Money Management

You may find the number appalling. 

Some people are comfortable with the idea of investing. They’re not nervous to load up their brokerage accounts with different stocks, and they know what it takes to analyze a business and decide if it’s a good buy or not.

But not everyone has those skills. And even if you work to educate yourself on how to vet a business, you might still lack the confidence to hand-pick stocks for your portfolio. That’s where different types of investment funds come in.

When you invest your money in a fund of any sort, you’re basically not making investment decisions yourself (other than your fund of choice). Rather, you’re taking a hands-off approach to building your portfolio, which may be a less stressful route for you to take.

There’s absolutely nothing wrong with investing in different funds rather than assembling a portfolio of stocks you’ve chosen yourself. Many people go this route and enjoy a lot of success.

But you’ll need to be careful with the type of fund you choose. In some cases, choosing the wrong type of fund could mean losing an almost unbelievable amount of money to fees.

How much money are you willing to give up?

The problem with investment fees is that they can really eat away at your returns and limit your ability to grow long-term wealth. A recent tweet by Market Sentiment told the story of someone who, at age 25, gave a hedge fund manager $100,000 to invest, and that manager delivered an annual return of 8%.

Assuming a 1.5% management fee and a 20% performance fee, that person would’ve had $764,000 by age 65. But the fund manager would’ve collected $1.24 million — without having to invest their own money.

That’s why hedge funds aren’t necessarily a great choice for everyday investors. And to be clear, often, they aren’t even a choice. That’s because it’s common for hedge funds to impose a large minimum investment requirement.

In some cases, it may be $100,000. In others, it might be $1 million. But either way, if you invest with a hedge fund, you should expect to pay a lot of fees. And that’s money you could be keeping for yourself.

Now while hedge funds often have a large investment minimum, mutual funds can be more attainable for everyday investors. But that doesn’t automatically make them a great choice, either.

Mutual funds employ fund managers to develop strategies and hand-pick investments. Those fund managers need to be paid. And the way they get paid is by imposing high fees on investors like you.

A better type of fund to invest in

If you’re not looking to hand-pick stocks for your investment portfolio, consider putting your money into exchange-traded funds, or ETFs. When you buy ETFs, you’re effectively buying a bucket of different stocks with a single investment.

Because these funds are passively managed, you generally will not be looking at the same fees you might pay with a mutual fund. And you can bet you won’t be paying the often-exorbitant fees that hedge funds tend to charge.

As an example, you may decide to put money into an S&P 500 ETF — a fund that will aim to match the performance of the S&P 500 index, which consists of the 500 largest publicly traded stocks. In that case, you might pay a fraction of the fee a mutual fund might charge you — all the while getting a comparable return. And this way, you won’t have to worry about choosing the right stocks, because you’re putting your money into 500 large, established companies.

Hedge funds can make a lot of sense for very wealthy investors. And even if you’re not in that category, mutual funds could be a good fit for you. But it also pays to look at ETFs if your goal is to grow a nice amount of wealth in a hands-off fashion without having hefty fees eat away at your returns.

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Keep these in mind if you’re planning to make a big move this year. 

Many people found that 2022 was a tough year to buy a home. But will 2023 be better? That’s questionable.

Whether you’re looking to buy or sell a home in 2023, it’s important to have a solid pulse on the market. And so it pays to keep these real estate trends in mind, as explained by Dave Ramsey.

1. Housing inventory is picking up, but is still low

A big reason many people struggled to buy a home in 2022 was that there wasn’t a lot of inventory to go around. This year, inventory could pick up a bit, but there likely won’t be enough homes on the market to fully meet buyer demand. That’s a great thing for sellers, but for buyers, not so much.

If you’re hoping to buy a home in a market where inventory is limited, be prepared to make an offer as soon as you see a suitable property that fits into your home-buying budget. Also aim to be flexible with your must-haves. Compromising a little could go a long way in a market like this.

2. Home values are still rising, but at a slower pace

Ramsey says the national median home price for active listings increased by 11% to $416,000 in November 2022 compared to a year prior. But in June and July of 2022, home price gains came in much higher at 16%.

What this means is that home prices are still up, but gains are slowing down. That means those looking to sell a home in 2023 may not want to wait.

Because home prices are still up, it’s important to know how much house you can really afford. Generally speaking, sticking to the 30% rule will help you avoid going overboard. That rule states that your total predictable monthly housing costs should not exceed 30% of your take-home pay. And those housing costs should include your mortgage payment, property taxes, and homeowners insurance at a minimum.

3. Mortgage rates will remain high

Mortgage rates rose sharply in 2022 and are still high. That means you need to be really careful about sticking to your price range when buying a home.

Now, there are things you can do to snag a lower interest rate on a mortgage in 2023. These include boosting your credit score and signing a 15-year mortgage if you can afford the higher payments that come with one.

Some buyers may get spooked by higher mortgage rates this year. But remember, if you can afford your housing payments based on today’s rates, you can always refinance to a lower rate once it becomes less expensive to borrow.

4. Online real estate services are growing

There are different online services that can buy and sell your house for you, explains Ramsey.

Third-party buyers like Opendoor will purchase your home outright so you don’t have to deal with the usual selling process that involves having potential buyers invade your home to scope it out. But you might lose out on a higher profit if you go this route, so be careful, and do your research before diving in.

Ramsey says we’re also likely to see digital closings remain an option for buyers in 2023. These became more widely available during the pandemic, and they’re actually a good thing, because they can make the process of closing on a home loan more convenient.

5. Risky buying options are more accessible

In today’s housing market, there are some lesser-known ways to overcome affordability issues. But they come at a major drawback.

Ramsey points to rent-to-own arrangements as one prime example. These setups make your rent more expensive because a portion of your monthly payments goes toward future homeownership. But if buying the home you’re renting to own doesn’t work out, you end up losing out financially by virtue of having paid more rent all those months.

Another risky real estate trend Ramsey cautions buyers to avoid is taking out a personal loan to cover a home down payment. As Ramsey puts it, that’s the same as buying a home with 0% down. And that means you’ll have two different monthly loan payments to deal with and work into your budget. If you don’t have any funds to bring to the table for a down payment, it could be a sign that you’re not financially ready to buy.

Ramsey is clearly pretty tuned in to today’s housing market. And if you’re looking to buy or sell in 2023, it pays for you to do the same.

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Don’t shop. Adopt. 

The ultimate debate in the world of pets is the best way to acquire them. Should you purchase a dog or cat from a breeder, or should you adopt one from a local shelter or rescue?

I’m of the latter camp. With so many pets in need of good homes, adopting is always the way to go, in my opinion. Not to mention the dearth of responsible breeders out there; it can be tough to know if you’re purchasing from someone who’s in it for the right reasons.

But even if you take a purely practical outlook on the whole thing, purchasing a dog or cat from a store or breeder can be a lot more expensive than adopting — and in more ways than the initial cost. Your pet’s medical bills could also be much larger, starting with your pet insurance premiums.

Most policies don’t ask about origins

All right, to be fair, how you acquired your pet typically won’t directly impact your pet insurance costs. In general, pet insurance applications don’t ask about the origins of your pet.

So, whether you adopted your pet or purchased them from a store or breeder isn’t something your insurance company will know or care about.

However, there are other factors that usually vary between purchased versus adopted pets that could influence your insurance costs. The most important? The breed.

Purebreds can be more expensive to insure

One of the key variables that influence the cost of pet insurance is the breed of your animal. This is especially true when it comes to dogs, though cat breeds can also cause insurance costs to change.

Why? For one thing, it’s generally accepted that mixed-breed pets tend to be healthier overall than purebred pets. This is often attributed to the greater genetic diversity in mixed-breed pets over their purebred counterparts.

Whether this is true or not is often debated. A major study from 2013 on the prevalence of inherited disorders in dogs did show that, for things like hip dysplasia and common heart problems, mixed-breed dogs and purebred dogs had similar susceptibility. However, the study also showed that at least 10 genetic disorders are more prevalent in purebred dogs.

And regardless of the public data available, most insurance companies will have their own internal data on which they base their pricing decisions. Since pet insurance companies typically charge less for mixed-breed pets, it’s probably safe to say they have the data to back up their decisions.

Insure early for best results

If you have a dog or cat, you should probably also have pet insurance. Even if your pet has been perfectly healthy until now — the sad fact is that they won’t stay that way forever. And when the inevitable happens, your finances will appreciate your foresight.

Regardless of whether you buy or adopt, it’s important to insure your pet as early as you can. The best pet insurance policies will come with lifelong guarantees; in other words, once you get pet insurance, the company won’t drop your pet for age or illness. So long as you pay your premiums, your pet stays covered.

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It can be done — in your dreams. 

Whether you’re a self-proclaimed Seinfeld fanatic or you’ve only caught the show once or twice via reruns or through a streaming service, you’ve probably noticed that Kramer, Jerry Seinfeld’s neighbor, actually has a pretty sweet existence. After all, the guy barely works, and yet he manages to cover the rent on a fairly spacious Manhattan apartment — an expensive prospect even back in the 1990s, when the show aired.

If your goal is to live like the infamous Cosmo Kramer, you should know that it can be done. Here’s what it takes to pull it off.

1. Find a neighbor you can mooch off of regularly

It’s easier to exist on an absent income (and, most likely, a non-existent savings account) when you have a neighbor who’s willing to give you full access to their fridge and pantry. That was the arrangement Kramer magically managed to worm his way into with Jerry. And lo and behold, the man probably didn’t spend more than a handful of dollars on groceries each week.

Along these lines, Kramer was hardly the first person to pick up the check when the gang ate at Monk’s Cafe — something they did on a regular basis. So it’s not just Jerry who Kramer was mooching off of all those years. He somehow managed to charm George and Elaine into funding his existence, too.

2. Partner up with a mailman to cash in on recycling

These days, recycling is something many of us do naturally. But back in the 1990s, consumers needed motivation to recycle, so many states offered money back for recycled bottles and cans.

Kramer, genius that he was, partnered up with Newman to run a mail truck full of recyclables from New York to Michigan to score a higher payday. And while their plan didn’t quite pan out, it had the potential to be a real (very teeny tiny) money-maker.

3. Become a best-selling author with no experience whatsoever

Some people dream of writing a book, having it published, and getting to live off of the royalties. And apparently, becoming a published author is super easy. Just find an obscure topic no one really cares about, like coffee tables, shoot some photos, and voila — you not only have yourself a publishing deal, but a spot on a well-watched TV show to talk about it.

4. Score a lifetime of free coffee

Store-bought coffee can be a huge expense. Just think of the way all of those Starbucks runs add to your monthly credit card bills. That’s not something Kramer had to worry about, though. After suing a major chain for serving him coffee that was too hot, Kramer agreed to a settlement of free coffee for life.

Granted, his lawyer wasn’t too happy about that. And to be fair, Kramer would’ve likely come away with actual money had he let his lawyer do the talking. But instead, he set himself up with a lifetime of free java.

You really can’t live like Kramer

By now, you’ve hopefully come to realize that all of these tips are meant in jest, and that living like Cosmo Kramer is just glaringly unrealistic. That said, one thing Kramer was good at was finding odd jobs to make money here and there, from moonlighting as a department store Santa to participating in police line-ups. And so if you’re looking to boost your income, you may want to follow Kramer’s lead by getting yourself a series of side hustles.

But to be clear, it takes a steady, stable income to pull off a Manhattan apartment that isn’t the size of a shoebox, and to have enough money to dine out regularly, whether at a diner or a soup stand with very strict rules. And so rather than aim to live like Kramer, aim to hold down a regular job — one with benefits and a 401(k) and all the other responsible adult things Kramer never seemed to get a handle 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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends the following options: short April 2023 $100 calls on Starbucks. The Motley Fool has a disclosure policy.

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To hire an agent or not to hire an agent… that is the question. 

If you’re planning to sell your house this year, you may be wondering if you actually need to hire a real estate agent to do so. Many sellers felt just like you in 2022. In fact, the 2022 Profile of Home Buyers and Sellers by the National Association of REALTORS (NAR) found that 10% of home sales last year were FSBO (For Sale By Owner), an increase over 2021 (7%).

The data on these sales in NAR’s report is pretty interesting. FSBO homes are more common in rural areas (13%, versus 6% in suburban areas), and half of the sellers knew the person who bought their home. They also walked away with less money, though — the median FSBO home went for $225,000, significantly less than the median sale price for a home sold with an agent, $345,000 (though rural versus suburban home prices also help explain the difference).

Now that we’re armed with this information, let’s take a look at what to know about selling a home on your own.

FSBO may save you money

The main reason a seller would choose to forgo hiring an agent is to save money. You’ll generally be asked to pay 5% to 6% of your home’s sale price to a real estate agent, and this can be a nice chunk of change indeed. For example, if your home sells for $350,000, and you’re paying 5% of that to your agent, that’s $17,500. I’d argue the cons that come with selling a home yourself outweigh your potential money savings, though.

But it might also cost you in other ways

If you choose to go it alone, you’ll be responsible for all the aspects of selling a home. This includes staging it, hosting open houses, marketing, and all the paperwork. These are time-consuming and potentially stressful tasks. Plus, you won’t have access to put your home on the multiple listing service (MLS) yourself, and it will be quite difficult to find as many buyers if you’re not on it.

Finally, a local agent will know how to best price your home in your specific area, because this is what they do for a living. That experience can be invaluable, especially as you’ll likely get more money for the home by using an agent.

Which is right for you?

I can’t make that decision for you, but as you can see, you may end up with less money for your home if you sell it on your own, despite having to pay a real estate agent’s commission if you hire one.

Consider your experience in the real estate world to decide (if this is your first time selling a home, it might be a good call to hire an agent to help), as well as how much free time you have to market your home. You could also pay a flat fee to a real estate agent to put your home on the MLS so more prospective buyers and buyers’ agents will see it. Or, if you have a reliable buyer for your home already (someone you know), you might have an easier time selling it yourself. The choice is yours, but to FSBO or not to FSBO is a crucial decision that will impact how much money you make on a home sale (as well as how much stress you take on), so tread carefully.

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As President Biden said, they are “surprise charges that companies sneak into bills because they can.” 

The White House Competition Council has recently taken on some powerful players. For example, they’re fighting to slash excessive credit card late fees, pushing to break down competition barriers in the mobile app store ecosystem, and working toward full transparency in the airline industry.

But that’s not all. No business sector is off limits. If an industry lacks competition, the Council is on the case, finding alternative ways to even the playing field. Here’s how they’re doing it and why the Biden administration is so dead set on eliminating bank fees.

Junk fees are the enemy

Americans spend at least $29 billion annually on junk fees, funds many of us cannot afford to lose. That’s $29 billion that doesn’t make its way into savings accounts, retirement accounts, or toward the high cost of education.

The President got the ball rolling in October 2022 when he announced his intention to target junk fees and the businesses exploiting consumers.

“One of the key things I’ve asked the council to take on was the unfair hidden fees known as ‘junk fees’ that are taking real money — real money out of your pockets — real money out of the pockets of American families. Things like, as been mentioned, surprise banking overdraft fees, excessive credit card late fees, hidden hotel booking fees, or those huge termination charges to stop you from switching cable and Internet plans to a better deal. Surprise charges that companies sneak into bills because they can.

In fact, there’s an entire industry that’s popping up in America to help companies use complicated algorithms to hide fees that hurt consumers and help them. These things add up.”

Targeting bank fees

A little over a year into the Biden administration, the CFPB targeted overdraft and bounced check fees. Due to the agency’s action, 15 of the 20 largest banks agreed to end bounced check fees.

Here are two more fees under the ax:

1. Surprise overdraft fees

Let’s say you stop by the grocery store to pick up supplies for dinner. You pay using your debit card, and the transaction goes through without a hitch. Later the same day, your rent payment hits the bank, overdrafting your account by $10. Typically, a bank would charge you an overdraft fee for both transactions, as well as any other transactions that hit your account, before a sufficient deposit is made.

The CFPB has now issued guidance banning “surprise” fees. In this case, the surprise fee would be the one incurred due to using your debit card at the grocery store. After all, the bank approved that transaction. Another transaction coming through later in the day does not change that fact.

Surprise depositor fees

Now, imagine that you’re selling a lawnmower. The buyer doesn’t have enough cash on them, so you agree to take a check for the remaining balance. The check bounces.

Normally, your financial institution would charge you a fee for depositing a bad check. Given that you had no way of knowing how much was in the buyer’s checking account, charging you for someone else’s error makes no sense. And now, that practice is banned.

Eliminating these two banking fees alone is expected to save consumers more than $1 billion annually.

The Competition Council has teeth

The Council has brought together several major government agencies to enact change. For example, the Department of Transportation (DOT) has implemented consumer-friendly guidelines to make travel costs more fair and potentially less stressful. And it’s the Department of Commerce’s National Telecommunications and Information Administration (NTIA) that is working to give smaller app developers a chance to get their apps to market. It’s the Consumer Financial Protection Bureau (CFPB) engaged in slashing credit card fees, reducing late fees from roughly $30 to $8, and saving consumers as much as $9 billion a year.

If you’ve ever tried to figure out the “true” cost of internet service, you know how confusing it is. Junk fees are labeled with terms that make no sense, information is spread out, and all of it sounds vaguely foreign. The Federal Communications Commission (FCC) is on the case, implementing a rule that requires broadband providers to provide “nutrition labels” like those found on food products. Providers must clearly state the speed, data allowance, additional fees, and total price of service.

If a business charges junk fees, they can expect to be snagged. And if an entire industry has found a way to block competition — like charging hefty fees for customers who cancel their service — it can count on receiving more scrutiny.

“We’re just getting started,” President Biden said in a statement from the White House. “There are tens of billions of dollars in other junk fees across the economy, and I’ve directed my administration to reduce or eliminate them.”

The Council can’t do it on its own, though. They’re going to need Congress to support their efforts by banning the junk fees that are costing their constituents billions of dollars a year.

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