Money Management

Don’t make a big investing mistake. 

There’s a reason some people make a point to never open a brokerage account or buy stocks. Investing in stocks can be a risky prospect. The value of a given stock can rise or fall dramatically within a short period of time. And sometimes, it can be hard to predict whether a given stock will gain or lose value, even when you make a point to review the finances of the company behind it thoroughly.

In fact, near-retirees and retirees are often advised to go light on stocks once their careers are wrapping or wrapped up. You’ll often see people in their 60s, for example, shift away from stocks in their IRA accounts and replace them with safer investments that are less volatile.

But while you might think that investing in stocks carries too much risk for your comfort zone, the reality is that there’s a risk in not buying stocks, too. And if you don’t put any money into stocks, you might end up disappointed in your portfolio down the line.

Don’t let yourself fall short

In a recent tweet, real estate and investing guru Graham Stephan said, “The opportunity cost of not investing in stocks is a bigger risk than ‘safe’ investing in the long run.” And he’s right about that.

Owning stocks means taking on some risk. But if you don’t invest in stocks, you’ll take on a different risk — the risk of not having enough money to meet your financial goals, like being able to retire in a secure, comfortable manner.

Remember, the value of a dollar tends to erode over time due to inflation — even during periods when inflation isn’t nearly as rampant as it’s been over the past 18 months or so. And so it’s important to invest in a manner that allows you to outpace inflation.

“Safer” investments like bonds won’t always allow you to do that. On the other hand, if you put money into stocks, even if some of those shares lose value over time, a lot might gain value. And buying stocks could make it so you’re able to do the things you’ve always wanted to do, whether it’s retire without financial worry or put your kids through college.

A good way to invest in stocks

There’s no way to take risk out of the equation when you’re investing in stocks. But one way to minimize your risk to some degree is to maintain a diversified portfolio. That means not loading up on a whole bunch of stocks from a single market sector, but rather, making sure you’re invested across a range of sectors, from tech to energy to healthcare.

At the same time, give yourself a long investing window. If you buy stocks with the goal of cashing them and taking the money in, say, five years, you might end up disappointed. But if you give yourself a 30-year window, that’s plenty of time to ride out market downturns and come out ahead.

It’s easy to see why the idea of buying stocks may not appeal to some people. But take Stephan’s advice and recognize that if you steer clear of stocks, you might end up taking on a less obvious risk that leaves you glaringly unhappy at the end of the day.

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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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Starting with a modest home can save you in more ways than one. 

Are you a renter who is considering buying your first home? Becoming a homeowner is an exciting decision that will change your life in many ways. With so many beautiful properties, it’s easy to fall in love with them all. If you’re beginning the home search process, you may want to consider choosing a modest property for your first home so you don’t accidentally overbuy beyond your means. Here are some benefits of purchasing a modest home as a first-time buyer.

1. You’ll have more wiggle room in your budget

You likely won’t end up with too much pressure on your budget if you buy a modest home. Many potential buyers become emotionally attached to expensive, large homes but don’t consider how their finances will change with their purchase. If you overbuy, your budget may be tight.

When you choose a smaller or more affordable home, you have more ability to live a comfortable life without feeling stressed about your personal finance situation. If a life change were to happen, such as job loss or divorce, you’ll be more likely to be able to continue to afford your mortgage payments without worry.

2. Utility costs are more manageable

Another benefit to buying a modest home is that the utility costs will likely be more affordable. When you go from renting to buying, it’s important to consider all of your living costs — not just your monthly mortgage payment. A larger home can mean higher utility costs, so you’ll have to spend more of your money on home expenses.

3. You may find it’s easier to save up for a down payment

If you plan to finance your home purchase, you’ll need to consider how you will come up with a down payment. If you choose a modest home at an affordable price point, reaching your down payment savings goals may be easier.

Let’s imagine you want to save 10% for a down payment and are looking at a smaller home priced at $175,000. You’ll need to come up with $17,500 to reach your down payment goal.

If you instead buy a larger home priced at $300,000, you’d need to save $30,000 for a 10% down payment. That’s a lot more money to come up with before closing.

4. It’s less expensive to furnish a larger home

Many first-time buyers focus on the property and don’t consider how they will furnish their home. If you already have some furniture from renting, that’s a win for your wallet. But if you buy a large home with many more rooms, you’ll eventually need to furnish them. If you instead buy a modest home, it can be more affordable to furnish your new space.

5. You can afford to pay down your mortgage faster

If you’re hoping to pay off your mortgage early, it’ll be easier if you have a lower mortgage payment amount. Many people with affordable mortgage payments make extra payments towards the loan’s principal to pay off their debt faster.

If your monthly mortgage payment is around $1,300, you may have more ability to make extra mortgage payments. But if your mortgage costs around $2,200 each month, it may be harder to swing additional payments because you have less room in your budget.

6. There’s less potential for clutter and less to clean

When you buy a modest home, you can enjoy a simpler life. There will be less room for clutter, and you may feel less tempted to buy junk. Plus, you may find that your property is a lot easier to care for and clean because there are fewer rooms and less work to do.

Before jumping into homeownership, consider the actual cost of owning a home. There are many properties to choose from, but some are more expensive and require more work than others. Are you ready to explore mortgage options? Check out our list of the best mortgage lenders for first-time buyers.

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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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Image source: Getty Images
What happenedAmazon Prime is getting rid of its free delivery on Amazon Fresh orders of over $35. The threshold for free delivery will increase to $150 from Feb. 28. According to an email from the online retail giant, Amazon will now charge as much as $9.95 for deliveries, depending on the order amount.So whatSome households, particularly smaller ones will have trouble spending $150 in one go to meet the new free delivery threshold. Moreover, spending almost $10 for a delivery of less than $50 would mean spending more than 20% of the total cost. This could be a significant hit to your bank account balance and may not be worth it, particularly on top of the Prime membership of $14.99 a month.Here’s how the new Amazon Fresh delivery charges break down:$9.95: Orders under $50$6.95: Orders of $50 to $100$3.95: Orders of $100 to $150Free: Orders over $150Now whatOne of the best ways to handle the economic uncertainty we currently face is to strengthen your financial foundations. Every dollar you save on groceries is a dollar you can put into your savings account or use to pay down debt.If you don’t regularly spend $150 on Amazon Fresh orders, here are some steps you can take.Consider whether your Amazon Prime membership is worth it: Amazon Prime brings various benefits, including free shipping on certain items and access to its streaming services. Review your recent activity to see what perks you use and what value they give you. If you mainly use it for Amazon Fresh and the current free delivery, it might be time to look elsewhere.Look for ways to reduce the number of orders you make: One way to save money on grocery shopping is to make fewer trips to the store, whether that’s online or in person. Might you be able to do a monthly Amazon Fresh shop that totals $150? As long as you have space to store purchases and will use them before they go bad, bulk buying could help you reduce costs and avoid delivery charges.Look for cheaper delivery options: Amazon Fresh is far from the only grocery delivery service out there. Head online and do your own price comparison to find out what your groceries might cost at other retailers. For example, Walmart+ charges $12.95 a month and includes free delivery on orders of $35 or more. See if it would be cheaper to shop in store: Online shopping is convenient and can save both time and money. It is easier to avoid buying things you don’t need (or already have) and there are often great bargains. However, there are advantages to in-store shopping too. Not only can you skip the delivery fees, you might find lower prices and extra special offers when you go in person.Alert: highest cash back card we’ve seen now has 0% intro APR until 2024If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee. In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes. Read our free reviewWe’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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Emma Newbery has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Walmart. The Motley Fool has a disclosure policy. 

What happened

Amazon Prime is getting rid of its free delivery on Amazon Fresh orders of over $35. The threshold for free delivery will increase to $150 from Feb. 28. According to an email from the online retail giant, Amazon will now charge as much as $9.95 for deliveries, depending on the order amount.

So what

Some households, particularly smaller ones will have trouble spending $150 in one go to meet the new free delivery threshold. Moreover, spending almost $10 for a delivery of less than $50 would mean spending more than 20% of the total cost. This could be a significant hit to your bank account balance and may not be worth it, particularly on top of the Prime membership of $14.99 a month.

Here’s how the new Amazon Fresh delivery charges break down:

$9.95: Orders under $50$6.95: Orders of $50 to $100$3.95: Orders of $100 to $150Free: Orders over $150

Now what

One of the best ways to handle the economic uncertainty we currently face is to strengthen your financial foundations. Every dollar you save on groceries is a dollar you can put into your savings account or use to pay down debt.

If you don’t regularly spend $150 on Amazon Fresh orders, here are some steps you can take.

Consider whether your Amazon Prime membership is worth it: Amazon Prime brings various benefits, including free shipping on certain items and access to its streaming services. Review your recent activity to see what perks you use and what value they give you. If you mainly use it for Amazon Fresh and the current free delivery, it might be time to look elsewhere.Look for ways to reduce the number of orders you make: One way to save money on grocery shopping is to make fewer trips to the store, whether that’s online or in person. Might you be able to do a monthly Amazon Fresh shop that totals $150? As long as you have space to store purchases and will use them before they go bad, bulk buying could help you reduce costs and avoid delivery charges.Look for cheaper delivery options: Amazon Fresh is far from the only grocery delivery service out there. Head online and do your own price comparison to find out what your groceries might cost at other retailers. For example, Walmart+ charges $12.95 a month and includes free delivery on orders of $35 or more. See if it would be cheaper to shop in store: Online shopping is convenient and can save both time and money. It is easier to avoid buying things you don’t need (or already have) and there are often great bargains. However, there are advantages to in-store shopping too. Not only can you skip the delivery fees, you might find lower prices and extra special offers when you go in person.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our expert loves this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our expert even uses it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Emma Newbery has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com and Walmart. The Motley Fool has a disclosure policy.

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There are ways you can use your own financial resources for loan purposes. 

Representative George Santos has been under scrutiny for several reported grievances, and on Jan. 31, he shared plans to temporarily remove himself from his assigned congressional committees, according to the New York Times. Santos has been in the news a lot lately on the heels of admitting to fabricating parts of his resume and providing more than $700,000 in loans to his 2022 campaign, according to CNN.

Now, the reality is that there are rules candidates have to follow when it comes to campaign funding. But if you’re an individual consumer, you shouldn’t necessarily be afraid to borrow money from yourself if the option exists.

Granted, you may have a host of outside borrowing options to explore, like taking out a personal loan or borrowing against the equity you’ve built up in your home. But here are a couple of other options to explore when you need money.

1. A 401(k) loan

If you’re saving for retirement in an IRA, you should know that these plans generally do not let account holders borrow against their balances. But 401(k) loans tend to be more common and widely available.

A 401(k) loan is what it sounds like — you take out a chunk of your 401(k) balance as a loan and pay yourself back over time. The upside of going this route, if your plan allows for it, is not having to deal with the process of applying for an outside loan and running the risk of rejection. Plus, when you repay a 401(k) loan, you’re repaying yourself, not a lender.

But you need to be careful with 401(k) loans, because while you might initially get a number of years to pay that money back, if you leave your job (whether willingly or due to being laid off), that repayment window could be whittled down to months. And if you don’t manage to repay your loan in full within that time frame, your loan will be treated as a withdrawal from your 401(k). If you’re under age 59 ½, that means you’ll be looking at a 10% early withdrawal penalty.

2. A passbook loan

A passbook loan lets you use your savings account as collateral for a loan through your bank. If you need access to $5,000 and you have $5,000 in savings, you can apply for a passbook loan and borrow that money without having to take it out of your savings account.

The upside of a passbook loan is that it can be fairly easy to qualify, since your own money is used as collateral. In fact, what will commonly happen is that funds in your savings account will be locked, so to speak, until your loan is paid off. This pretty much eliminates risk for your lender. Because of this, passbook loans tend to come with low interest rates.

A passbook loan could be a good means of building credit, since timely loan payments will count toward your payment history — a key measure of calculating your credit score. However, you may want to think twice before taking out a passbook loan.

While these loans generally come with low interest rates, at the end of the day, you’re paying interest to borrow money you already have. Now, if you’re able to lock in a lower interest rate on a passbook loan than what your savings account is paying, this option could make sense. But otherwise, you may be better off just taking a withdrawal from your savings unless you’re actively trying to build credit.

George Santos may be under fire for lending his campaign money, but you can rest assured that 401(k) loans and passbook loans are perfectly legitimate. Whether they’re the right choice for you, however, is something you’ll need to consider before moving forward.

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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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