Money Management

It could give you a lot more flexibility. 

One of the trickiest things about renovating a home is figuring out how much it will cost. That’s because there are so many different variables to consider.

First, there’s the cost of materials. You might budget a certain amount for new tiles or cabinets only to run into supply chain issues that force you to choose another option that’s far more expensive.

Then there’s labor to think about. You might assume you’ll be able to tackle certain tasks yourself only to get in over your head. And at that point, you might need to pay more to bring in a professional or otherwise risk damaging your home and injuring yourself.

Even if you ditch the DIY routine and decide to completely outsource a home renovation from the start, you might still end up having to spend more than what your contractor estimates. After all, it’s called an estimate, not a guaranteed bill, for a reason.

That’s why it’s so important to choose the right borrowing option when you’re financing a home renovation. And in that regard, a home equity line of credit, or HELOC, could be your best bet.

When you need flexibility

In Angi’s most recent State of Home Spending report, 23% of homeowners who did renovations this year went over budget by under 20%, while 8% of homeowners who renovated went over by 20% or more. If you take out a home equity or personal loan to cover renovations and your costs come in higher than anticipated, you could end up in a tough spot. That’s why using a HELOC could make more sense.

A personal or home equity loan requires you to borrow a lump sum of money upfront. A HELOC gives you access to a line of credit you can draw from as needed over a preset period of time — sometimes up to 10 years.

So, let’s say you estimate the cost of an upcoming renovation at $10,000, only it winds up costing $12,000. If you commit to a $10,000 personal or home equity loan, you’ll be out of luck, or you’ll need to scramble to borrow an extra $2,000 after signing your original loan.

If you take out a $15,000 HELOC, on the other hand, you’ll have the option to borrow the full $12,000 you need. You can then leave the remaining $3,000 alone so you’re not racking up interest on money you don’t need for the project.

Make your renovations less stressful

Renovating a home isn’t easy. It can be a time-consuming process that upends your life, especially if you’re doing something major, like a kitchen remodel.

That’s why it pays to consider a HELOC as your optimal financing option. That way, you won’t have to worry about not having enough funds to complete your project if your costs throw you for a loop. Instead, you’ll be able to focus on finishing the work as quickly as possible so you can enjoy your updated home and get back to your regular life.

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The “I Will Teach You To Be Rich” author highly recommends them, but not everyone is in agreement. 

Most of us have probably heard about how important investing is. The stock market is arguably the most proven way to build wealth, so it’s a great place to grow your retirement savings. But this doesn’t mean you need to pick stocks yourself, and in fact, there are much simpler options available.

Financial advisor Ramit Sethi usually advises people to take the simple option. For that reason, his investment of choice is target-date funds, or TDFs for short. He even says that he recommends them to his family. Here’s why he likes them.

How target-date funds make it easy for investors

Building an investment portfolio from scratch is a time-consuming process. It takes about 20 to 30 stocks to have a diversified portfolio, which is when you’re not too reliant on any single company. In addition to finding stocks, you’ll also need to manage your portfolio by deciding when to sell investments and adjust your asset allocation. That could be a lot of work, especially if you’re new to investing.

A target-date fund is an investment that does all that work for you. This type of fund is built around a specific retirement year, and it designs a portfolio for you based on when you want to retire. For example, if you want to retire in 2045, you could invest in a 2045 target-date fund.

These funds handle asset allocation for you. When you’re decades away from retirement, a target-date fund will invest heavily in stocks, since they offer more growth potential. Your portfolio will gradually transition to more conservative investments, like bonds, as your selected retirement year gets closer.

When you invest in a target-date retirement fund, all you need to do is transfer money to it. Most good stock brokers will also let you set up recurring transfers, so you can contribute automatically. You get a diversified portfolio that will have you on track to retire when you want, with zero work required on your part.

The argument against target-date funds

While Sethi is a fan of target-date funds, there are also those who feel this type of investment isn’t the best option. There are two downsides people typically bring up: expense ratios and suboptimal returns.

An expense ratio is the fee you pay for an investment fund. To be honest, this isn’t a serious issue. Although target-date funds are known for having somewhat high expense ratios, these have decreased in recent years, and there are plenty of low-fee options available.

Suboptimal returns are more of a problem, particularly for retirees. Target-date funds generally get very conservative in retirement, which limits growth. A more even split between stocks and bonds offers greater growth while still providing plenty of security.

Some also argue that target-date funds aren’t ideal for young investors. Target-date funds invest heavily in stocks early on, but they also invest in bonds. If you’re still in your 20s or 30s, you could go all-in on stocks and rebalance your portfolio later. There are plenty of exchange-traded funds (ETFs) and mutual funds that only invest in stocks. Your portfolio will be more volatile, but it could also grow more.

Is a target-date fund right for you?

A target-date fund is a great choice for most investors. While they may not fit every investor’s preferences, they don’t have any glaring flaws. If you’re looking for a retirement plan you can set up, automate your contributions, and leave alone, then target-date funds will fit your needs.

One thing to keep in mind with a target-date fund is that it’s not ideal if you plan to make other investments on the side. It’s designed to serve as your only investment, and the portfolio it builds is based on that assumption. If you add other investments to the mix, then your portfolio won’t be balanced as intended.

If you want more flexibility and control, there are other ways to invest. But Ramit Sethi is correct that target-date funds are one of the best options available for straightforward retirement saving.

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It was bound to happen eventually. 

When you have a child who’s several years older than their siblings, your younger kids are apt to pick up on certain truths before you’re ready for it. For example, my neighbor recently spent hours trying to convince her 9-year-old that Santa is, in fact, real after her 12-year-old decided to bust that myth and ruin Christmas for everyone (or so she says).

Meanwhile, in my household, there have been plenty of instances where my oldest child’s teachings, so to speak, were less than welcome. I won’t get into the details, but let’s just say that my 7-year-old daughters are more familiar with certain inappropriate language than they need to be at their age. And that’s just one example.

Another example happened last month. My daughter lost two of her teeth in short order, and that warranted two separate visits from the tooth fairy.

Now in our house, the tooth fairy is kind of cheap when it comes to giving out actual money because she knows her daughters are likely to lose physical bills. So instead of sticking a $10 bill under my daughter’s pillow, what I’ll usually do instead is give her a $1 bill and a coupon for a local treat in town, whether it’s ice cream, cupcakes, or cookies.

When my daughter received her last tooth fairy gift, she was totally thrilled with it and proceeded to show off her money and coupon to her older brother. And at that point, he decided to truth bomb her by explaining that the tooth fairy is none other than her mom. He even pointed out that the handwriting on the coupon could easily be matched to mine, which sealed the deal for my daughter.

Now I could’ve gotten really annoyed with my son for spoiling the tooth fairy for a 7-year-old. But the way he explained it was enough to make me grateful he took it upon himself to bust that myth.

An important lesson learned

My son didn’t ruin the tooth fairy for my daughter to be a jerk. Rather, he’s the sort of kid who has never bought into that sort of thing, and he likes others to be in the know.

But also, the way he explained things to my daughter made me appreciate his little truth bomb. That’s because he said something along the lines of, “First of all, how could some magical fairy show up here at night without anyone hearing someone break into the house? It would set off the dog and make him bark up a storm. And also, have you ever noticed that the tooth fairy’s gifts all require Mom to spend money? So wouldn’t it make sense that Mom is the tooth fairy, because she’s the one who’s on the hook for making good on those coupons?”

Upon hearing this, my daughter actually didn’t get upset, but rather, said something along the lines of, “You’re right. Everything we get is from Mom and Dad, so it makes sense that they’d give us everything the tooth fairy is supposed to.”

It’s all about appreciation

No parent wants to raise spoiled children. Now that my daughter knows I’m the tooth fairy, she’s apt to be appreciative of the fact that I’m the person who takes the time to write her up coupons, and that I’m the one who swipes her credit card to pay for her ice cream/cupcakes/cookies when she goes to redeem them.

Now to be clear, there are still some things I wish my son would keep to himself and not share with his younger sisters. But I’m actually glad that he wrecked the tooth fairy concept and taught my daughter to appreciate the fact that everything she has comes from her parents.

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New rules are being introduced that could give savers more flexibility with their retirement savings. 

There’s a reason workers are encouraged to save for both emergencies and retirement. In the case of the former, you never know when life might throw you a curveball. And without a chunk of cash in your savings account, you might land in debt if you have an unplanned expense.

Meanwhile, you need retirement savings because Social Security most likely won’t pay you a high enough monthly benefit to cover your living costs in full. And without a nest egg, you might struggle financially as a senior.

Now many people who save for retirement opt to do so in tax-advantaged accounts. With a traditional IRA account or 401(k) plan, you get a tax break on the funds you contribute. You also get to enjoy tax-deferred growth in your account, whereas with a regular brokerage account, you’re on the hook for capital gains taxes every year.

But on the flip side, IRAs and 401(k)s bind you to certain rules. One of them is that you’re not allowed to take withdrawals prior to age 59 1/2. Doing so will typically result in a 10% early withdrawal penalty, unless you happen to qualify for an exception. And unfortunately, withdrawals to cover emergency expenses don’t get you out of being assessed that penalty.

Lawmakers may be looking to change that, though. And if a new set of rules passes, you may be able to take a penalty-free IRA withdrawal if an unplanned bill pops up and you don’t have enough money in your savings account to cover it.

The rules could change

This week, lawmakers are looking to pass a $1.7 trillion spending bill, and part of that package is a set of new retirement rules known as Secure 2.0. One provision within Secure 2.0 is the option for savers to take an emergency withdrawal of up to $1,000 from an IRA or 401(k) without being hit with a penalty.

Now, on the one hand, that $1,000 limit may be restrictive in situations where a large bill pops up out of the blue. But still, the option to access $1,000 penalty-free is better than not having penalty-free access for emergency withdrawals at all. So if Secure 2.0 passes as part of that larger bill, savers should get more flexibility in the near future.

You still need an emergency fund

If Secure 2.0 becomes law, you’ll have more options for raiding your IRA or 401(k) in a pinch. But it’s still a good idea to build yourself a separate emergency fund.

For one thing, a $1,000 withdrawal may not go very far if you’re looking at, say, a $10,000 home repair bill. And also, the whole point of funding an IRA is to have money available during retirement. So you don’t want to keep tapping your savings prematurely, because if you do, you could end up with a shortfall on your hands once your career wraps up.

But still, giving workers limited penalty-free access to retirement savings for emergency withdrawals is a positive thing. And if this change becomes official, it could spare a lot of people a world of expensive debt.

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Image source: Getty Images
What Happened: BlockFi, the defunct crypto lender that filed for bankruptcy at the end of November, is taking steps to return customer funds. According to an email it sent users, the company filed a motion with the U.S. Bankruptcy Court asking for authority to let BlockFi Wallet account holders withdraw their assets. The company plans to make the same move in front of the Supreme Court of Bermuda for non-U.S. wallet holders.“While filing this motion is an initial step, we will continue to work towards solutions that maximize value for all clients and other stakeholders and will share updates as quickly as practicable,” the email to users said.
Discover: Best places to buy bitcoinMore: Check out our updated list of best crypto apps including one offer with a $100 crypto bonus
That’s not all. Some users attempted to withdraw funds before BlockFi officially froze their accounts. Those assets didn’t leave the platform but aren’t reflected in users’ balances — they’re currently in limbo. BlockFi wants to fix this. If the court approves its application, BlockFi could update users’ balances which would then make it easier for the cryptocurrency platform to honor future withdrawals.So What: One of the big challenges for crypto investors is the lack of investor protection. Money held in a bank is protected against failure by FDIC insurance, but this does not apply to a lot of crypto assets. Some top crypto exchanges say funds held in U.S. dollars — not crypto assets — are covered by FDIC insurance. It isn’t clear how the money people deposited on crypto platforms will be handled in the different bankruptcy cases.BlockFi is sending a clear message that the funds held in its BlockFi wallets belong to its clients and should not get pulled into any bankruptcy proceedings. The move sets BlockFi apart from other platforms (such as Celsius and FTX) that have also filed for bankruptcy this year. If the court gives it the green light, crypto held in BlockFi wallets could be released directly to users. Now What: If you’re a BlockFi customer, pay attention to emails you receive from the company and don’t panic if you see changes to your account balance. Bear in mind that the move only applies to funds held in BlockFi wallets. The motion does not apply to funds held in BlockFi Interest Accounts. Key dates to watch are:Jan. 9, 2023: U.S. Bankruptcy Court will hear the motionJan. 13, 2023: Supreme Court of Bermuda hearingIf you’re a crypto investor with funds held on any exchange, don’t assume your assets are safe. It’s worth taking time to learn how non-custodial crypto wallets work. They won’t be right for everybody, but they do put your digital assets firmly under your control. Importantly, non-custodial crypto wallets mean funds won’t be impacted by any further crypto exchange failures.
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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.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: BlockFi, the defunct crypto lender that filed for bankruptcy at the end of November, is taking steps to return customer funds. According to an email it sent users, the company filed a motion with the U.S. Bankruptcy Court asking for authority to let BlockFi Wallet account holders withdraw their assets. The company plans to make the same move in front of the Supreme Court of Bermuda for non-U.S. wallet holders.

“While filing this motion is an initial step, we will continue to work towards solutions that maximize value for all clients and other stakeholders and will share updates as quickly as practicable,” the email to users said.

That’s not all. Some users attempted to withdraw funds before BlockFi officially froze their accounts. Those assets didn’t leave the platform but aren’t reflected in users’ balances — they’re currently in limbo. BlockFi wants to fix this. If the court approves its application, BlockFi could update users’ balances which would then make it easier for the cryptocurrency platform to honor future withdrawals.

So What: One of the big challenges for crypto investors is the lack of investor protection. Money held in a bank is protected against failure by FDIC insurance, but this does not apply to a lot of crypto assets. Some top crypto exchanges say funds held in U.S. dollars — not crypto assets — are covered by FDIC insurance. It isn’t clear how the money people deposited on crypto platforms will be handled in the different bankruptcy cases.

BlockFi is sending a clear message that the funds held in its BlockFi wallets belong to its clients and should not get pulled into any bankruptcy proceedings. The move sets BlockFi apart from other platforms (such as Celsius and FTX) that have also filed for bankruptcy this year. If the court gives it the green light, crypto held in BlockFi wallets could be released directly to users.

Now What: If you’re a BlockFi customer, pay attention to emails you receive from the company and don’t panic if you see changes to your account balance. Bear in mind that the move only applies to funds held in BlockFi wallets. The motion does not apply to funds held in BlockFi Interest Accounts. Key dates to watch are:

Jan. 9, 2023: U.S. Bankruptcy Court will hear the motionJan. 13, 2023: Supreme Court of Bermuda hearing

If you’re a crypto investor with funds held on any exchange, don’t assume your assets are safe. It’s worth taking time to learn how non-custodial crypto wallets work. They won’t be right for everybody, but they do put your digital assets firmly under your control. Importantly, non-custodial crypto wallets mean funds won’t be impacted by any further crypto exchange failures.

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We’ve vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class picks pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with The Ascent’s best 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.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.

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Two years ago, I was one of them. 

Inflation sucks. It makes everything more expensive, from gas prices to the cost of groceries. To combat higher prices, many adults are moving in with family members. It’s a trend that has been growing for decades among working Americans, according to Pew Research.

There are many reasons to live in a multi-generational household. But the No. 1 reason cited by those in multi-generational households is saving money.

You can save money

To save money, as many as one in three adults choose to live with older family members, according to Pew. Among 25-to-29-year-old men, that number jumps to two in five adults. I moved in with my parents at the start of the pandemic, when I graduated college. The reason: to save money.

It worked. I saved thousands on housing costs. And I put my free time toward building my writing portfolio. Thanks to my parents, now I can support myself by freelance writing.

In these situations, all the family members who are living together can benefit financially. Here’s how:

They get to split housing costs.They can share a vehicle and split car insurance bills.They’re able to reduce grocery fees by shopping in bulk at stores like Costco.

Money saved can be put toward a move-out fund or long-term savings in a high-yield savings account.

You can do more with your time

Despite these financial benefits, only 40% of adults report living with older family members to save money. Other reasons include the following:

To care for a child (12%)To care for an older family member (25%)Because it’s an arrangement they’ve always had (28%)

Having family members help with healthcare saves time — two pairs of hands are better than one. Sometimes, caregivers can even get paid for caring for a family member.

There’s also a time benefit to living at home with family members. Moving out and figuring out how to pay for living expenses takes effort.

Should you live with your family?

Maybe. Adult children are more likely than parents to say that living with family actually saves them money. And living with family can be stressful — it’s important to establish boundaries so all parties feel as if they’re in control of their living situations.

Before making the decision, consider the following:

Make sure your family is on the same page.Estimate how much money you’d need to save for retirement.Calculate how much money you could save by living with family.

Will it be worth it?

For me, living with the family was worth it. Despite the stress, it gave me the opportunity to achieve financial independence. I ended up moving out after a year or so, but some folks might decide to stay longer, and that’s fine — it could end up saving them thousands in the long run.

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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.Cole Tretheway has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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