Money Management

Cash-reporting rules can impact you.  

Depositing cash in your bank account is a normal activity for many people. Whether you make cash tips at your job or receive birthday money from your grandma, putting your cash in a bank account is a great way to keep it safe. However, your bank will report your activity to the IRS if you make a large cash deposit over a certain dollar amount.

Banks report cash deposits totaling $10,000 or more

If you’re headed to the bank to deposit $50, $800, or even $1,000 in cash, you can go about your affairs as usual. But the deposit may be reported if you’re depositing a large chunk of cash. When banks receive cash deposits of more than $10,000, they must report it to the IRS.

While most people making cash deposits likely have legitimate reasons for doing so, that isn’t always the case. The government wants to keep a record of large cash deposits to make tracking and tracing illegal activity easier.

Anyone depositing more than $10,000 in cash into their bank account should be aware that their bank will report the deposit by completing IRS Form 8300. It’s also worth noting that this rule applies to more than just cash deposits.

If you plan to deposit more than $10,000 in foreign currency, cashier’s checks, traveler’s checks, or money orders, your bank will also need to report the bank deposit to the IRS. Personal checks, however, aren’t an issue and don’t apply to this rule.

What you need to know about this rule

Some people may wonder if they can get around this rule by depositing $9,500 and then making another $501 deposit a few days or weeks later. You can’t get around this rule by making smaller deposits.

The IRS requires Form 8300 to be filed if more than $10,000 in cash is received from the same payer or agent in any of the following ways:

In one lump sumIn two or more related payments within 24 hoursAs part of a single transaction or two or more related transactions within 12 months

This is something to keep in mind if you make cash deposits regularly. If you’re making legitimate cash deposits into your bank account, there is nothing to worry about — but it’s good to be aware of this cash reporting rule.

When are you responsible for filing out IRS Form 8300?

It’s also worth noting that you may need to fill out an IRS form 8300 if you operate a trade or business and someone pays you in cash. If you receive a cash payment of over $10,000 in one transaction or two or more transactions, you’ll need to report it. You and the person paying you will need to provide the details of the transactions on IRS Form 8300. Keep this in mind if you’re a business owner who accepts cash payments.

Bank accounts are a great place to store your extra cash

If you’re keeping your spare cash in a piggy bank or under your mattress, you may want to start stashing it in a bank account instead. When you keep your money in an FDIC-insured bank account, up to $250,000 of your funds are insured.

If you have significant savings, don’t keep all your money in a checking account. You’ll miss out on earning interest. High-yield savings accounts offer an excellent way to boost your savings as you earn interest on your contributions. For additional money management tips, the following personal finance resources may be helpful.

These savings accounts are FDIC insured and could earn you more than 13x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you more than 13x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

Shedding square footage could prove more difficult than expected. 

There are different reasons why people make the decision to downsize their living space. If you’re nearing retirement, for example, and your kids have grown up and left the nest, it may not make sense to hold onto a larger home with space you don’t need. Downsizing might allow you to lower your housing costs so you can use your money for other purposes, like padding your IRA account.

Even if you still have young kids living with you, you may be reaching the point where you’re finding it difficult to keep up with your home — both financially and logistically. If you have a larger home, you may be tired of spending your weekends mowing the lawn and dealing with upkeep. And if your property taxes recently went up a lot, that alone could be driving you to think about downsizing.

But while downsizing can be a big source of savings, now’s a pretty tough time to try it. Here’s why.

1. There’s not a lot of inventory

Just because you’re downsizing doesn’t mean you shouldn’t be happy with and comfortable in your new home. But right now, there’s very limited housing inventory available across the country. And so you might struggle to find a smaller home that meets your needs.

It may be that you can’t find a place to live in the neighborhood you want to stay in or settle down in. Or, you may have your heart set on a standalone home to downsize into, but it’s only townhouses and condos that are on the market in your neck of the woods.

Once housing inventory opens up, downsizing may be easier. But right now, limited inventory could make downsizing difficult.

2. Home prices are still high

Although home price gains have been slowing down, housing prices are still elevated as a whole across the country. And because there’s been a particular shortage of homes on the lower end of the market, you may find that a smaller home doesn’t end up being as inexpensive as you would’ve thought. And if you’re not going to reap the savings you’re after, then it may not be worth it to deprive yourself of square footage.

3. Mortgage rates are high

If you’re older and have a paid-off home, you may not need to take out a mortgage loan to buy a new one. Rather, you might sell your home for enough money to buy a smaller one outright.

But it’s not just retirees or near-retirees who might choose to downsize. And if you’re downsizing after only having lived in your home for a few years, you might still have a hefty mortgage to pay off — and you might need a new mortgage to finance a home purchase. But because mortgage rates are so high right now, a new home loan could get expensive — to the point where you’re not saving much money at all.

While downsizing does tend to offer financial benefits, now’s just a really hard time to do it. And so you may want to consider holding off on downsizing if you’re struggling to find the right replacement home or are finding that you won’t be able to save the money you expected.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More 

Image source: Getty Images
What happenedGlobal leaders and decision makers have gathered again at the World Economic Forum in Davos, Switzerland to talk about the most urgent challenges we face. This year, the word “polycrisis” is on everybody’s lips. “The collective vocabularies stored in the world’s great dictionaries didn’t appear to hold a single world to sum up all this strife,” explained a World Economic Forum blog. “So here’s a new one: Polycrisis.”So whatThe thinking behind the new word is that there are a number of interconnected negative events that could hit at the same time. Those events could compound in such a way that the impact is much bigger than the sum of its parts. For example, Russia’s invasion of Ukraine played a part in the sky-high food and energy costs we saw last year. In some countries, this has fueled social unrest. In the coming decades we may see more of these types of disruptions, with even more serious consequences.When the world’s leaders feel the need to coin new phrases to describe impending doom, it is worth taking notice. But at the same time, you’d be forgiven for feeling tired of ever more dramatic warnings about the future. After all, we’ve been struggling with an unprecedented global health crisis for the past few years, and many Americans have spent recent months preparing for a potential recession.Now whatWhat matters is how you react to potential crises, not what they’re called. Try not to panic about what might be in the future, and instead focus on the things you can control, such as strengthening your financial bases and building wealth.For example, if you don’t have three to six months’ worth of living expenses socked away in a savings account, make this a priority. If you carry high interest debt, make a debt repayment plan. You might not be able to solve everything overnight, but every step you take will mean you’re more prepared. It can also be easy to think that there’s no point in investing for the future because so many things can go wrong. Sure, there are no guarantees. But historically, long-term stock market investments have not only beaten inflation, they’ve also produced decent returns. Consistent investing is a tried and tested way to build wealth.Constant doom mongering also brings a temptation to try to time the market and only buy equities when they hit their absolute lowest. The trouble? It’s impossible to know what the bottom is. If you’re investing with a long-term horizon — say 10 or 20 years — the exact day you buy becomes less important. Open a brokerage account and look for ways to build a portfolio of quality assets that you believe will do well over time. 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.Emma Newbery 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. 

What happened

Global leaders and decision makers have gathered again at the World Economic Forum in Davos, Switzerland to talk about the most urgent challenges we face. This year, the word “polycrisis” is on everybody’s lips. “The collective vocabularies stored in the world’s great dictionaries didn’t appear to hold a single world to sum up all this strife,” explained a World Economic Forum blog. “So here’s a new one: Polycrisis.”

So what

The thinking behind the new word is that there are a number of interconnected negative events that could hit at the same time. Those events could compound in such a way that the impact is much bigger than the sum of its parts. For example, Russia’s invasion of Ukraine played a part in the sky-high food and energy costs we saw last year. In some countries, this has fueled social unrest. In the coming decades we may see more of these types of disruptions, with even more serious consequences.

When the world’s leaders feel the need to coin new phrases to describe impending doom, it is worth taking notice. But at the same time, you’d be forgiven for feeling tired of ever more dramatic warnings about the future. After all, we’ve been struggling with an unprecedented global health crisis for the past few years, and many Americans have spent recent months preparing for a potential recession.

Now what

What matters is how you react to potential crises, not what they’re called. Try not to panic about what might be in the future, and instead focus on the things you can control, such as strengthening your financial bases and building wealth.

For example, if you don’t have three to six months’ worth of living expenses socked away in a savings account, make this a priority. If you carry high interest debt, make a debt repayment plan. You might not be able to solve everything overnight, but every step you take will mean you’re more prepared.

It can also be easy to think that there’s no point in investing for the future because so many things can go wrong. Sure, there are no guarantees. But historically, long-term stock market investments have not only beaten inflation, they’ve also produced decent returns. Consistent investing is a tried and tested way to build wealth.

Constant doom mongering also brings a temptation to try to time the market and only buy equities when they hit their absolute lowest. The trouble? It’s impossible to know what the bottom is. If you’re investing with a long-term horizon — say 10 or 20 years — the exact day you buy becomes less important. Open a brokerage account and look for ways to build a portfolio of quality assets that you believe will do well over time.

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.Emma Newbery 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.

 Read More 

Your retirement savings could be going, going, gone in one of these states. 

Financial influencer Graham Stephan recently shared some alarming new research. In multiple states, even if you retire with $1 million, your money could last 15 years or less. Due to the high cost of living in those states, there’d be a possibility that you run out of money.

Running out of money in retirement is a nightmare scenario that nobody wants to experience. Here’s a closer look at the states where you’re at the greatest risk, and an important counterpoint to this research.

Where retirement savings doesn’t go very far

GOBankingRates used data from cost-of-living estimates and consumer expenditure surveys to determine how expensive retirement is in each state. Based on that, it calculated how long a nest egg of $1 million would last. Here are the states where it would run out the soonest:

Hawaii: 10.9 yearsNew York: 13.8 yearsCalifornia: 15 years

Considering retirement can last for decades, you definitely don’t want to only have enough money for 10 to 15 years. While Hawaii, New York, and California had the highest average expenditures for retirees, there were also far more affordable states. Here are the ones where retirement savings go the farthest:

Mississippi: 25.3 yearsOklahoma: 24.8 yearsKansas: 24.6 years

The fine print

Before getting too worried about this news, it’s important to go over the math behind these numbers. The analysis simply divided $1 million by each state’s estimated annual expenditures for those 65 and older.

For example, in Hawaii, average annual expenditures were $91,684.73. When you divide $1 million by $91,684.73, you get 10.9, hence 10.9 years for that money to run out.

There’s one big problem — this assumes you’re getting a 0% return on your money. In this scenario, you haven’t invested your money. You also haven’t stuck it in the bank, because even the worst bank account ever will probably get you at least a little interest.

The data is essentially based on how long your money would last if you decided to keep $1 million in a safe or under your mattress. It’s safe to say that most people wouldn’t do that. And if you put your money anywhere that it can grow, it changes the math. Your savings will then last significantly longer, especially if it’s invested.

How to avoid running out of money in retirement

Even if this data on how quickly your money will run out is fairly simple, it still makes a good point about personal finances in retirement. Your money may run out if you don’t have enough saved, and you’ll go through it much more quickly in high-cost states.

So, how can you avoid this? First, make sure you’re saving enough. A helpful rule of thumb is to save at least 15% of your income for retirement. However, the correct amount also depends on your age and the amount you want to save. For example, if you want to retire with $1 million, it could take anywhere from $116 to over $2,600 per month in savings, depending on how old you are when you get started.

Here are some additional tips that can help your retirement savings last longer:

Keep a portion of your portfolio in stocks. Retirees normally shift more to bonds for stability, but continue to invest in stocks for their growth potential. A 60:40 split between stocks and bonds is a popular choice for retirees.Consider moving somewhere cheaper or downsizing. Many people move to another state or even retire abroad to stretch their money further. You could also consider downsizing, especially if your children have moved out and you don’t need as much room anymore.Plan ahead to save on taxes. It’s normally a good idea to fund a Roth IRA, which offers tax-free withdrawals in retirement.Make sure you have the right insurance. Health insurance is a must for retirees, and you may also want to get long-term care insurance. An estimated seven in 10 Americans will need long-term care at some point, and without insurance, this can cost thousands of dollars per month.

The best way to be comfortable in retirement is to plan and prepare for it now. With consistent saving and investing, you’ll be able to build a nest egg that can last for decades. And if you’re worried about the cost of living in your state, you could start thinking about more affordable places to live.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

A modest drop in rates led to an uptick in home loan applications.  

Roughly one year ago, mortgage rates were still sitting at reasonably affordable levels after staying ultra-low throughout 2021. But things have changed a lot since then on the borrowing front.

These days, you’re not going to find a 30-year mortgage anywhere close to 3%, whereas in early 2022, it was still possible to sign a home loan in the 3% range. But last week, the average 30-year mortgage rate dipped to 6.23%, according to data from the Mortgage Bankers Association. That’s the lowest rates have been since September. And seeing as how mortgage rates were at above 7% at several points during the latter part of 2022, that’s a big dip.

It also explains why mortgage loan application volume rose about 28% last week compared to the previous week. And it’s not just purchase mortgage volume that increased. Demand for mortgage refinances soared, too.

Of course, it’s easy to see why would-be buyers may have been tempted to lock in a mortgage to take advantage of lower rates. But should you rush to get a mortgage right now? Or are you still better off waiting for borrowing rates and housing market conditions to improve?

Don’t be too hasty

A mortgage in the lower 6% range is apt to be more affordable than a mortgage with a 7% interest rate or higher attached to it. But right now, home prices are still up and real estate inventory is still pretty limited. So all told, it actually isn’t the best time to be signing a mortgage and buying a home.

What’s more, we don’t know what direction mortgage rates will trend in. Recently, we got some good news about inflation (namely, that it cooled substantially in December, compared to November), and that could cause the Federal Reserve to ease up on interest rate hikes. It’s possible that will lead mortgage rates to soften even more, possibly dipping down to the 5% range later this year.

That’s why you shouldn’t necessarily rush to sign a mortgage today. It’s one thing to borrow if you’ve found a great home in your price range and you want to move forward. But otherwise, sitting tight a while longer could work to your benefit.

Could mortgage rates come back up?

Absolutely. That’s the risk you take any time you’re in the market for a home loan. Rates might fall one week but spring back up the next week, and it’s often impossible to predict what direction they’ll trend in from one week to the next.

But still, it’s best not to rush into homeownership for fear that if you don’t, you’ll miss out on your most affordable borrowing opportunity this year. There’s a good chance mortgage rates will drop further at some point in 2023, so if you’re not quite ready to buy, don’t. Instead, spend some time shoring up your finances and accumulating a larger down payment. Those moves will put you in an even stronger position to pounce on lower mortgage rates should they continue to dip.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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.

 Read More