Money Management

Gambling away your money could hinder your long-term goals. 

Inflation has made life exceedingly more expensive and difficult for consumers over the past 18 months. And at this point, a lot of people are desperate for a windfall, whether in the form of a stimulus check from the government or another type of surprise payday.

For some people, the desire to get their hands on extra money has pushed them to play the lottery this year. But that’s basically akin to throwing money away.

Unfortunately, the temptation to play the lottery can be huge, as most states not only offer a lottery, but advertise it persistently. In fact, in 2019, lottery sales surpassed $91 billion, according to the North American Association of State and Provincial Lotteries. But there are five states that don’t sell lottery tickets — and for good reasons.

Not a countrywide practice

There are five states that do not sell lottery tickets: Alabama, Alaska, Hawaii, Nevada, and Utah. And they have their reasons.

Alabama and Utah prohibit gambling in their state constitutions, and religious groups in these states have long blocked efforts to legalize casinos or start offering lotteries. And in Nevada, the ban on lottery tickets boils down to the casino industry wanting to minimize its competition.

But there’s another reason some states have hesitated to adopt lottery ticket sales. It’s often the case that lower-income households spend a disproportionate share of their income on lottery tickets compared to higher earners. That’s hardly a healthy pattern, so it’s easy to see why some states would want to go out of their way to discourage that behavior.

Why it pays to avoid the lottery

At first, the idea of playing the lottery can be tempting. After all, for just a few dollars, you have the potential to come away a millionaire. Talk about a good investment.

But one thing you should realize is that your chances of winning the lottery are abysmally small. You’re more likely to get hit by lightning than to end up with a string of winning numbers. So rather than waste money on lottery tickets, you’re better off doing what you can to save and invest the limited funds you have.

In fact, if you want to turn a small amount of money into a whopping sum, investing it in an IRA or brokerage account is a good bet. For example, if you were to invest $1,000 over 50 years at an average yearly 8% return (which is below the stock market’s average), you’d end up with roughly $47,000.

That’s not the same as spending $5 on a lottery ticket and walking away a millionaire. But it’s a pretty good deal nonetheless.

Also, when you invest your money, the odds of earning a solid return aren’t slim. Quite the contrary — they’re pretty high. So the next time you’re tempted to take $5 or $10 and put it into a lottery ticket, consider putting it into your IRA or brokerage account instead. You’re likely to end up much happier with the results.

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With stagnant wages and higher prices, many consumers feel like they’re losing ground financially. 

For much of last year, there were warnings of a potential recession. Just last month, 4 out of 5 economists said they expect a recession in 2023 or 2024. It hasn’t happened yet, and despite the prognostications, it’s still possible that it doesn’t happen at all. But according to recent research, over half of Americans could already be experiencing their own personal recessions.

How inflation is causing a “personal recession”

TransUnion, one of the three major credit bureaus, recently released its Consumer Pulse Study for the fourth quarter of 2022. The study looks at how consumers’ personal finances have changed and how they expect them to change in the future. The results of the latest study show that inflation has taken its toll this year.

Wages were either flat or falling for most consumers in the fourth quarter of last year. Here’s what respondents said about their household income during that time frame:

51% reported their income stayed the same25% reported their income decreased24% reported their income increased

Because prices increased so much last year, 54% of Americans said their incomes hadn’t kept up with inflation. This group could be going through what TransUnion called a personal recession. They’re more likely to decrease their spending and less likely to seek out any new financing in the near future because of inflation concerns.

Fortunately, the study results weren’t all doom and gloom. Despite the inflation concerns, over half of Americans (52%) said they were optimistic about their household finances over the next 12 months. Another 21% felt neutral about their finances, and 26% were pessimistic. Those who felt optimistic were better off financially. Americans in the highest income band were the most likely to feel optimistic about their financial situations.

How to deal with inflation

Even if you don’t feel as if you’re going through your own personal recession, inflation has clearly impacted many Americans. The cost of living has increased significantly, and that makes paying bills more difficult, especially if you were already on a tight budget.

If you’ve been having a hard time getting by, the first thing to do is review your spending and see what you can cut or reduce. You might find that there are lots of areas where you can spend less. People often have plenty of nonessential expenses they can get rid of if need be. Maybe that means going out less, or getting rid of some streaming services for the time being.

Another good strategy is to look for ways you can earn more money. It’s no coincidence that the Americans who were most optimistic about their finances were the ones making the most. If you can get a promotion, bring in some extra cash from a side hustle, or find a higher-paying job, any of those things could give you more breathing room financially.

On a positive note, inflation is finally slowing down. The cost of living is still a long way from coming down, but there’s hope that it will get more affordable over the next six to 12 months.

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For some, the lure of owning an Airbnb property is too great to resist. 

Economics is all about demand and supply. When demand is high but supply is low, prices soar. Given the limited number of rental units in the U.S., it’s no surprise that some households have been priced out. Between 2021 and 2022, the average rent rose 15% nationwide, reports Redfin. In cities like Seattle, Cincinnati, and Austin, rents spiked by more than 30%. The situation is even worse in places like New York, Los Angeles, and the formerly affordable Nashville.

There’s no doubt that several factors converged to create this problem, including the global pandemic, lack of building supplies, and a labor shortage. Add to that list the short-term rental industry, specifically Airbnb, the largest player in the game.

Airbnb maintains more than 6 million rental listings in more than 100,000 cities worldwide. That means that globally, Airbnb has single-handedly changed residential neighborhoods into quasi-hotel districts. In doing so, the company has also gobbled up rental homes to lease to short-term guests.

The appeal for investors

Imagine that you own a small rental home near a lake in Kentucky. There’s not much industry in the area outside of hospitality, and you are only able to rent the home for $1,200 per month. By sprucing the place up a bit and adding homey touches, you can rent it to tourists for $1,200 per week. From a business perspective, the choice is easy when it equals money in the bank.

Over the past few years, the number of buyers looking for a high-yield investment has led to skyrocketing rental property sales. For example, in 2020, vacation home sales grew by 44% over the previous year. What’s not to appreciate about buying a vacation home that others pay for?

Real estate investment firms across the country plan to spend billions to build a portfolio of short-term rentals. The Airbnb watchdog group Inside Airbnb found that about one-quarter of hosts on the platform own approximately two-thirds of all listings.

At issue: For every investor who buys a rental home to use as an Airbnb, one fewer property is available for locals to rent. Major U.S. cities are now looking for a way to control the cycle.

New restrictions

With listings in more than 100,000 cities worldwide, Airbnb is everywhere, from tiny hamlets to huge cities. Here’s a partial list of cities that have imposed tight restrictions to minimize the number of people who open an Airbnb:

New York CityBarcelonaBerlinParisAmsterdamLondonMiamiSan FranciscoSanta MonicaCharleston, South CarolinaJersey City, New JerseyBangkok, ThailandReykjavik, Iceland

The potential impact

Strict restrictions appear to be working in Santa Monica, California, but it remains to be seen if cities can throw enough obstacles in the way of Airbnb hosts to slow the growth of the industry.

In New York City, where there may now be more Airbnb listings than available rentals, a new measure goes into effect this month. The measure will require Airbnb hosts to register their property with the city and provide proof that they themselves live there. Failure to do so could lead to fines of $1,000 to $5,000. The city hopes to reduce the number of Airbnbs in New York City by at least 10,000.

While the measure sounds as if it has teeth, Airbnb hosts in other cities have reportedly lied about living in the property they rent. Before any real progress is made, cities must find a way to verify the truth of hosts’ statements and assess penalties when needed.

For now, renters in more than 100,000 cities across the globe continue to struggle to find affordable housing. It will be up to local governments to fight on their behalf.

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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.Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb. The Motley Fool has a disclosure policy.

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Getting a mortgage may be more costly than you expect. 

If you are thinking about getting a mortgage, you need to research different types of loans carefully. There are many different choices when it comes to home loans, and some are better than others — especially for specific types of buyers such as those who are well qualified or those who may not have perfect financial credentials.

When you look into your loan options, you should look at all the details — including both the mortgage interest rate as well as any added fees you may have to pay. Specifically, finance expert Dave Ramsey warns about sneaky added expenses associated with one common type of loan.

This kind of mortgage could cost more than you think

The type of loan Ramsey warns about is frequently used by buyers with no credit, low credit scores, a low down payment, or other financial issues that could prevent them from getting the cheapest loans from the broadest range of lenders.

It’s called an FHA loan, because it is guaranteed or backed by the Federal Housing Administration. Because the government guarantees these loans, they are less risky for lenders, so the qualifying criteria is much less strict than with many other mortgages that don’t have government backing. In fact, you can qualify with as little as 3.5% down and with a much lower credit score than you’d need for most other kinds of mortgages.

Although the ease of approval could be very attractive, Ramsey warns that you could find yourself facing lots of extra costs with FHA loans.

“FHA loans seem great at first, but they have some sneaky fees,” Ramsey explained. “They require you to pay a 1.75% mortgage insurance premium (MIP) up front and an annual premium between 0.45% and 1.05% for the life of the loan. So, an FHA loan can cost you thousands of extra dollars that don’t go toward paying off your mortgage.”

Should you listen to Ramsey and avoid FHA loans?

There is absolutely no doubt that Ramsey is right about the big added costs associated with FHA loans. They can be a far more expensive option in terms of fees compared with conventional mortgages (those not backed by the government).

In fact, while you do have to pay private mortgage insurance (PMI) with a conventional loan if you make a small down payment, this typically doesn’t come with an upfront fee — you just make a payment toward it with each month’s payment. And you can eventually get rid of PMI once your loan balance falls to a certain amount relative to your home’s value — meaning you aren’t stuck with it for as long.

Because of these added FHA loan expenses, if you have reasonable credit, then you should try to get a loan from a conventional lender and steer clear of FHA mortgages. But the important thing to remember is that these loans are meant for people who might not otherwise be able to get affordable mortgages.

If you are ready for homeownership, have plenty of cash saved, can easily cover your mortgage, and you want to buy a property right away, then getting an FHA loan is likely going to be a better choice than getting a subprime loan if you couldn’t qualify for a standard mortgage.

Get yourself in the best position possible before getting a mortgage

Now, you should seriously think about waiting a little to improve your credentials and get a better loan elsewhere — but if that would take longer than you’re comfortable with or you think property values will go up in the meantime and you’ll lose out on that appreciation, then an FHA loan isn’t a terrible option. And if you improve your finances later and can qualify for a better, cheaper mortgage, you can always refinance your home loan.

So you can listen to Ramsey’s warning about fees — with the caveat that this doesn’t always mean an FHA loan should be off the table. It all depends on your situation, so you just need to carefully consider your options to make the best choice for you.

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Flying with Delta will soon come with more perks. 

Travelers who like to stay connected while on the go will appreciate this news. Delta Air Lines, in a partnership with T-Mobile, will offer free wifi to fliers on domestic mainland flights beginning Feb. 1. By the end of 2024, the airline plans to expand its free wifi offerings to international and regional flights. Find out more so you know what to expect.

Delta fliers can soon enjoy wifi without paying extra fees

Delta Air Lines announced that it will introduce free wifi on most domestic mainland flights on Feb. 1. This service will be available to all passengers. The airline plans to make wifi available at no cost across its entire global fleet by the end of 2024.

The airline hopes that this offering will improve the in-flight experience for passengers. Fliers will need to enter their SkyMiles loyalty number and password to access the internet. The SkyMiles program is free to join, and non-members will be able to join the program mid-air. Those who don’t want to join the loyalty program can pay $10 per device to connect to the internet.

In a statement, Delta shared a recent message from CEO Ed Bastian: “At work, at home, and everywhere in between, connectivity is essential to daily life, and your journey on Delta should be no different.” He continued, “Our vision has long been to deliver an experience at 30,000 feet that feels similar to what our customers have available on the ground.”

Free in-flight wifi is rare

This is exciting news for the airline industry. At this time, most U.S. airlines make customers pay extra fees to access in-flight wifi (JetBlue is the exception). Some travelers have airline credit cards that offer a discount on in-flight purchases like wifi or provide a statement credit for such expenses, but not everyone uses these cards.

Paying to use the internet can be frustrating when you’ve already spent a significant amount of money on your airline ticket. It’ll be interesting to see if any other airlines decide to say goodbye to wifi fees to win over more customers.

There’s more good news for Delta fliers

The airline highlighted some additional offerings that will be available later this year. Delta will boost its in-flight entertainment options through Delta Sync in spring 2023. SkyMiles members who connect to the internet can access exclusive content from brands like Paramount+, Atlas Obscura, and New York Times Games.

Delta will also introduce an all-new in-flight entertainment system in 2023. The new user interface will feature SkyMiles membership integration, content recommendations, real-time seatback notifications, and food- and beverage-ordering capabilities in First Class.

What this means for your wallet

If you’re a loyal Delta flier, you’ll soon be able to access free in-flight wifi, which is a win for your wallet. You’ll have more money left in your vacation budget to spend at your destination, plus you can have a more pleasant in-flight experience with plentiful entertainment options.

If you fly with Delta often, you may want to open a Delta credit card. You can earn more Delta SkyMiles and take advantage of perks that improve your travel experience. Review our list of the best Delta credit cards to learn more about available cards.

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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.Natasha Gabrielle has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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Will listing during the offseason actually help you get a faster sale? 

If you’re thinking about the best time to sell your house, the winter months probably aren’t on your radar. Most people sell their homes during the spring or summer. That’s because home buyers tend to be out looking for properties in good weather, and parents often want to move before the start of a new school year.

But finance expert Dave Ramsey suggests there could be one benefit to selling during the winter months when it’s not prime home-buying time. He indicates it may even be possible to sell your property faster in the winter than at other times of the year.

Here’s why Dave Ramsey thinks you could sell your house faster in the winter

According to Ramsey, a smaller number of homes are for sale during the winter months compared to the spring and summer.

“Come spring, other sellers will flood the market and your home will be just another fish in a great big pond. But in winter, you’ve got a limited number of sellers on the market,” Ramsey said, pointing to data from 2021 that showed a total of 230,000 homes came off the market between November and December.

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Ramsey explained that if the same drop off occurs this year as last year, home sellers who put their properties on the market in the winter could have as many as 21% fewer competing properties. This reduced supply could potentially drive up demand among home-purchasers for the properties on the market at that time. “Buyers have fewer homes to choose from, which means you could sell your house faster,” the Ramsey Solutions blog reads.

Is Ramsey right?

While the theory that fewer homes on the market could lead to a faster sale seems like it might make sense, the data on that doesn’t really pan out.

Data from the Federal Reserve Bank of St. Louis shows that the number of days a home is on the market tend to go up in December and January before falling dramatically during the summer. For example, in December 2021, homes were on the market for a median of 57 days in December and they were on the market for a median of 62 days in January 2022. By contrast, in June 2021, homes were on the market for a median of 36 days.

To be fair, many factors affect demand and impact how long homes sit on the market. Mortgage loan rates, for example, have a big impact. But, as a general rule, faster sales are going to happen in the summer. While you have a larger pool of homes, you also have more buyers out looking so there’s significantly increased demand.

Ultimately, you’ll need to decide when to sell your home based on many factors including your finances and life goals. But if you want to have the best chance of selling quickly at a fair price, summer is going to be a better bet based on past data. If you’re lucky enough to have the flexibility of choosing when to list your property, aiming for a summer listing just makes good sense.

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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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