eligible to join. This could offer you the chance to make lower payments or pay less interest until you get back on your feet.

It’s important to reach out to the company before you have missed a payment, though, as this will prevent the credit score damage, late fees, or higher penalty interest rates that come as a result of being delinquent. And since payment history makes up 35% of your FICO® Score, it’s important to keep on top of your payments — you don’t want your credit card company sending the bill to collections.

3. Improve your financial standing for the future

Once you’ve made a plan with your credit card company to pay what you owe, it’s a good idea to take a look at your larger financial standing so you can avoid this problem in the future.

The typical advice when you’re having trouble affording your bills is to cut your nonessential spending to the bone, and while it’s worth looking to see where your money is actually going (and perhaps using a budgeting app to gain greater control of your spending), you could also try increasing your income. I got out from under a pile of debt in 2022 thanks to working more, and I can’t recommend it highly enough.

Having more income also means you can save up a solid emergency fund, so if you end up in a pinch due to an unexpected expense, you won’t end up struggling to afford your credit card bill — or going deeper into debt.

Another thing to consider, especially if you find yourself constantly struggling to get ahead of your creditors, is credit counseling. A nonprofit credit counseling agency will go through your budget and expenses with you and can even help you with a debt management plan, putting you on the road to better financial management in the future. If you’re struggling with credit card payments or other bills, there’s help out there for you. Don’t ignore the problem or pretend it doesn’t exist — it’s best to face it head on.

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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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Paying with a credit card comes with extra benefits. 

Credit cards make it easy to pay for purchases. But many of the best credit cards also come with valuable perks for shoppers. Some credit card issuers promote credit card offers, so cardholders can save money when making eligible purchases. This makes for an easy way to get a better deal. Here’s how this perk keeps more money in your pocket.

Introducing credit card offers

Is there any better feeling than scoring a deal on a purchase you planned to make? It can feel like a win for your wallet. Some credit card issuers offer money-saving opportunities with select retailers to cardholders.

You can find these offers in your credit card issuer’s mobile app or website if available. You can browse offers that allow you to get a discount on eligible purchases with participating merchants. Such offers can help consumers save more money when spending with their cards. Two examples of these programs include Amex Offers and Chase Offers.

Most of these programs require cardholders to activate offers they’re interested in, and then they must make an eligible purchase and pay with their card. If they meet the terms of the offer, they’ll receive cash back as a statement credit. While you won’t get a direct discount when you check out with a retailer, these deals can save you money by reducing your credit card balance.

If you’re already using credit cards regularly when you shop, don’t miss out on this perk. See if your card issuer has a credit card offers section in its mobile app or website before you make a purchase. You could waste less money and better stick to your personal finance goals by taking advantage of these deals.

Don’t miss these other ways to save money when you shop

In addition to using credit card offers, you may be able to save money in other ways when you shop. Here are a few ways you can save money or earn rewards while shopping:

Coupon apps: You can use coupon apps to browse coupon codes and promo codes from popular retailers. By using a coupon, you can reduce your total spending at checkout. Many retailers have promo codes available, so the savings potential is significant.

Cash back apps: Cash back apps and browser extensions offer another way for consumers to save. You can earn cash back on your spending when you activate offers and shop with participating retailers. You can then use your earnings to make future shopping trips cheaper.

Credit card rewards: You can also use rewards credit cards to earn cash back or points or miles, which you can redeem for freebies. If you’re not yet using these cards, check out our list of the best cash back credit cards to learn more.

Credit cards offer many benefits

If you’re strategic, you can use credit cards to your advantage. You can save money while shopping, earn rewards, build credit, and take advantage of other credit card perks. But it’s essential to use credit cards carefully and only charge what you can afford so you don’t risk racking up expensive credit card interest charges.

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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.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. Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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That’s an important thing to keep in mind when deciding where to settle down as a senior. 

Taxes can be a notable burden at any stage of life. But they can be particularly stressful for retirees.

Many retirees inevitably end up with less income than they had when they were working. And as such, it’s important for seniors to stretch that limited income as far as it can go.

One way to do so is to retire in a state that won’t tax your retirement income. But you’ll need to look at the big picture before deciding to move to a state that falls into this category.

Which states won’t tax your retirement income?

There are eight states that do not have a state income tax, so whether you’re retired or are in your 40s and earning a paycheck from work, state taxes won’t apply. These states are:

AlaskaFloridaNevadaSouth DakotaTennesseeTexasWashingtonWyoming

Meanwhile, New Hampshire also doesn’t have a state income tax on wages. But it does tax interest income and dividends. So if a portion of your retirement income is coming from investments in your brokerage account, your retirement income may be partially taxable in New Hampshire.

Now there are some states that do have an income tax but offer special benefits to retirees. Illinois, in many cases, does not tax distributions from pensions or retirement accounts like IRAs. Mississippi also does not tax retirement plan distributions, and the same holds true for Pennsylvania.

Georgia, meanwhile, allows residents aged 65 and older to deduct up to $65,000 of retirement income for state tax purposes. So if your income doesn’t exceed that threshold, you can avoid state taxes there.

Which states won’t tax your Social Security income?

Social Security is commonly a big source of retirement income for seniors. The good news is that most states do not impose a tax on Social Security benefits (though taxes on that income can apply at the federal level).

However, these 12 states do tax Social Security income:

ColoradoConnecticutKansasMinnesotaMissouriMontanaNebraskaNew MexicoRhode IslandUtahVermontWest Virginia

Some of the states on this list, however, offer an exemption for lower or moderate earners.

Should you move to a state that won’t tax your retirement income?

Avoiding taxes on your retirement income could help you better manage your money at a time when it may be limited. But state taxes on your income shouldn’t be the only factor you consider when deciding where to settle down during your senior years.

Some states without an income tax have a higher cost of living, like Alaska. And others, like Wyoming, may come with winters that are too harsh for your liking.

There’s also proximity to amenities, family, and friends to consider. Florida offers the benefit of warm weather and no state income tax. But if you don’t have any sort of social network in the state, you might get lonely or have a difficult time living there.

Similarly, moving to rural Texas might put you far away from healthcare facilities. And the heat might get oppressive during the summer.

So while you may be motivated to retire in a state that won’t tax your income, before you uproot your life, make sure to look at the big picture. Not having to pay state taxes on your income is a nice thing, but you don’t want to sacrifice factors like your comfort and quality of life in the process.

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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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