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Contrary to the popular perception that aging inevitably leads to cognitive decline, studies show that about 50% of people over the age of 70 maintain their mental acuity or even improve in certain cognitive functions. When you pause to think about it, you’ll probably realize that’s true. You know older people who are as sharp as a tack and can qualify as wise. And you probably know others who…
Historical data from Google Flights reveals when airline ticket savings are largest. Markus Mainka / Shutterstock.com
If you want a great deal on a holiday flight, try to buy your ticket about 38 days before a domestic departure. That is when you are most likely to find rock-bottom pricing, according to four years of aggregated Google Flights data. Historically, domestic travelers get the best deals in a window between 21 and 52 days before takeoff, Google says. Prices tend to be lowest for Thanksgiving…
Decade by decade, build a life that plans for physical and financial well-being. DisobeyArt / Shutterstock.com
Life sometimes has something different in mind than what you had planned. While there have been meaningful improvements for how to manage chronic diseases like hypertension, cancer, and diabetes, these conditions can throw a real wrench into well-being. Caring for your health is paramount, but illness can also have an impact on your financial well-being. No matter your current health status…
This financial writer thinks savings account balances will shrink in the new year. Read on to see why. [[{“value”:”
Image source: The Motley Fool/Upsplash
It would be more than fair to say that 2024 has been a great year for people with money in the bank. Both savings accounts and CD rates have been elevated since January, giving many people an opportunity to earn money risk-free.
But in the coming months, CD and savings account interest rates are expected to fall. And due to a combination of factors, I predict that savings account balances will be lower in 2025 than where they are today.
There’s a reason savings account and CD rates have been so attractive this year. The Federal Reserve spent much of 2022 and 2023 hiking the federal funds rate to slow the pace of inflation. And the Fed’s tactics worked.
In August, inflation was measured at 2.5% annually, according to the Consumer Price Index, an index that measures changes in the cost of goods and services. That reading — the lowest we’ve seen in years — is close to the 2% annual inflation target the Fed favors.
The Fed thinks 2% inflation in the long run leads to a strong, stable economy. And it’s been trying to get inflation closer to that point for years.
But now that inflation is cooling, the Fed is expected to start its benchmark interest rate to reverse its 2022 and 2023 hikes. Once that happens, two things are expected to happen.
First, savings accounts and CDs are apt to start paying less interest. Second, borrowing costs are expected to ease. People looking to sign car loans, mortgages, or personal loans may be looking at much lower interest rates.
This combination could drive a lot of people to pull money out of their savings and use it to pay for things like new cars or financed purchases, like furniture or vacations. And for this reason, I think the average savings account balance will be lower in a year than it is today.
If you’ve been parking your cash in a savings account for the past year or so in anticipation of making a large purchase, like a car, then there’s nothing wrong with sticking to that plan in the coming months as borrowing rates fall. But one thing you don’t want to do is remove money from savings to the point where you aren’t covered for emergencies.
Ideally, you should always have enough cash in savings to pay for three full months of essential expenses. This way, if you were to lose your job, you’d have a way to pay your bills without resorting to costly debt.
If you’re going to take money out of your savings account as rates fall, run the numbers to make sure you’re leaving yourself with a basic emergency fund. Also, be cautious about taking on debt even if borrowing rates come down.
You may, for example, be able to snag a much better rate on an auto loan next fall than this fall. But that doesn’t mean you should buy the most expensive car on the lot, or pay extra for every added feature your vehicle might come with.
You no doubt worked hard for your savings. You don’t want to blow that money just because it’s less expensive to borrow.
And remember, even if interest rates eventually fall to the point where you’re earning practically nothing in your savings account, that’s still the best home for your emergency fund. You can ditch CDs once rates come down enough, but always make sure your savings account has money to deal with unexpected expenses.
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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.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.
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Homeownership isn’t always a smart move. Keep reading to learn how to tell whether it will be for you. [[{“value”:”
Image source: Getty Images
Perhaps you heard the same phrase growing up as I did: “Renting a house is throwing money away!” But the world is far different now than it once was, and salaries sure haven’t kept pace with rising housing costs. As a result, many Americans can’t afford the upfront and ongoing costs of owning a home, and are effectively shut out of getting a mortgage.
But even if it looks on paper as if you might be able to afford to buy a home, it still pays to approach with caution. The first time I bought a house, almost 15 years ago, I was fortunate enough to have family help with the upfront costs. And my mortgage payment wasn’t much more than what I was paying to rent an apartment.
But buying a home at that time was easily the biggest financial mistake I’ve ever made.
Don’t be like me! Read on for a few scenarios in which becoming a homeowner can spell doom for your finances.
It might be unrealistic to insist that you have paid off all your other debt when you set out to buy a home. I actually pulled this off before becoming a homeowner again just recently (and now I’m the proud owner of a shiny new mortgage — even more debt than before!). But I had the good fortune to have already paid off my car and my education, and I was able to pay off the rest of what I owed thanks to taking on a side hustle.
If you have manageable lower-interest debt, like a reasonable monthly car payment or other loans, you might be fine to buy a home. But if you have high-interest debt, like credit card debt, it’s a really great idea to pay that off before trying to buy a house.
Credit card debt comes with high and variable interest rates — the average rate on cards charged interest was 22.76% in May 2024. That means your debt can easily spiral out of control. It’s a good idea to give yourself as much budgetary breathing room as possible if you’re taking on the (sometimes unpredictable) costs of homeownership.
This was part of my problem the last time I was a homeowner. My now former spouse and I made enough money to be successful renters, but we had no savings. When I found myself out of a job just two years after we moved into the house, there was no fallback plan and no emergency fund to cover the bills.
It’s a great idea to have a solid emergency fund before you contemplate buying a home. This means enough money to cover three to six months’ worth (or more, depending on your line of work and comfort levels) of expenses, ideally in a high-yield savings or money market account. This money can save your bacon (and interest costs) if an unplanned repair comes up — or you get laid off from your job.
This was the other part of my problem last time. I was just a few years into my previous career in nonprofits, which came with neither a high salary nor the ability to remain in one place and hope to find a new job in the same city.
So when I was let go, I knew I’d have to move for a new role — and having to sell a house after just two years of living in it usually means losing money. Breaking a rental lease, on the other hand, is usually pretty easy and costs far less than selling a house.
In my case, I ended up needing to get my mortgage lender to agree to a short sale. I got free of my obligation, but it trashed my credit score, which took me years to rebuild. Adding insult to injury, I also went through a divorce soon after.
In short, my life wasn’t suited to owning a home, and I never should have pursued it.
Things are different now. My new career is fully remote, meaning I no longer have to move for work. And my finances are solo — I don’t have any joint financial commitments or bills with anyone else. I bought my new house on my own, and while this is a big, scary responsibility, I wouldn’t have it any other way.
Here’s a quick checklist to help you answer this question:
You have a low debt-to-income ratio: Ideally, you’re spending less than 36% of your income on debt, including your mortgage.You have an emergency fund: Or at least don’t live paycheck to paycheck. You also might need to show a lender that you have reserve cash to even get approved for a mortgage.You expect to stay in the house for several years: If your career constantly has you moving, buying a house is a bad idea.Your credit is in solid shape: The better your credit score, the more you stand to save on a mortgage — so if your credit needs work, focus on increasing your score first.
Ideally, becoming a homeowner makes your life better. And you should buy a home because you want to and when your finances are in good shape — not because someone told you renting was a waste of money.
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Earning a high income or having a high net worth are both measures of wealth. Check out how you fare compared to your peers on both measures. [[{“value”:”
Image source: Getty Images
Are you rich? A lot depends on how you define that word. Some people consider you to be rich if you earn a lot of money. Others only consider you to be rich if you have a high net worth, which means the value of your assets (like your home and other property) far exceed your liabilities (like credit card debt).
Regardless of how you define “rich,” you can find out below what it actually takes to meet that standard and be considered wealthy in America.
According to a recent Pew Research study the median income of upper-class households in the U.S. was $256,920 as of 2022. By contrast, the median income of middle-class households was $106,092 and the median income of lower-class households was $35,318. If you hope to be within the upper-income group, or among the richest Americans in terms of income, this would mean you’d need household earnings of $256,920 or higher.
People who earn above $250,000 are in the top 5% of earners in the country, so only a small minority of people fall within this category. That’s not surprising because, of course, not everyone can be rich.
There’s another way to measure wealth beyond income: You can look at your net worth. Many believe net worth is a more accurate measure of wealth since the higher your net worth, the more assets you own free and clear.
For example, if you have a ton of money in real estate and brokerage accounts but don’t owe much, then you’re in pretty good financial shape because your assets can make you financially independent.
According to the Federal Reserve, you need a median net worth of $3,794,600 to be in the 90th to 100th percentile, and you need a mean net worth of $7,810,500 to fall within this group. If you hope to be in the 75th to 89.9th percentile, you would need a median net worth of $1,036,200 or a mean net worth of $1,102,400. This is considerably higher than the median net worth of $356,300 or the mean net worth of $373,700 for those in the 50th to 74.9th percentile.
Obviously, very few people have a multi-million dollar net worth, so if you do, you’d undoubtedly meet most anyone’s definition of being wealthy.
If you aren’t wealthy now, that doesn’t mean you won’t be in the future. You could win the lottery to get there, of course, but that’s probably not the best approach.
Instead, if you want to become rich, there are a few primary things you should do.
Aim to increase your income. It’s a powerful tool to help build wealth. The more you earn, the more you can devote to buying assets that make you financially secure.Spend less than you earn. Save around 20% of your income, at a minimum, to help you grow your wealth.Invest in assets that provide a good return. If you can put your money into the stock market and earn a 10% average annual return, this helps you grow wealth without having to earn every dollar since your gains can be reinvested and earn money for you.
With diligent and dedicated effort over time, almost anyone can become rich — so start working toward this goal today if being wealthy is something you aspire to.
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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.
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