Money Management

Waiting could mean losing out financially. 

Sellers have had the upper hand in the housing market for a long time now. In mid-2020, mortgage rates fell to record lows, which drove buyer demand upward at a time when most sellers weren’t moving forward with listings. (After all, who wanted to deal with selling a home in the midst of a pandemic?)

In 2021, mortgage rates stayed low, and real estate inventory didn’t pick up. That allowed sellers to retain their edge.

And in 2022, mortgage rates rose sharply. But because housing supply didn’t follow suit, sellers still maintained an advantage over buyers.

But the days of sellers being in control of the housing market may soon be coming to an end. If you’ve been thinking about selling your home, you may want to put your listing together sooner rather than later.

Don’t wait to sell your home

The National Association of Realtors (NAR) reports that in November, existing home sales declined for the 10th month in a row. In fact, home sales slipped 7.7% from October and were down 35.4% compared to the same month one year prior.

Does that mean the housing market is crashing? No. But does it mean buyer demand may be waning? Yes. And it’s easy to see why.

Right now, both mortgage rates and home prices are elevated. That’s putting many buyers in a position where they just can’t afford to sign for a mortgage loan. And so it’s not all that surprising to see home sales decline.

That said, there’s still a reasonable amount of buyer demand out there. And if you want to capitalize on it, you should aim to list your home as soon as possible.

This is an especially wise move to make given that economists have been sounding recession warnings for the past several months. If economic conditions worsen in 2023, it’s apt to push even more buyers out of the market. And that could mean having to settle for a lower sale price for your home than you want.

List while inventory is low

As of the end of November, there was only a 3.3-month supply of available homes for sale, reports the NAR. But it generally takes a 4- to 6-month supply of homes to create enough supply to meet demand.

If home listings pick up in 2023, you’ll have more competition to deal with. And that could mean winding up with a lower sale price for your home. As such, you’re better off getting ahead of that situation by listing your home in the near term.

Selling a home during the winter can bring forth some challenges. You can’t easily show off a home’s curb appeal, and inclement weather might force you to reschedule showings and open houses.

But despite those drawbacks, listing your home soon could really work to your benefit. So the sooner you find a real estate agent to team up with and get moving on your listing, the more money you might end up walking away with.

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Keeping extra money in savings may not be the smartest financial move. 

Like many people, I have money in savings. In fact, I have several thousand dollars in a high-yield savings account. The money I have in there is for my emergency fund, as well as for big purchases I am saving up for and that I plan to make within the next year or two.

I won’t keep more money than I need to in savings, though. In fact, I’ve calculated the amount needed to accomplish my goals and to be prepared for a rainy day, and I only put that amount of cash in savings and not even $1 more.

It may seem odd not to want to have more money saved, but there are four really good reasons why I keep my account balance as low as I can while still being financially responsible.

1. The money loses ground due to inflation

Savings accounts — even high-yield ones — don’t pay much interest. That’s true even though many accounts have been increasing the rates they pay in recent months as the Federal Reserve has raised the benchmark interest rate.

Because the return on money in savings is very low, money in these accounts actually loses buying power. If inflation is going up at a rate of 8% or higher (as has been the case recently) and I’m making 2% on my saved money, the cash I have in there will be worth much less in real terms when I go to spend it.

Why would I want to devote more money to an investment that causes me to lose ground?

2. I can earn a much better return by investing

I don’t want to keep more money than I absolutely have to in savings because I have better things to do with it. I want to invest it.

I have a brokerage account where I can deposit funds and put them into assets that can earn me much better returns than a savings account ever could. Specifically, I invest a lot of money into an S&P 500 index fund. This is a pretty safe investment that has provided an average 10% annual return over many decades. I would much rather earn 10% than 2% or less.

Now, I know I can’t invest my emergency fund or the money I need for purchases in the short term, because an average annual return doesn’t mean I’ll earn 10% every year. In some years, my investment balance could decline. That’s why I only invest money I won’t need for at least two to five years — so I can give it time to grow even if there’s a bad year or two.

3. The money is too easily accessible

Another reason I don’t like to keep too much in savings is because it’s really accessible. The cash is just sitting there, and I could access it quickly without having to sell any investments.

While this is a good thing if I need to tap my emergency fund, it’s not a good thing because it makes it too easy to justify taking the money out for something that isn’t really necessary. I’m much less likely to sell investments and cause my portfolio balance to drop than I am to raid my savings account.

4. I’m not getting any tax benefits for putting money into savings

Finally, when I deposit money into savings, there are no special tax perks for doing so. I would rather invest as much as I can in a 401(k), IRA, or other tax-advantaged plan than put extra cash into savings.

For all of these reasons, my savings account balance is only as big as it needs to be — and the rest of my money is elsewhere, working harder for me to help grow my wealth.

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Going without health insurance means taking a huge risk. 

There are many benefits to becoming a freelance worker. For one thing, you can commonly set your own hours and schedule rather than be locked into preset hours. If you have multiple obligations, like children or aging parents you care for, that make it difficult to commit to a standard work schedule, then freelancing could be a good choice.

Also, as a freelancer, you’re not tethered to a specific office location. If you want to relocate to a part of the country where the cost of living is more moderate, you might have that option.

But there are certain pitfalls you might encounter as a freelance worker. For one thing, you might struggle with a lack of paid time off. And while you could always pad your savings account to try to give yourself that option, you might struggle to take a break from the grind not from a financial perspective, but from a workload perspective.

Another downside of being a freelancer? You don’t get employee benefits like access to a retirement plan and subsidized health insurance. And the latter is a big deal, because buying health insurance on your own can be costly.

In a recent Everly survey, only 58% of freelancers said they have health insurance. But the 42% of freelancers who don’t have coverage may be making a massive mistake.

The danger of going without health insurance

Even if you’re a pretty healthy person who rarely gets sick, you never know when a random illness or accident might land you in the emergency room. Without health insurance, your bills could total thousands of dollars.

Plus, you never know when you might need a diagnostic test that costs thousands of dollars if you have to pay for it in full. And so in many cases, the cost of health insurance will more than pay for itself if a medical issue or injury pops up.

How to get health insurance as a freelancer

If you’re a freelance worker who’s married, your most cost-effective option for health insurance may be to get onto your spouse’s workplace health plan, if they have access to one. Otherwise, you can purchase a plan from the health insurance marketplace, which was established by the Affordable Care Act.

Now, you have to follow the rules for obtaining coverage through a marketplace plan. You can sign up during open enrollment, which runs from Nov. 1 through Dec. 15 every year. The process of signing up for coverage can vary by state, and you may be eligible for a health insurance subsidy, depending on your income (this option is usually available for lower earners but phases out for moderate ones).

That said, if you had health insurance through a job but lost your coverage (say, by going freelance), you may qualify for a special enrollment period to sign up for a marketplace plan. This means you won’t have to wait until the annual open enrollment period.

Whether you’re new to freelancing or have been doing it for years, it’s important to factor the cost of health insurance into your budget and make room for it. Going without insurance has the potential to be a very costly mistake. And the last thing you want to do is regret your decision to go freelance due to a pile of medical bills.

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Did the holidays leave you in debt? Here’s a solid strategy for eliminating it. 

The holidays are a great time to be generous — but only to a point. And if your generosity has landed you in debt, you’re not alone.

That said, the last thing you want to do is let holiday debt linger. If it drags on, it’s only going to cost you more money. And it might even cause damage to your credit score, which you really don’t want. So if you’re closing out the holiday season with debt, here’s your three-step plan for paying it off.

Step 1: Order your debts from least to most flexible

Some types of debt are more rigid than others when it comes to sticking to a payment schedule. If you made any holiday purchases using a “buy now, pay later” (BNPL) plan, you don’t get much wiggle room in paying them off. Rather, you have to stick to a schedule that has you making payments for a limited period of time (usually three months or less).

On the other hand, if some of your purchases were made via credit card, you get a little more flexibility in that you can start by making your minimum payments and then tackle your remaining balance once you’re able to. Of course, carrying a balance forward isn’t ideal, but if you fall behind on BNPL payments, you could face harsh penalties and credit score damage. If you make your minimum payments on your credit cards, you’ll rack up interest, but your credit score shouldn’t take a hit.

Step 2: Find ways to make your debt less expensive

Once you’ve knocked out your “buy now, pay later” purchases, you may be sitting on several credit card balances to tackle. At that point, consolidating your debt could make it easier to pay off and less expensive.

One option in that regard is to move your existing balances onto a single card with a 0% introductory rate. Another is to take out a personal loan, which will generally mean paying a much lower interest rate than what your credit cards are charging you. Plus, with a personal loan, you lock in a fixed interest rate, which prevents a scenario where your monthly payments rise over time.

Step 3: Come up with a plan to free up cash

Knocking out your debt will require extra money. So you’ll need to think of your most realistic option in that regard.

If inflation is causing you to spend the bulk of your paycheck on essential expenses, then telling yourself you’ll reduce your spending may not cut it. Instead, you may need to get on board with the idea of taking on a second job temporarily, until your debt is paid off.

Ending the holidays with a pile of debt isn’t the best thing, but it’s also pretty common. If you follow these three steps, you might find that you’re done with your debt fairly early on in 2023. And that will give you one less thing to stress about. At the same time, use your experience as motivation to start saving money for next year’s holiday season. That way, you won’t have to follow this three-step plan again.

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The quick answer? It’s definitely possible. 

For months on end, the Federal Reserve has been on a mission to fight inflation. To that end, it’s been implementing aggressive interest rate hikes that are driving up the cost of borrowing.

How does that help with inflation? One of the big reasons living costs are up is that the demand for goods exceeds the available supply. If it gets too expensive for consumers to borrow money, they’re apt to cut their spending to some degree, thereby narrowing that supply-demand gap.

Right now, anyone looking to lock in a personal loan, auto loan, or home equity loan is generally looking at paying more interest than they would have a year ago. And credit card interest rates, which are high to begin with, are also up.

That’s the bad news. The good news, though, is that the Fed’s recent string of rate hikes has made it so banks are paying more generously. These days, you’re apt to score a higher interest rate in a savings account than you would have at the start of the year. And CD rates are up as well.

But are savings account rates done climbing? Or will banks pay even more interest in 2023?

There may be even more upside for savers

Right now, most high-yield savings accounts are paying between 3% and 3.6% interest. But if the Fed keeps implementing interest rate hikes, those figures could climb in the new year.

In fact, at one point, the Fed predicted that interest rates on the best high-yield online savings accounts could reach between 4.77% and 5.83% in 2023. That’s a sizable jump from where rates are sitting today.

Now before you get too excited, do realize it’s possible that savings account rates won’t rise that much in the new year. But could more banks start paying interest in the 4% range? Absolutely.

Should you put more money into savings?

It’s a great idea to have plenty of cash reserves available for emergencies. And now, you can earn more interest on your emergency fund than you did in the past.

That said, once your emergency fund is fully loaded and even padded, you may not want to stick too much extra money into savings. The reason? While earning somewhere in the ballpark of 3% or even 5% on your money might seem appealing, if you invest your money in a brokerage account, you might snag two to three times that return.

Of course, investing your money means taking some risk. But if you’re saving for a far-off goal, like retirement, you want your money to be able to outpace inflation.

Generally speaking, a savings account rate of 4% or 5% allows you to do that. But given the way inflation has surged this year, you may be better off snagging a higher return on your money.

All told, it’s not a bad idea to put more cash into your savings, especially if rates keep climbing. Just be mindful of not overfunding your savings, tempting as it may be to do so.

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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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If you’re thinking about buying an electric vehicle, you need to read this. 

On Aug. 16, 2022, President Biden signed the Inflation Reduction Act into law. Among other things, this law created a new tax credit for electric vehicles. The tax credit is worth as much as $7,500 but you must meet certain requirements in order to be eligible for it.

Before you drain your bank account or apply for a car loan to buy an electric car in order to benefit from generous tax breaks, you’ll want to ask a few key questions in order to make sure you qualify for the savings.

How much money do you make?

Starting in 2023, there are caps on the amount of money you can make in order to qualify for the electric vehicle tax credit. You can claim the credit if you are a single tax filer with under $150,000 in earnings or if you claim married filing jointly status on your tax return, you can claim the credit with an income up to $300,000.

The Inflation Reduction Act also created a second tax credit for used electric vehicles, although the maximum value of this credit is $4,000 or 30% of the total cost of the vehicle. If you want to earn the credit for the purchase of a used car, your income will need to be under $70,000 as a single filer or $15,000 as a married joint filer. The income test applies to either the current or prior year (whichever is lower) and looks at your modified adjusted gross income.

How much do you pay in taxes?

The tax credit for electric vehicles isn’t refundable. As a result, it can reduce your tax bill down to $0 but not to less than that. So unless you pay at least $7,500 (or $4,000) in federal taxes, you won’t be able to claim the full value of the credit.

This means the credit is most valuable to higher earners who actually pay a substantial amount of taxes rather than to lower income people who may have lower IRS bills or even get money back.

Does your vehicle qualify?

There are some pretty strict requirements that must be followed in order for your vehicle to actually qualify you for these credits. Here are some of the rules:

Your vehicle must be assembled in North AmericaThe maximum price of the electric SUV, van or truck you are buying must not exceed $80,000 and the maximum price of an electric car you’re buying must not exceed $55,000Starting late in 2023 and 2023, the components and minerals of the car battery must come from a country that is involved in a free trader agreement with the U.S.

If you are not sure if a vehicle that you are interested in will qualify, this VIN decoder will help you to see where the vehicle is manufactured. You can also check out a complete list of qualifying vehicles on the Department of Energy website.

Be sure to check the fine print carefully and confirm with your dealership and/or your accountant if a credit qualifies because you don’t want to buy a car expecting a tax break, only to find an issue that prevents you from claiming it.

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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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