Money Management

What if the best money move after Fed rate cuts is to do nothing? See why you and your personal finances might want to stick to the plan into 2025. [[{“value”:”

The recent Federal Reserve rate cut of 0.50% has been big news in the financial world — but what should you do with your money now? Many people might feel tempted to make big money moves now that interest rates are 0.50% lower. Should you open a certificate of deposit (CD), move cash out of your savings account, apply for a mortgage, or buy stocks?

Here’s the biggest money move you should make after this (or any) interest rate cut: Stay the course. That’s right — stick to your plan. Don’t make any big sudden moves with your money.

Let’s look at a few reasons why the immediate aftermath of a Fed rate cut might not be the best time to make big changes in your personal finances.

Savings accounts vs. CDs — how much does it matter?

One of the first impacts of Fed rate cuts is likely to be seen in your savings accounts and CDs. Lower interest rates mean that the best CDs, savings accounts, and money market accounts are likely to see lower APYs — maybe 4.75% APY or lower, instead of the 5.00% to 5.25% APYs that were being offered before the Fed’s 0.50% rate cut.

Does this mean you should move money out of a savings account and into a CD? For most people, the answer is probably no. Unless you have lots of money, like tens of thousands or hundreds of thousands of dollars, that extra 0.50% APY isn’t going to make much difference. For every $1,000 of savings, an extra 0.50% APY gives you an extra $5 of yield per year.

But most Americans don’t have $100,000 to put into a CD. The typical American’s bank account balance (including checking and savings) is only $8,000. If your emergency fund is in a savings account, leave it there.

Don’t worry about chasing after a slightly higher yield on a CD that might only amount to pennies per year. Even if you earn 0.50% less on your savings account after the Fed rate cut, your money is safe, liquid, and accessible anytime — with no risk of early withdrawal penalties like you’d get from a CD.

Mortgage rates could go down…or not

When the Fed cuts interest rates, that means mortgages will get cheaper, too, right? Wrong. In fact, 30-year fixed rate mortgages (the kind of mortgage that most home buyers typically should want to get) tend to follow the yield on 10-year Treasury bonds. But after the Fed announced its 0.50% rate cut on Sept. 18, the yield on 10-year Treasuries actually went up — meaning mortgages could become slightly more expensive in the short term after this Fed rate cut.

Mortgage rates depend on a large range of complex factors and decisions by banks, investors, and mortgage lenders, not just the federal funds rate. If the Fed keeps cutting interest rates throughout 2024 and into 2025 (as it has forecast), and if the economic news is favorable in other ways, the 10-year Treasury yield could come down and mortgage rates could get cheaper.

The takeaway: Don’t assume that right now is the best time, only time, or last chance to get a cheap mortgage. If right now is the right time in your life to buy a home or refinance an existing mortgage, you might want to start looking into the mortgage application process and checking your credit score. But mortgage rates could go down (or up) in the next few months.

The stock market could go up…or down

One bit of conventional wisdom about Fed rate cuts is that they tend to be good for the stock market. But this isn’t always true; sometimes the S&P 500 index goes up after Fed rate cuts, and sometimes it goes down.

Fed rate cuts are just one piece of information about the economy that investors use to make decisions about valuing, buying, and selling stocks. And while the Fed is important and powerful, its decisions don’t control everything. Instead of trying to out-guess the global economy and time the market based on Fed decisions, most everyday investors are likely going to be better off just sticking to their investment plans.

Keep buying stocks in a way that’s appropriate to your time horizon and risk tolerance. Keep making your 401(k) contributions at work. Keep putting money into your traditional IRA, Roth IRA, or brokerage account on a regular basis to dollar-cost average your investments over time. This will keep you investing consistently for the long term, through the ups and downs of the stock market.

By this time next year, the S&P 500 index could go up by 10% (or more) or it could go down by 10% (or more). No one knows! Instead of asking, “Is now the right time to buy stocks?” you should ask yourself, “How many more years can I let my investments grow?” Most investors who are saving for retirement that’s still 10 to 20 years away (or more) should be mostly invested in a diversified portfolio of stocks and ETFs.

Remember: During the past 30 years, throughout all kinds of crashes, recessions, fads, and global crises, the S&P 500 index has earned a compound average annual growth rate of 10.7% per year. But you won’t earn those great returns by timing the market and jumping in and out of investments.

Bottom line

Don’t overreact with your money after a Fed rate cut. Keep your emergency savings in a savings account. Don’t be in a rush to get a mortgage. Keep buying stocks and stay invested for the long haul.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Mortgage rates are starting to fall, but that doesn’t mean it’s a good time to refinance. Find out why I’d wait a little longer. [[{“value”:”

Buying a home has been pretty tough these last few years. The pandemic led to an inventory shortage, which in turn raised prices. Higher living costs made it more difficult to save up for a down payment, and mortgage interest rates went up, too.

But things are finally starting to turn around. The Federal Reserve recently cut the federal funds rate by 50 basis points (0.50%). This usually triggers banks to start lowering their rates as well, including mortgage rates. But if you’re waiting to refinance, I would still hold on a while longer.

More rate cuts are coming

The Federal Reserve’s September rate cut was the first one since 2020. But many see this as just the beginning of a rate-cutting cycle that’s likely to continue into next year. Some experts believe the Fed will cut rates once more in 2024, either at its November or December meeting.

Refinancing is something you want to do infrequently because you’ll have to pay closing costs again and do a bunch of boring paperwork. So it makes sense to wait a little while when you know rates are likely to drop further.

It’s impossible to say when this rate-cutting cycle will end. But it’s reasonable to expect that you may be able to snag an even more affordable rate if you wait until 2025 to refinance your mortgage.

How to get the best deal when refinancing your mortgage

To score the best deal on your mortgage refinance, compare offers from a few lenders before deciding which to work with. It’s best to get your applications in within about 30 days of each other if you can.

Lenders do hard inquiries on your credit report when you apply for a new loan or credit card. This can drop your credit score by a few points. But generally, all loan inquiries that happen within about a month are considered a single inquiry to account for normal credit-shopping behavior.

In the meantime, take other steps to increase your credit score to secure an even lower interest rate. You can do this by making regular, on-time payments whenever possible, paying down other debt, and resolving any errors that appear on your credit report. Check for these by viewing your free reports through AnnualCreditReport.com.

When choosing the right refinancing lender for you, don’t forget to examine the closing costs. These are generally 3% to 6% of the loan amount. You can roll these into your loan if you don’t have the cash to pay for them outright.

If you have any questions, reach out to the mortgage lender for more details. It’s a big decision, so you want to be clear about what you’re agreeing to before you sign on the dotted line.

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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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Doing the math on a financial snafu can be a painful lesson. Take a look at one big mistake that can cost a lot. [[{“value”:”

Do you ever keep yourself awake at night by playing the greatest hits of your errors, goofs, and embarrassing moments in your head? One that popped into my mind and haunted me recently was thinking about how I didn’t sign up for my company’s 401(k) plan when I first entered the workforce.

At the time, it didn’t seem like a big deal. I was already doing a good job of adding money to my savings account, and retirement was ages away. Why should I bother with all that paperwork? Ah, youthful ignorance — I mean innocence.

Let’s do the math so you can see exactly why this slip-up has been haunting me.

Four years of missed opportunity

When I landed my first job right out of college, I was thrilled just to be working and earning a steady paycheck. I was completely focused on learning my responsibilities and befriending my coworkers; I wasn’t ready to take on any extra homework at the time, including setting up my retirement account.

Unfortunately, I let that state of mind drag on for four years. That’s right — the length of a whole presidential term passed before I finally gathered the digital paperwork needed to set up my 401(k). (And lesson learned: Actually doing the big thing you’ve been procrastinating on is never as bad as you think it will be.)

Lots of lost compound interest

The reason this mistake was so costly is due to compound interest. This is when you earn interest on your money, and then the new total amount continues to earn interest. Like a snowball rolling downhill, your funds will grow slowly at first but grow by larger amounts each year as time goes by.

At the time, my company offered a 401(k) contribution match of up to $1,000. Let’s say I put in my own $1,000 to meet that match each of those four years. The average annual rate of return of the S&P 500 during those years was 14.78%. That means my $4,000 of contributions would have been worth about $10,600 after four years (thanks in part to the company match). And now, 10 years later? It would be worth nearly $39,000. Heavens to Betsy.

Small contributions can lead to huge totals

It doesn’t matter whether you’re just getting started in your career or you’ve been in the workforce for a while. You need to make sure you’re taking full advantage of your retirement accounts, whether that’s a 401(k) with a company match or an individual retirement account (IRA) that you set up yourself.

If I could tell 22-year-old me a few things, one of the first would be to get into gear and sign up for that 401(k). It would have only taken just over $80 a month out of my own pocket during those four years to make it happen. Though I wasn’t earning much back then, my expenses were low and I could have easily afforded that amount. But I never took the time to think about what I’d miss out on down the line.

However, I’d like to give myself a little credit. I met my future husband on the first day at that job, so clearly I wasn’t making all bad decisions.

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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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Most experts recommend building a high credit score. Here are just a few of the reasons it can help you. [[{“value”:”

Much like good budgeting and setting savings goals, having a strong credit history is one of the cornerstones of smart personal finance.

It also really pays off. The effort you put into building your credit has a number of benefits, both tangible — cash in your pocket — and more ephemeral, like a bit of metaphorical swagger in your financial step.

Here are a few perks you can expect when you have great credit.

1. Lower interest rates when borrowing

Most lenders rely on your credit scores to set your interest rate. Having a high credit score will help unlock the lowest rates for just about any kind of borrowing, from credit card 0% APR offers to lower rates on auto loans and mortgages.

Consider this example:

The average price of a new vehicle is nearing $50,000. With 20% down, you’d need to finance around $40,000.Experian data shows that the average interest rate on a new vehicle loan ranges from 5.25% up to a whopping 15.77%, depending on your credit score.

Using that data, we can see how much an average $40,000 auto loan, with a typical 60-month term, would cost for each credit score group:

Overall, having a high credit score could save you around $200 a month, which is almost $12,000 in total interest over the life of your loan.

2. No down payment for postpaid bills

Some services you need to pay for in advance; your streaming services bill you before they activate your service. But some types of services, like home utilities and cellphone bills, are postpaid, meaning you pay your bill at the end of the service period.

Companies with postpaid products have to trust that you’ll actually pay for the services you received, so they check your credit history.

If you have a low credit score, the utility or cellphone companies may want you to make a down payment or security deposit before they’ll give you service. With a high credit score, however, you’ll rarely be asked for money upfront.

3. Easier time getting small business funding

Many types of small business funding, especially when you’re just starting out, will require you to agree to a personal guarantee. This essentially means that you agree to take personal responsibility for the debt regardless of what happens with your business.

Due to that personal guarantee, small business lenders will check your personal credit when you apply for financing. A high personal credit score can make it much easier to get approved for small business funding.

On the flip side, having a lower personal credit score could mean your business funding request is denied. At the least, it may mean you’ll be stuck paying higher interest rates than applicants with better credit history.

4. The confidence to apply for whatever you want

This is the most underrated perk of a high credit score, in my opinion. A high credit score gives you the confidence to apply for any credit card or loan because you know your credit history shows you’re a good candidate.

For example, some of the more elite travel rewards credit cards require you to have excellent credit to qualify. And there are several lenders who only offer loans to people with high scores.

This is not to say that great credit will guarantee you anything. However, I never have to worry that my credit score will be the problem that gets my application denied.

Building credit is a (worthwhile) marathon

It can take several years of conscientious effort to really build up an excellent credit score. That effort is worth making. A strong credit history not only gives you more opportunities, it also saves you money. Keep these four perks in mind when you’re building your credit.

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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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Are you looking to buy a home, but are having trouble making the numbers work? Here’s why you might get a better chance in 2025. [[{“value”:”

Home prices remain near all-time highs, and there doesn’t seem to be much relief in sight. In fact, the average forecast calls for U.S. home prices to increase by 2.5% in 2025, according to ResiClub’s analysis.

However, there could still be good news for would-be home buyers. The United States is widely expected to enter a falling-rate environment in the very near future, and this could cause mortgage rates to decline. You might be surprised how much more affordable this can make homeownership, even if analysts are correct and prices continue to rise.

Will mortgage rates fall in 2025?

To be perfectly clear, nobody knows exactly what mortgage rates will do in 2025. With the Federal Reserve widely expected to gradually cut rates through at least the end of next year, the most likely scenario is that mortgage rates move lower. But there’s no way to know exactly how much they’ll decline, or if they’ll decline at all.

After all, when the average mortgage rate was about 3% at the start of 2022, how many experts were projecting that we’d see 7% or higher rates on 30-year mortgages before the end of that year?

Having said that, let’s assume for a moment that mortgage rates are going to continue to decline. As mentioned, we’ve already seen the average 30-year mortgage rate cool off from a high of 7.90% in late 2023 to 6.29% as of early September 2024. And while 2025 estimates depend on who you ask, I’d say that rates in the low 5% range for both home purchases and refinancing by the end of 2025 are quite possible.

Why this matters more than home prices

Let’s say that you’re in the market for a home, and the average of homes that meet your needs is about $500,000. You plan to put 20% down and finance the rest with a 30-year fixed-rate mortgage, and as of today, you can qualify for an interest rate of 6.25%. This would give you a monthly payment (principal and interest) of $2,463.

Here’s a hypothetical question: Let’s say I give you a choice between two options that will make your home purchase more affordable:

Home prices decline by 10% from current levels, so you could buy what you want for $450,000.Your mortgage rate declines to 5%, but the prices of the homes you are considering remain the same.

Which do you think would be the better option? The answer might surprise you.

Looking at the lower-price option, you’d now have to come up with a lower down payment and would only need to finance $360,000. With a 6.25% mortgage rate, your payment would fall to $2,217 per month — a savings of $246 per month.

On the other hand, if you still have to pay $500,000, but your mortgage rate is just 5%, this would give you a monthly payment of $2,147 per month — that’s $316 per month less than you’d pay with the higher rate.

In a nutshell, a steep decline in mortgage rates can be an even more important factor in home affordability than the price of the home itself.

The bottom line

Of course, there are a lot of moving parts here, and your home affordability depends on how much home prices in your desired market rise or fall, and how much the mortgage rates you qualify for change. But the point is that if we see serious relief on mortgage rates in 2025, it could make homeownership far more affordable for millions of Americans.

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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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Fast food prices are getting out of control, making a cheap treat now an expensive splurge. Here’s how Walmart+ could cut your costs. [[{“value”:”

It used to be that subscriptions like Amazon Prime and Walmart+ were more about saving time than about being good for your budget. But Walmart+ has been doing a lot over the last few years to help you get your money’s worth.

The latest addition to the Walmart+ perk lineup is a deal with Burger King. Linking your Walmart+ and Burger King accounts now unlocks exclusive offers for discounts and, wait for it, free burgers (arguably the most delicious kind).

You’ll need to use the Burger King mobile app to take advantage of this new perk, but it could be well worth it for Burger King fans. Here’s how it works.

Link your Burger King app for 25% off daily

Before you can link your accounts, you need to, well, have accounts. If you don’t already have the Burger King app, you’ll need to download it and create a BK® Royal Perks account.

After that, linking is simple:

Open the Walmart app and log into your Walmart+ accountUnder the Account tab, select Walmart+ membershipClick on the Burger King savings benefit, then the blue “Get started now” buttonThis will open the Burger King app; sign into your BK accountSelect Link Accounts

Once that’s done, you can redeem the 25% off deal through the Offers tab in your Burger King app. It works for one order per day placed in the Burger King mobile app.

Pro tip: Make sure you’re paying with a good restaurant rewards credit card to maximize your return!

Get a free burger once per quarter

In addition to the daily discount, you’ll also get an offer for one Free Whopper added to your Burger King account once per quarter. Specifically, the offer will be added four times per year on:

Jan. 1April 1July 1Oct. 1

The offer can only be used once, but it will last for up to three months if you don’t use it. It expires at the end of the quarter, so you can’t stack offers. Use it or lose it.

You don’t need to order anything else to redeem your Free Whopper coupon, so you can just get your free burger and go. The fine print says that the offers aren’t valid with other coupons or offers, so if you want your free burger and your 25% off other food at the same time, you may need to make two mobile orders.

Other lesser-known Walmart+ perks

Walmart+ has a lot of somewhat standard-feeling perks, like free shipping and free store delivery, that are valuable but not exciting. However, there are a few perks, like the Burger King deals, that may pique your interest. Here are some of my favorites.

Free Paramount+ subscription

Streaming services have become as expensive as the cable they replaced, so anytime I can get a free one is a win. Walmart+ users can get a basic, ad-supported Paramount+ subscription for free.

If you’re not a fan of ads, and you watch enough of the content to warrant it, you can upgrade to the Paramount+ with Showtime package for 50% off.

Discounts on gas

Walmart+ members can get discounts at over 13,000 gas stations around the U.S. Eligible stations include Exxon, Mobil, Walmart, and Murphy.

The discount is $0.10 per gallon ($0.05 per gallon in Alabama and Oklahoma). It’s a straight discount at the pump, not some kind of purchase rewards, so it should show up right away. Make sure you have a credit card loaded in your Walmart+ account so you can pay through the app.

Returns from home

Many items will qualify for the Returns from Home feature, which lets you set up home pickup for eligible Walmart returns. This means you don’t have to make a special trip to the store just to make a return.

You can get a free 30-day trial

Walmart offers a 30-day free trial of Walmart+ if you’re interested in trying it out. Make sure you set a calendar reminder for 27 days out to cancel your trial if you aren’t planning on keeping the service.

After the trial, Walmart+ currently costs $98 per year, which works out to an average of about $8 a month. (If you’re on government assistance, you may qualify for a discounted Walmart+ Assist subscription for half the price.)

If you already use some of the perks, then getting Walmart+ could be a good money saver. It’s not for everyone, though, so use the free trial to see if it’s a good fit for your finances.

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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, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Brittney Myers has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.

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