Money Management

Cash can really come in handy sometimes. 

We’re using less and less cash these days. Pew Research found recently that 41% of Americans say that none of their purchases in a given week are made in cash. This is up from 29% just four years ago in 2018. Cash-carrying habits also vary by age, with 71% of Americans over age 50 trying to always keep cash on hand, just in case, and only 45% of those ages 18-49 saying the same.

I’ve been making more of an effort lately to keep cash around. I had fallen away from it the last few years, but as it turns out, there are some situations that cash is really good for. To that end, I’ve promised myself that I will periodically visit an ATM (one that’s in-network for my bank, so I can avoid paying fees) and replenish my supply of twenties. Here’s why you should consider keeping some cash on hand.

1. Tipping

People who work in the service industries, like hospitality, food service, and personal services, really like cash tips. It’s much easier for them than having to wait on a final credit card transaction summary at the end of a busy work shift, and if you hand your hair stylist a crisp $5 or $10, you can be sure they’ll receive it (and will appreciate the gesture).

2. Making a small purchase

Small purchases are tailor-made for cash — such as paying for a jukebox song, ice cream and other food truck treats, or a snack from a vending machine. Plus, some small businesses like neighborhood convenience stores have a minimum purchase requirement to use a credit card to make the credit processing fees they’re assessed worthwhile. If you don’t want to spend $5 or $10 to use your credit card, cash will definitely come in handy.

3. Cash-only businesses

Speaking of small businesses, you’ll find some that are cash-only establishments. There are restaurants or small shops that don’t want to pay for credit card processing at all and want the ease of cash. If you hope to frequent them, you’ll need cash.

4. Emergencies and tech failures

Need a cab ride in the middle of the night? That cash behind your credit cards could save you if the cab doesn’t take plastic. In general, it’s a good idea to travel with a little cash at the ready for just such an emergency situation. And sometimes we encounter technology failures. If you’re at the grocery store and their credit-processing system is down, you may have to abandon your cart of groceries if you don’t have the cash on hand to cover your bill.

5. Quickly paying a restaurant or bar tab

As a person who hates wasting time, nothing drives me up the wall quite like waiting around for wait staff to bring me my check in a restaurant or a bar. Cash makes it possible for a diner in a hurry (if you have a good idea of what the total will be) by putting some money on the table and leaving.

6. Tolls and parking

While many states and tolling situations have shifted to electronic transponders like EZPass, not all of them have. For times when you need to pay tolls in cash, having bills or change in your wallet will come in handy. In a similar vein, if you find yourself paying to park often, cash can really be helpful here too. On multiple occasions, I’ve found broken credit card readers at parking garages and have been happy to have my little stash of cash.

7. Yard sales

If you enjoy yard sale shopping, you’re really doing yourself a disservice if you don’t carry cash. In fact, you may be able to score a better bargain by offering cash. After all, if all you have is a $20 bill and the yard sale proprietor wants $25 for that toaster, they may be willing to cut you a deal to get rid of it sooner.

8. Easy gifting

Cash makes a great gift in most situations and is very easy to stick inside a birthday or holiday card. Cash is also a great way to say thanks. My downstairs neighbors occasionally check up on my cats if I’m away, so I leave them some cash in a card as a thank-you for the favor.

As we submerge ourselves (and our wallets) in the digital world, it can be easy to forget that once, we all relied on cash. I don’t know about you, but being a kid and getting a birthday card with $10 cash inside felt like becoming instantly rich.

It’s important to note that cash doesn’t come with the kind of fraud protections and security that credit and even debit cards do. If someone steals your cash, you’re likely out of luck when it comes to getting it back, so make a reasoned estimate of how much you should keep in your wallet and/or at your home at any given time.

And of course, if you’re keeping large sums of cash on hand, not only are you missing out on the security of plastic, but you’re also losing the opportunity for that money to grow in your savings account or other interest-earning account. That said, as you can see, there are some parts of life where cash is still king.

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Some may consider homelessness an eyesore. For those living on the streets, it can mean the difference between life and death. 

Homelessness has long been a problem in American society. According to World Population Review, there are more than half a million homeless people in the U.S. According to a White House announcement released on Dec.19, the Biden administration has a plan for reducing homelessness by at least 25% over the next two years. In short, the goal is to help more than 100,000 Americans currently living on the streets, in abandoned buildings, or seeking shelter to have a place to call their own.

How the American Rescue Plan plays a role

And here’s where the American Rescue Plan comes into play. The American Rescue Plan, which passed in 2021 shortly after Biden became president, provided tens of billions of dollars to Americans in need of rental assistance. Now, the federal government wants to release additional American Rescue Plan funds to create affordable housing on the state level and help local leaders cut down on homelessness.

To be clear, it will need to be a joint effort between the federal government, state and local leaders, faith communities, businesses, philanthropic sectors, and nonprofit organizations to make the administration’s goal a reality.

The problem is real

No matter where you live, there’s a good chance you’ve seen an uptick in homelessness. In addition to people sleeping under bridges and panhandling for money to get by, the homeless have little to no access to healthcare. In turn, this leads to higher rates of illness, including asthma, tuberculosis, hypertension, HIV/AIDS, and diabetes. According to the National Health Care for the Homeless Council, on average, homeless people die 12 years sooner than the general population.

Even if the push gets 25% of the homeless population off the streets, it ends up benefiting the public as a whole.

Support, services, and the best chance for success

According to the president, “My plan offers a roadmap for not only getting people into housing but also ensuring that they have access to the support, services, and income that allow them to thrive. It is a plan that is grounded in the best evidence and aims to improve equity and strengthen collaboration at all levels.”

It’s tough to argue the fact that homelessness is a problem or to complain that American Rescue Plan recipients might tuck any assistance they receive away into a bank account. These are, literally, the most desperate among us. As we continue to celebrate this holiday season, perhaps we can pull together long enough to wish this endeavor success.

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Traditional lending is not the only way to buy a home.  

It’s easy to understand the frustration. You desperately want (or need) to buy a home, but the interest rate is climbing, home prices remain elevated, inventory is limited, and it seems as though the fates have conspired against you. As a couple who finds ourselves moving frequently, my husband and I have been in your position. Over the years, we’ve purchased homes in several atypical ways. Here, I’ll tell you about one we’ve used and one that has worked well for other home buyers.

1. Owner financing

Owner financing — also known as “seller financing” and a slew of other names — allows buyers to buy a home by paying the current homeowner rather than a traditional mortgage lender.

At this point, I would normally write that the monthly payment is amortized over 30 years, but there’s a balloon payment due after five years. In other words, the buyer makes payments to the previous owner for five years, then at the five-year mark, they refinance the house through a traditional lender and pay the former owner off in full. That’s how both of our owner-financed deals worked for us.

According to Marco Bario, a real estate note investor and owner of Porch Swing Funding in Los Angeles, says that’s no longer the case. Bario is a fan of owner financing, saying it “helps people get into homes and strengthens communities.”

Bario says a properly executed owner-financed deal benefits both the seller and the buyer. Here’s how.

Everything is negotiable

The buyer and seller are free to sit down and hammer out the details, including interest rate, loan term, and how large the down payment will be.

Let’s say a home seller is 15 years away from retirement. They’re already investing in the market and are now looking for a way to earn guaranteed interest. They look around and see that interest rates remain at 2% to 4% on most guaranteed financial products, like money market accounts (MMAs) and certificates of deposit (CDs). They decide that self-financing the sale of their home will bring in a higher fixed rate.

The potential buyer agrees to pay a 5% down payment and an interest rate of 7% for 15 years. They calculate the monthly payments, including principal, interest, property taxes, and homeowners insurance. The payment fits within the buyer’s budget, and both parties are confident that the buyer will be able to keep up with the payments.

Both parties win. The seller receives a higher interest rate than they would otherwise earn, and the buyer owns the home free and clear in 15 years.

To be clear: The term does not necessarily have to be 15 years. The two parties may agree on any length mortgage they choose. Or, they may do it the old-school way by agreeing that a balloon payment will be due in five years. It all depends on what works out best for each party.

Capital gains

Bario points out that owner-financing can make it easier for a seller with a great deal of equity in their home to pay capital gains taxes. Let’s say a single seller has a $300,000 gain in their home. According to the IRS, they may qualify to exclude up to $250,000 of that gain from their income. That leaves them with a tax bill on the remaining $50,000.

If they sold the home the traditional way and received the entire $300,000 at closing, their tax bill would be due at tax time. But because they’re receiving the proceeds from the home a little at a time, Bario says they will only pay capital gains on the portion of principal they receive in any given year. The fact that they’re not receiving the entirety of the proceeds at once can even keep the seller in a lower tax bracket.

2. Lease-option

Often confused with owner-financing, lease-option has a totally different set of rules. However, the details are negotiable.

In a nutshell, here’s how lease-option works:

Before a contract is signed, the homeowner and renter determine which party is responsible for upkeep and repairs to the property. Most agreements split the costs.The homeowner may require the tenant to pay an option fee of 2% to 7% of the home’s value to hold the option open.The homeowner and renter decide on how long the lease will last. At the end of that time, the renter must decide if they are going to buy the house.The renter pays a slightly higher rent than fair market value for a set number of years.The homeowner deposits part of each month’s rent into a special fund that goes toward the down payment.At the end of the lease, the renter either buys the home, signs another lease, or moves out.If the renter decides against buying the home, they lose the option fee as well as any funds deposited into the down payment fund.

Not to be confused with lease-purchase

Some homeowners prefer to sell their property through a lease-purchase agreement. Here’s how it works:

While many of the details are the same as a lease-option, a lease-purchase agreement requires the renter to purchase the home at the end of the lease.Before the initial contract is signed, the two parties either agree upon a price or agree upon a specific date to have a home appraisal conducted.If the renter decides to walk away from the deal at any point, the homeowner can sue them for breach of contract. It’s important to know which type of lease contract you’re offered before signing on the dotted line.

It’s a tough time out there for home buyers, but having alternative ways to purchase a home just might make it possible.

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Federal law currently has few financial protections for flight delays. 

Southwest Airlines is in the midst of what’s being described as a meltdown. In one week, it has had to cancel over 15,000 flights.

Winter storms hit airlines hard, affecting thousands of holiday flights. However, while most carriers have been able to get back on track, Southwest’s situation has gotten worse. On Wednesday, 86% of all canceled flights in the United States were operated by Southwest.

One potential cause is Southwest’s point-to-point model. Unlike most airlines, Southwest doesn’t have its planes return to central hubs between destinations. But Casey Murray, president of the Southwest Airlines Pilot Association, told NPR it’s because the airline is using outdated technology and procedures. With many travelers still stranded, lawmakers are speaking out about compensation for passengers.

Will U.S. lawmakers make airlines reimburse travelers for delays?

Right now, U.S. air passengers don’t have much in the way of legal protections. If a flight is delayed, airlines aren’t required to provide any financial compensation. Airlines also aren’t required to provide compensation if they cancel a flight and rebook passengers on another one.

There are a few situations where you can at least get a refund. If your flight is canceled and you decide to cancel your trip, then you’re entitled to a full refund. The U.S. Department of Transportation (DOT) also says you may be entitled to a refund for a significant delay. It hasn’t defined what a significant delay is, though, and instead decides this on a case-by-case basis.

Transportation Secretary Pete Buttigieg has pledged to hold Southwest accountable and make sure the carrier both pays for affected travelers’ expenses and refunds them. Senator Maria Cantwell released a statement where she said that “Consumers deserve strong protections, including an updated consumer refund rule.”

An updated refund rule would be a good start. But it’d be even better for travelers if lawmakers went a step further and required airlines to compensate passengers for flight issues. For an example of how this could work, we can look at the European Union (EU), where passengers receive substantial compensation for flight delays.

How flight delay compensation works abroad

When you’re used to U.S. air travel, the rules in Europe are a breath of fresh air. The 27 countries making up the EU have specific air passenger rights that airlines must follow. These rights apply to:

Flights within the EUFlights that arrive to the EU from outside it and that are operated by an EU airlineFlights that depart from the EU to a non-EU country

For example, a flight from France to Germany would qualify, because that’s within the EU. A flight from Italy to the United States would also qualify, because it’s departing from the EU. A flight from the United States to the EU would only qualify if you’re flying on an EU airline and not a U.S. carrier.

If your flight is delayed in the EU, you have the right to assistance, a return flight, and possibly reimbursement. The airline is required to reimburse you if you reach your final destination with a delay of three hours or more that’s not due to extraordinary circumstances. The compensation amount depends on the distance traveled:

Dealing with issues at the airport

Unfortunately, the United States is probably a long way from considering compensation for delayed passengers. That doesn’t mean you’re entirely out of luck, though.

There are certain situations where you have the right to a refund, even if you bought a nonrefundable ticket. If the airline cancels and rebooks your flight, and you’d prefer to cancel, you have the right to a refund. This is also the case if you want to cancel due to a significant flight delay. In these situations, if the airline doesn’t want to provide your refund, you can file a complaint with the DOT. Although, as mentioned earlier, the DOT decides if a delay is significant.

The major U.S. air carriers have made commitments for how they’ll help passengers if there’s a controllable delay or cancellation. An airline may provide meals, hotel accommodations, and ground transportation, depending on its policy in this regard. Information on the commitments airlines have made is available on the DOT’s airline customer service dashboard.

Last but not least, there are travel credit cards that have travel insurance. You typically need to purchase your airfare with your credit card for this type of protection to apply. This is a great way to get trip protection free of charge. If you don’t have any credit cards with this benefit, or you just want a more comprehensive policy, you can purchase a travel insurance policy before your trip.

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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.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool recommends Southwest Airlines. The Motley Fool has a disclosure policy.

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Sometimes, life circumstances lead to money moves you otherwise wouldn’t make. 

Paying cash when buying a home is not the smartest financial move. In fact, even opting for a mortgage loan with a short pay-off timeline usually doesn’t make sense.

There’s a few key reasons for that. First, it’s hard to get money out of your home, so tying up a bunch of cash in an illiquid investment isn’t a great idea. Second, mortgage interest is usually pretty affordable (even at today’s high rates), and can be tax deductible so it’s usually a better idea to get a mortgage and invest your cash in other things.

Even though I’ve repeatedly written about why it’s not a good idea to buy a home outright, I had to do exactly that last year. My husband and I needed to purchase a property and we had to pay cash for it. Here’s why that’s the case — and why I don’t regret my choice.

Paying cash allowed us to get a better deal on a property

The biggest reason why paying cash on a property made sense for us is because doing so allowed us to be competitive in a seller’s market without having to pay more than our home was worth.

My husband and I had to buy a home during the heart of the buying frenzy and properties were routinely selling for above asking price. We didn’t want to get into a bidding war. Because we were cash buyers, though, we were able to get a good deal on a home that people needed to sell quickly. Our sellers needed to be out of the house ASAP because they were having disputes with the HOA, so they accepted our all-cash offer with a very quick closing date even though they could have gotten more for the property had they waited.

Since we didn’t have to wait for a lender or worry about an appraisal, our cash purchase made us competitive buyers despite not being willing to overpay — and that was worth it to us.

Paying cash didn’t prevent us from making other investments

One of the biggest reasons not to pay cash for a property is because of the opportunity cost. But my husband and I did not have to give up on our other investments when we paid cash for our home. We used the proceeds we’d made from selling another house to buy it.

Since we still had plenty of other money invested and weren’t reducing our deposits into our brokerage account, I didn’t worry about putting my future security at risk (or tying up cash I might need) by buying the house with cash.

We don’t plan to stay in the house for the long term

Finally, the last reason I didn’t mind paying cash is because we don’t intend to stay in this home for more than a few years. It is a temporary one while we wait for the market to calm down and for a house we really want to come on the market at a price we’re willing to pay.

When we move into our next house, we have the option to get out of this property, get our money back, and make a choice about whether we want to get a mortgage. Since I wasn’t tying up cash forever, I felt better about the choice.

My situation shows that sometimes money rules have to be broken — and it can make sense to do so. The important thing is to look at the pros and cons and decide what’s the best option for your personal circumstance, rather than just following conventional wisdom in every case.

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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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Hooray, gift cards! 

Sifting through your holiday loot? I hope you received some gift cards, as they are one of the best holiday gifts for adults. If you did, it’s important to use them to their maximum benefit (and for your maximum enjoyment, whether that’s spending them on purchases you have to make anyway, or using them to buy yourself a fabulous present). To that end, be sure to follow these tips.

1. Decide if you can use the card

First things first! You’re going to want to make sure you can actually use the cards you received. If they’re for a retailer you don’t like, that stinks, but there’s still a way forward — keep reading. If you live in a different part of the country than your loved ones, you might have gift cards for retailers or restaurants that don’t have any locations in your area. While this is also a bummer, it’s best to find out sooner rather than later, so do a quick Google search if you don’t know off-hand whether a card is usable.

One option you might have is to use the card online and have purchases shipped to you (and hey, this way you’ll avoid the flood of in-person shoppers using their gift cards). If it turns out that the gift card is for something that must be enjoyed in person (like a movie theater) and you have no locations nearby, it’s time to sell it or trade it.

2. Sell or trade it

Some enterprising companies have gotten into the gift card resale business; one such company is called CardCash. I used it a few years ago to get 80% value back from a gift card I couldn’t use. It was very easy to deal with, and I chose the cash back option (although I could have also traded my card for another one). But there are other ways to find a new home for that gift card. Trade it with a friend or relative for something you like better, or offer to sell it directly to them. They will likely want to confirm the full value of the card (and I don’t recommend being dishonest about this).

3. Deploy it immediately if you can use it

All set with the gift cards you want to keep? Now you can spring into action by popping it off the cardboard backing it might have come stuck to, activating it (if needed), and adding it to your wallet so it’s ready to go the next time you’re in that store. I recommend putting it in a part of your wallet where you’ll see it. Nothing worse than going shopping then not noticing until later that you could’ve saved some of your own money by using a gift card.

If it’s a gift card for an online retailer (in which case, it might be in email form, rather than a physical card), it’s best to go ahead and add it to your account. Amazon in particular makes this process very easy; you’ll just need to type (or copy and paste) in the code for the card and it’ll automatically become your default payment method for future purchases.

4. Add leftovers to your Amazon account

Speaking of your Amazon account, if you have a Visa or Mastercard gift card (rather than one tied to a particular retailer) with a few dollars left on it, you can convert it to an Amazon gift card via Amazon Reload. You’ll need to know how much is left on the card, and can add it as a payment method to your Amazon account and add that exact amount on Amazon Reload, which will convert it to Amazon gift card dollars. Pretty cool! Just make sure you then delete it as a payment method after this (and toss out the card once it’s empty).

5. Pay attention to expiration dates

One last tip for spending your gift cards wisely: Watch those expiration dates. Some gift cards come with fees if they go unused for a certain period of time (like 12 months) and could expire altogether eventually. So it’s best not to let a gift card get lost in your wallet or purse, lest you lose that money.

Gift cards are great. They let you give your checking account a break and still cover your everyday costs. Plus, they offer the opportunity to buy a pretty sweet present for yourself, all thanks to the thoughtful person you got the card from.

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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.John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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, Amazon.com, Mastercard, and Visa. The Motley Fool has a disclosure policy.

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