Money Management

Just because you can tap your home equity for a loan doesn’t mean it’s the best move.  

When you’re a homeowner, it’s good to know you have equity in your home. If needed, you can tap into that equity to pay for important expenses. One way homeowners get cash from their property is through a home equity line of credit (HELOC). If you’re considering a HELOC, this article is for you.

What is a HELOC?

A HELOC is similar to a credit card in one way: You have a revolving line of credit you can draw from as needed. There’s a big difference, though. When you take out a credit card, it’s typically unsecured, meaning you don’t put anything of value on the line to secure the card. When you take out a HELOC, your home is used as collateral. That way, if you fail to make payments, the lender can repossess your home, sell it, and recoup its loss.

Whether you borrow money from your original mortgage lender or other financial institution, you’ll normally be allowed to borrow between 80% to 85% of your home’s value. Let’s say your property is worth $300,000, and you’re approved to borrow 80% of the home’s value (which equals $240,000)

However, if you still owe money on the house, you must subtract that amount from the equity in your home. For example, if you still owed $80,000, the most you could borrow is $160,000 ($240,000 – $80,000 = $160,000).

To be clear, a HELOC can be a wonderful source of cash for some people. For others, it’s a risky proposition. Before taking out a HELOC, ask yourself the following questions.

1. Am I willing to put my home on the line?

Lenders are willing to approve HELOCs because the risks are so low. Your home acts as collateral and protects the lender from a total loss.

It’s up to you to determine whether a loan is worth the risk. For example, if you’re taking out a loan to pay for a wedding, you have the option of downsizing the cost of the nuptials and paying cash. If you’re in the mood to visit a tropical island in the middle of winter, putting your home at risk to do so may not make sense.

Before signing on the dotted line of a HELOC, do a gut check. Make sure the money you’re borrowing is worth the risk of losing your property to the lender.

2. Am I prepared to deal with a variable rate?

Although it’s not always the case, most HELOCs come with a variable rate that changes as the prime rate changes. While your interest rate may go down, it’s important to remember that it can also rise, boosting your monthly payment amount. It’s easy to get into trouble as the payment increases, and getting into trouble is the last thing you want to do when your home is on the line.

If you absolutely cannot abide the idea of a variable loan and you’re looking for predictability, shop for a fixed-rate HELOC. That way, you remove any uncertainty about payments from the equation.

3. What’s my plan if my home loses value?

If you purchased property in the past two years or so, you may have bought at the height of the market, paying top dollar. Let’s say that in the next couple of years the market is suddenly flooded with new housing inventory and the value of existing homes drop. Are you prepared to have even less equity in the home?

While we can only guess at what will happen in the housing market, it’s possible that some people who purchased their homes at the height of the market will find themselves underwater — owing more on a property than it’s worth.

Are you prepared to be both underwater and owe money on a HELOC?

4. Am I certain I won’t need the equity in my home for another purpose?

While it’s important to have an emergency savings account with money to cover at least three to six months’ worth of bills, home equity can come in handy when a true emergency strikes. For example, if you find yourself out of a job for months with no end in sight or there’s a medical emergency in your family and it feels nearly impossible to cover the bills, are you okay with not having the backup of home equity from which to draw?

No one can tell you with certainty whether it’s right or wrong to borrow money from the equity in your home. However, if any of these four questions made you feel uncomfortable, it’s worth exploring why.

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 

Consumers could be in for some relief on the borrowing front. 

For pretty much all of 2022, inflation wreaked havoc on consumers. That forced many people to go to extremes such as raiding their savings accounts and racking up credit card balances just to cover their basic expenses, like food, healthcare, and housing.

The Federal Reserve, meanwhile, has been doing what it can to address the issue of inflation. In 2022, the central bank implemented a series of aggressive interest rate hikes to drive the cost of borrowing upward.

The logic there is that if borrowing becomes too expensive for consumers, they’ll start to cut back on spending. That could help narrow the gap between supply and demand that’s been causing inflation to persist at such aggravatingly high levels.

Of course, expensive borrowing is a burden for consumers at a time when living costs are also up. But December’s Consumer Price Index (CPI) that was just released had some positive news on the inflation front. And it could lead to relief for consumers in multiple ways.

Will the Fed start to slow down on rate hikes?

In December, the CPI rose 6.5% on an annual basis. Historically speaking, that’s a big increase. But it’s substantially lower than the 7.1% annual increase recorded in November. And it’s also a lot lower than the June 2022 reading, which had inflation peaking at 9.1%.

If the Fed ends up happy with December’s CPI reading, it might go easy on interest rate hikes for the foreseeable future. So consumers might get relief in the form of not just lower living costs, but also a less drastic increase in borrowing costs.

But the aforementioned “if” is a big one. The Fed does not seem inclined to back down in its fight to bring inflation down to more moderate levels. In fact, in late November of 2022, Fed Chair Jerome Powell said, “For wage growth to be sustainable, it needs to be consistent with 2% inflation.”

Clearly, 6.5% inflation is a far cry from 9.1%. But it’s also a far cry from 2%. In fact, even if inflation continues to cool nicely month after month, we may not get down to 2% inflation at any point in 2023. So all told, while December’s CPI data could lead the Fed to slow down its interest rate hikes, that’s not guaranteed.

Consumers should borrow with caution

Even if the Fed dials back on interest rate hikes, the reality is that right now, it’s expensive to borrow money in just about every form, whether it’s a personal loan, an auto loan, or a credit card balance. So consumers should make every effort to borrow carefully and make sure they can manage whatever debt payments they lock themselves into.

Of course, avoiding debt altogether is really ideal right now, especially with so many recession warnings looming. But if the Fed slows down on interest rate hikes, we might manage to avoid the dreaded recession so many experts have been cautioning about.

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.The Motley Fool has a disclosure policy.

 Read More 

You can get outdoors and explore our country without ignoring your budget. 

We have many beautiful parks, monuments, and historical sites throughout the United States. Even if you’re not an outdoor enthusiast, it can be fun to get outside and see our country. Many national park sites charge entry fees, but if you take advantage of free admission days, you can be adventurous without breaking your budget. Keep reading to find out which days you can get free entry to the national parks in 2023.

Free outdoor adventures are a win for your wallet

Each year, the National Park Service announces free entry days. On these dates, visitors can explore all of the National Park entry sites that typically charge an entrance fee at no cost. If you have time off of school or work and want to do something different, this is a great family-friendly activity that won’t cost you anything.

For individuals and families on a tight budget, opportunities like this offer a great way to save money without sacrificing fun. Paying entry fees can add up and negatively impact your checking account balance. But if you plan accordingly, you can visit our parks for free.

2023 National Park Service free entry dates

Are you looking to get outside more this year?

Here are the five free entry dates for 2023:

Jan. 16: Martin Luther King Jr. DayApril 22: First day of National Park WeekAug. 4: Anniversary of the Great American Outdoors ActSept. 23: National Public Lands DayNov. 11: Veterans Day

Go ahead and mark your calendar so you don’t miss out. Park sites may be busier these days. It may be worthwhile to visit earlier in the day or later in the afternoon to beat the crowds.

Three ways to save money on national park access

If you want to explore our beautiful national parks but aren’t able to do so on the free entry dates mentioned above, there are other ways to save money on entry fees.

Here are a few suggestions:

Invest in an annual pass for $80

The National Park Service sells annual passes for $80. If you’re planning to take a road trip and visit multiple parks this year or live near several park sites, investing in a yearly pass may be worthwhile instead of paying entry fees every time you visit a park site. Up to two people can share ownership of one pass, and they don’t have to be related.

The entire vehicle is covered with this pass at sites that charge a per-vehicle fee.At sites that charge per-person fees, non-pass holders aren’t covered with this pass.

Get a free pass for your fourth-grade child

If you have a child in the fourth grade, they can score a free park pass through the Every Kid Outdoors program. This pass enables fourth graders and their families to explore the outdoors together. Passes are valid from September through August of the child’s fourth-grade school year.

The entire vehicle is covered with this pass at sites that charge a per-vehicle fee.At sites that charge per-person fees, this pass covers the pass holder, all children ages 15 and under, and up to three adults.

Buy a lifetime senior pass for $80

Seniors can buy a lifetime senior pass for $80. U.S. citizens or permanent residents ages 62 or older are eligible for this pass. This makes for an affordable way for grandma and grandpa to see the country with the entire family.

The entire vehicle is covered with this pass at sites that charge a per-vehicle fee.At sites that charge a per-person fee, this pass covers the pass holder, up to three additional adults, and children ages 15 and under.

Don’t miss out on free park entry days and other opportunities to save money while visiting our beautiful national parks. You don’t have to miss out on fun activities while you continue to honor your personal finance goals.

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.The Motley Fool has a disclosure policy.

 Read More 

As if losing your phone wasn’t already scary enough. 

The vast majority of Americans have a cellphone. Pew Research data from 2021 shows that 97% of Americans do, and 85% of those are smartphones. It’s kind of astonishing how quickly mobile phone technology advanced and we all got on board; like many people, I would be lost without my smartphone.

This phone obsession has also led many people to use mobile wallets to make paying for purchases easier. Gone are the days when you had to carry around an actual wallet with your credit cards and cash in it to pay for things. Now you can tap your phone on the payment reader at the checkout and be on your way. It’s very easy to put your credit card info on your phone in your Apple Pay, Google Pay, or other mobile wallet. But just how do these apps work?

How do mobile wallets work?

If you’re one of the 85% of Americans with a smartphone, chances are it has a mobile wallet app built right in. These are fairly straightforward to set up — you’ll be prompted to enter card numbers, expiration dates, CVV numbers, and your own information. You may have to verify the card information via two-factor authentication. This is for your protection and to ensure that someone who stole your credit card information can’t just add it to their own mobile wallet without some additional legwork (such as also getting access to your email or cellphone number).

A really cool feature of mobile wallets is that your actual credit card number won’t be transmitted when you use it to pay. Instead, your mobile wallet will generate a unique encrypted number instead, saving you from the possibility that a skimmer embedded in a credit card reader is capturing your credit card number. The cashier won’t know your actual credit card number either. This is one of the ways that your credit card info is kept safe on your phone. But will you have to worry about other safety issues?

Are mobile wallets safe?

Nothing in life is entirely without risk, but the features mentioned above make mobile wallets extremely secure. A thief would have to not only steal your phone, but also be able to access the data in it, and if you’ve set your phone up with facial recognition, fingerprint access, or a good old-fashioned passcode, your data is secure. (And you can remotely erase that data if your phone goes missing.)

And remember, you don’t even have to take out a credit card to use it to pay for a purchase, lessening the chances your physical card will be stolen (or accidentally left at the store or restaurant where you’re using it). You might even go so far as to stop carrying around your credit cards altogether, but I wouldn’t necessarily recommend this.

Mobile pay technology hasn’t been universally adopted, and there are still many places that aren’t capable of processing a payment like this, so you’ll need that physical card. However, it’s a good idea to keep credit cards that aren’t your “daily drivers,” so to speak, in a safe place at home. For example, I don’t use my travel credit card often, so I don’t keep it in my wallet; whereas, I use my grocery rewards credit card at least once a week, so in my wallet it stays.

What can you do to keep your data safe?

It’s even more vital to keep your smartphone safe if your credit card info is on it, and as such, it’s worth reviewing the steps for what to do if you lose your phone, namely:

Attempt to find it before you panic.Remotely erase your phone’s data.Contact your mobile carrier and the police.Change your account log-ins and monitor your financial accounts.

The Federal Communications Commission (FCC) provided some other tips for safe mobile wallet usage:

Don’t leave your smartphone visible and unattended, like in your parked car.Watch your surroundings and be discreet when you use your phone.Don’t use mobile payment services over unsecured wifi.Always choose unique passwords.Closely monitor the financial accounts linked to your phone.

These are all great tips for general smartphone and financial security, and they’re worth following. We’re living in the future, and while technology has made our lives easier, it’s important not to get complacent. Keep your phone secure and private to keep your credit card info safe as well.

Top credit card wipes out interest until 2024

If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR for up to 21 months! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read our full review for free and apply in just 2 minutes.

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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Alphabet and Apple. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

 Read More 

Make this the year you finally stick to your New Year’s resolution. 

Being better with money is a popular New Year’s resolution, but it’s also kind of vague. If you want to increase your odds of success, it helps to get a bit more specific about what you hope to accomplish this year.

You may already have some ideas about what those goals should be, but here are a few others that are worth considering. Tackling even one of these tasks in 2023 can go a long way toward improving your finances.

1. Create an emergency fund

Building an emergency fund should be everyone’s top financial priority because without one, you could wind up in serious financial trouble when an unexpected bill arrives. Ideally, you want to have at least three months of living expenses on hand, but some people prefer to save six or even 12 months of expenses.

You should keep this money in a high-yield savings account where it’s easily accessible. You don’t want to invest these funds because you never know when you’ll need to withdraw them. If the stock market is down at the time, you may have to sell your investments at a loss and you could still come up short. You won’t have this risk with a savings account.

Remember, these funds are intended for emergencies, not planned expenses. If you know you have an upcoming expense, you should save for this separately. And when you do tap your emergency fund, try to replenish it as soon as possible. Don’t forget to review your fund annually to see if you need to increase or decrease it to keep up with inflation and lifestyle changes.

2. Pay down high-interest debt

High-interest debt, like payday loan or credit card debt, can quickly spiral out of control. What might start as a few hundred dollars can balloon into several thousand dollars over the course of a few months. You’ll have to budget more and more of your monthly income to debt repayment to keep up, and you could rack up additional charges for late fees.

It’s a vicious cycle, but there are ways to put an end to it. Some people prefer to just cut back on other expenses and put their extra cash toward their debt repayment. One popular way of doing this with credit cards is known as the debt avalanche method. This is where you make the minimum monthly payment on all your cards, then put your remaining cash toward the card with the highest annual percentage rate (APR). When that’s paid off, you move onto the card with the next-highest APR, and so on.

Other people do better at debt repayment if they use a balance transfer card. These are credit cards that offer a 0% introductory APR for anywhere from a few months to a few years. Since your balance won’t accrue interest at first, any money you pay will go toward reducing your debt. However, there are usually one-time fees associated with balance transfers.

Personal loans are another option for those with credit card debt, and they also work for those with payday loans or other types of debt. These are installment loans, so you’ll have a predictable monthly payment. You don’t need to put down any collateral, but because of this, interest rates on personal loans tend to be higher than rates on other types of loans, like auto loans.

3. Create a plan for your long-term goals

Think about what you hope to accomplish financially over the next few years. You might want to purchase a new vehicle, fund a wedding or vacation, or buy a bigger home. Make a list of each goal and decide which is your most important. If any of these goals have specific deadlines, note these as well.

Then, determine how much you’ll need to save and decide how you’ll make that happen. It might be as simple as setting aside a certain dollar amount out of each paycheck or it might be more complicated, requiring you to bring in extra money via overtime or a side hustle. Explore a few options until you find what works for you.

If you don’t have anything specific you’re trying to save for, you can always set aside money for retirement. This is best kept in a retirement account rather than a savings account. Retirement accounts give you special tax breaks and enable you to invest your money so it can grow more quickly.

The tasks on this list may not all apply to you, but if there’s any you haven’t done yet, now is a great time to get started. Even if you don’t fully accomplish what you set out to do by the end of 2023, you can probably still make some good progress toward your long-term goals.

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.The Motley Fool has a disclosure policy.

 Read More