Money Management

When budgeting became a huge drag, I stopped doing it. But doing so didn’t hurt my finances. Read on to see why. [[{“value”:”

When my husband and I first moved in together and combined our finances, we sat down to set up a household budget. And for a good number of years, we’d have monthly check-ins where we’d look at our budgeting spreadsheet, review our spending in different categories, and make changes if certain expenses wound up being more than we’d bargained for.

But after a while, that process got really old. A number of years back, we decided to put an end to that. So now, we don’t budget at all. But we still manage to save money every month.

And no, it’s not magic. It’s a simple change to our approach to managing money that’s worked wonders for us, and it may work well for you, too.

When you unload a tedious task and replace it with one simple move

Back in those early days of budgeting, my husband and I tried our best to make it fun. We would sometimes open a bottle of wine and make our budget review a date night of sorts (OK, fine, it may have been the world’s worst date night). Or, we’d have a “Hooray, we stuck to our budget” celebratory ice cream store run after (on the nights, ahem, when we didn’t first open a bottle of wine and it was therefore safe to drive to the ice cream shop).

But in time, budgeting became a huge time suck for us. And I’ll admit it — it was just so darn boring. Looking at line items on a spreadsheet and comparing them to credit card statements was hardly an enjoyable way to spend an evening — even when there was wine involved.

So we stopped budgeting and instead did something super easy — we decided on a monthly savings goal to strive for and set up an automatic transfer. And since then, that system has worked really well.

At the start of every month, a certain amount of money moves out of our checking account and into our savings account before we get a chance to spend our earnings. That sum has changed over time as our earnings have changed. But all told, it’s been a vast improvement over budgeting, because we don’t have to actually do anything.

Also, our current approach to saving money seems so much less restrictive than budgeting. When we used to budget, if we had a month when, say, our electricity bill would come in at $217 instead of $200, we’d try to spend $17 less on groceries or in another area to make up the excess. But who wants to do that?

With our current system of automating our savings, we don’t have to sweat the small details we used to when we followed a budget. Instead, we get the comfort of knowing our savings goals are being met off the bat. From there, the remaining money in our checking account is ours to spend as we wish — no guilt or number-shifting required.

Stop budgeting if it’s making you miserable

A 2023 SecureSave survey found that 63% of Americans couldn’t cover an unplanned $500 expense out of their savings. So if you’re in that boat, or if you’re trying to grow your cash reserves, then it’s important to manage your money to some degree.

But budgeting isn’t your only option. And if you’ve tried budgeting and hate it, try doing what we do.

Figure out what sum of money you can reasonably contribute to your savings each month, and set up an automatic transfer so you don’t have to think about it. If that system works for you, there’s no reason whatsoever to go back to budgeting.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.

“}]] Read More 

Even savings accounts have drawbacks. Read to find out when these accounts aren’t the best option. [[{“value”:”

I have some money in my savings account that I plan to put toward buying a house later this year. Having easy access to the money is important to me in case I find a home I’m interested in.

With many savings accounts paying a high interest rate, they’re generally a great place to keep your money. But there are some downsides to leaving piles of money in a savings account. Here are a few to consider.

1. Inflation can erode your money’s value

Inflation has wreaked havoc on Americans’ finances over the past couple of years. Even though it’s cooled down lately, the inflation rate is still at an elevated 3.3%.

For that reason, if your savings account isn’t paying a high annual percentage yield (APY), your money could lose value as it sits in the account. That may be fine if you’ve only got a little money in the account, but if you have lots of cash in your savings account, you could lose a lot of value every year.

Fortunately, you can fix this quickly by opening a high-yield savings account, many of which pay 5% or higher.

2. High-yield rates aren’t guaranteed

Many years ago I had a high-yield savings account that was paying far more than the average APY. One day, I received an email saying my interest rate was decreasing. A few months later, I got another email saying it was dropping again. This happened several times until my high-yield account was anything but.

This could happen to current high-yield savings accounts if and when the Federal Reserve begins cutting interest rates. While high yields won’t disappear overnight, you should know that they aren’t guaranteed, either.

3. Easy access can mean easy spending

I love having easy access to money in my savings account, but the potential downside is that piles of cash at your fingertips can be easy to spend.

If you’re the type of person for whom money burns a hole in your pocket, consider putting it into a brokerage account or certificate of deposit (CD). Your money will be less accessible in each. You’d have to sell investments to access cash in a brokerage account, and a CD will charge you a fee to take money out before the term is up. Both of these factors could discourage you from spending your savings.

4. You could earn more money elsewhere

Earning a 5% APY in a savings account is nothing to sneeze at. But if you’re aiming to earn as much money as possible on your cash, a savings account isn’t the way to do it.

The S&P 500 has a historical annual rate of return of 10.2%, more than double many of the highest savings account yields right now. Of course, these earnings are not guaranteed, but the long-term earnings potential is far greater with an investment account than with savings.

If you put $10,000 into a low-cost index fund that earned the historical annual rate of return of 10.2%, your money could be worth $26,412 in just 10 years. In contrast, the same amount in a 5% APY savings account would be $16,288 over that period.

I know what you’re thinking: “I could lose money in the stock market!” Yes, you could. But you could also be missing out on significant returns by leaving your money in a savings account.

5. You have to pay taxes on the interest

Just like with any other type of income, Uncle Sam will want his cut of your savings account earnings. Because of this, you’ll have to state how much interest you’ve earned in the account for the year when you file your taxes.

How much you’ll owe will depend on your income tax bracket, which can range from 10% to 37%, depending on your income. This isn’t a huge downside, but some account holders may not know this negative aspect of savings accounts and could be surprised by the IRS’s rules come tax time.

Don’t get me wrong, high-yield savings accounts are a great place to put your money. But it’s important to understand the downsides of leaving lots of money in one and how doing so can affect your finances.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.

“}]] Read More 

Renting isn’t throwing your money away. Learn a few reasons why renting a home can be better than owning one. [[{“value”:”

Buying a home has long been a cornerstone of the American dream — but it didn’t used to be so difficult to become a homeowner. According to the Joint Center for Housing Studies of Harvard University, the home price-to-income ratio hit an all-time high in 2022 — the median price of a home was 5.6-times higher than the median household income. This means that buying a house is even more unattainable for a lot of Americans, and many will have to continue renting.

Renting has some solid advantages over owning a house, however — here’s what to keep in mind.

1. Lower upfront costs

First and foremost, as you may have gathered from the data above, it’s cheaper to rent a home than own one. According to Redfin data, in April 2024, the median U.S. home price rose 5% over the prior year, landing at $380,250. That’s less than $3,100 shy of the all-time median price record in June 2022.

To add insult to injury, if you want to buy a home, you’ll pay a lot more for financing than you would have just a few years ago. The current rate on a 30-year fixed loan is 6.94%, according to Freddie Mac. If you’re buying a home at that median price with 20% down (more than $76,000 — a lot to save!) and that mortgage rate, your monthly principal and interest payment will be $2,011 — ouch.

But what about renting? It’s not free to move into a rental, and laws and requirements vary depending on your situation. Over my many years of renting, whenever I signed a new lease, I owed a deposit equal to a month of rent, plus that first month of rent. That’s it. I didn’t have to shell out tens of thousands of dollars for a down payment and closing costs.

2. Added flexibility

I have moved many, many times (as I write this, I’m getting ready for move No. 36), and being a renter for most of that time has worked to my advantage. Renting gives you far more flexibility than being a homeowner because if you need or want to move, it’s easier and cheaper to break a lease than to sell a home.

Even if you’re selling in a red-hot neighborhood in a seller’s market, you’ll still likely want to hire a real estate agent to market your home and be your representative in the selling process. Plus, you’ll pay closing costs that will eat into the proceeds from the sale.

Depending on the terms of your lease, you might need to pay a few months of rent to break it early, which isn’t ideal. But your landlord might cut you a break if you give a ton of notice or if you can help find a new tenant to take your place. Or, best case scenario, you’re on a month-to-month lease — in which case, you need only tell your landlord you’re moving out, pay them for the last month, and go on your merry way.

3. Included amenities

Admittedly, while I have been a renter for most of my life, I rarely lived in rental situations that came with a lot of amenities. Usually, I rented single-family houses or apartments in small multi-family homes that were owned by an individual landlord or a small company, rather than apartments in complexes or high-rise buildings. These are the rentals that tend to come with perks like:

Access to an on-site gym or swimming poolAn office center with printers and computers residents can useAn event space residents can book for free to host a family gathering or party

The amenities I have enjoyed in my own rental situations have included lawn maintenance and occasionally even snow plowing (a huge deal when you live in a snowy place like I do). As I prepare to close on the house I’m buying, I’m not looking forward to including a line item in my budget for someone to mow my lawn and plow my driveway — but when you’re a homeowner, you have two choices: You can pay someone else or you can do it yourself — it won’t be included.

If anyone has ever told you that renting is throwing money away, they are wrong. Renting is paying for a place to live and enjoying lower costs and flexibility that you won’t get as a homeowner. If you’re comfortable as a renter and it fits your life, carry on — don’t let anyone shame you into applying for a mortgage and buying a house if you don’t want to. Instead, keep enjoying these renting perks.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.

“}]] Read More 

Worried about foreclosure? Read on to learn what the process entails. [[{“value”:”

A lot of people today are having a hard time keeping up with their expenses due to stubbornly high living costs. If you’re struggling to make your mortgage payments, you may be wondering whether foreclosure is in your future. Here’s what you need to know about foreclosure — and how to avoid it.

1. It doesn’t happen right away

If you’re worried that a single missed mortgage payment will cause your home to be foreclosed on, you can stress a bit less. Usually, the legal foreclosure process won’t begin until you’re at least 120 days behind on your mortgage payments. So even a couple of missed payments won’t automatically cause you to lose your home.

If you’re worried that you can’t make your next home loan payment but you’ve been current so far, contact your mortgage lender and ask what options you have. If you’re experiencing a financial hardship, like a job loss or medical issue that’s keeping you out of work, you may be eligible to put your mortgage into forbearance. This allows you to pause your mortgage payments without being considered delinquent on them.

Another option that may be available is mortgage modification. Unlike refinancing, where you apply for a completely new mortgage, modification lets you keep your existing home loan with altered terms. Your lender may let you go from a 30-year to a 40-year mortgage, resulting in lower monthly payments.

2. Lenders don’t want it any more than you do

Mortgage lenders will often try to do everything they can to help homeowners avoid foreclosure. And it’s not even necessarily because they care — it’s because avoiding foreclosure is easier for them, too.

Mortgage lenders make their money by collecting interest on home loans. They’re not in the business of reclaiming and selling homes — they only do that when they absolutely have to in order to get repaid. So lenders will often work with homeowners to steer clear of foreclosure when possible.

3. It can stay on your credit report for a really long time

A foreclosure can stay on your credit report for seven years. During this time, it may be more difficult to borrow money or get a good rate on a loan.

If you do end up getting foreclosed on, and your credit score takes a hit as a result, there are steps you can take to bring it up. These include paying all future debts on time, paying down existing credit card debt, and correcting errors that appear on your credit report.

You should also know that over time, the impact of a foreclosure on your credit report should lessen, even if it remains there for seven years. In fact, in some cases, you may be able to get another mortgage just two or three years after being foreclosed on (though it’s always best to wait until you’re truly financially stable to jump back into homeownership). However, you may not qualify for the best mortgage rate due to lingering credit score damage.

Foreclosure isn’t a given — especially today

The good news is that many homes today are worth a lot more than they were a few years ago. Because of this, you may find that you’re able to sell your property for enough money to cover your remaining mortgage balance in full. If so, there’s no need for foreclosure — you simply sell your home, pay off your lender, and move on.

However, if your home won’t sell for a high enough price to satisfy your mortgage balance, talk to your lender about options that allow you to stay in your home and avoid foreclosure. You may be pleasantly surprised at how willing your lender is to help.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.

“}]] Read More 

If you invest $5,000 in a fund that tracks the S&P 500, it could be worth over $20,000 in 20 years’ time. Find out what investment makes most sense for you. [[{“value”:”

If you have $5,000 to invest, congratulations! It isn’t easy to build up a sizable chunk of cash to put toward your future. There are many ways you can invest that money, and the right move for you depends on your financial situation. A person in their 20s will have a different risk tolerance than someone close to retirement.

We’ve highlighted five routes you might take, as well as when they might make most sense. Bear in mind these aren’t either/or scenarios — you can mix and match to suit your needs.

1. ETFs: Best for decent rewards at relatively low risk

Think of exchange-traded funds (ETFs) as pies containing a mix of securities. Buying even a small slice of that pie will give you a taste of all the securities inside. ETFs that track the S&P 500 are popular with investors because they give exposure to the largest 500 U.S. companies. The diversification across different industries reduces risk.

Many top brokerages don’t charge commissions when you buy or sell ETFs. They also have lower expense ratios than other types of funds. Without factoring in inflation, the S&P 500 has generated average annual returns of over 10% over the past 30 years. There will still be years where the market performs badly. But on average, the good years more than outweigh the bad ones.

If you invest $5,000 today and get annual returns of 8%, you could have around $23,000 in 20 years. Even a few percent makes a difference. A $5,000 investment earning 5% would only be worth about $13,000 in 20 years.

2. A 401(k) or IRA: Best for your retirement money

Tax-advantaged accounts can considerably boost your retirement savings. Find out if your company has a 401(k) plan and will match the money you put in. If it does — and you’re not already maxing out your contributions — talk to the human resources department. See how to put some of that $5,000 into your work retirement account.

If a 401(k) is not an option, a tax-advantaged account such as an individual retirement account (IRA) could help. Traditional IRAs reduce your taxable income now, while Roth IRAs let you put in after-tax dollars and make tax-free withdrawals when you retire. There’s a limit to how much you can contribute each year. In 2024, it’s $7,000, or $8,000 for those over 50.

Make sure you understand the different types of IRAs and how they’d impact your tax bill. You can put several of the assets listed in this article, including ETFs, into many IRAs and 401(k)s.

3. CDs or savings accounts: Best for money you might need in the near future

Savings and investments have different purposes. Savings vehicles like CDs and high-yield savings accounts usually carry less risk and make sense for money you might need in the near to medium term. That might include your emergency fund or cash you’re saving for a down payment on a home.

Investing carries more risk than saving, but it can potentially generate higher returns, particularly if you let the returns compound over a decade or two. This makes it easier to wait out any dips and reduces the risk of being forced to sell at a loss.

Think about whether you’ll need that $5,000 in the coming five years. If you will, the current APYs of 4% or 5% on some savings vehicles could make sense.

4. Bonds: Best if you’re looking to reduce risk

Bonds are like a loan you make to the government or a company at a fixed rate. They tend to be less volatile than stocks, though they usually generate lower returns. Bonds and stocks often move in opposite directions, so they can balance one another. As you get closer to retirement, increasing the percentage of bonds you own is a popular way to reduce risk.

Bonds have been impacted by the recent high inflation and other unusual aspects of the post-pandemic economy. However, they can be a good source of fixed passive income. Plus, you won’t owe federal taxes (and even state taxes in some situations) on the income from municipal bonds.

You can buy bonds through a broker or directly from the government. If you buy a bond EFT, you can invest smaller amounts and get exposure to a mix of bonds.

5. Pay down debt: Best if you carry high interest debt

Strictly speaking, paying down debt is not an investment. However, if you carry a balance on your credit card, you might be paying upward of 20% in interest. That’s much higher than the potential gains of the stock market or the interest on a savings account. Put simply, there aren’t many legitimate investments that can guarantee annual returns of 20% or more.

It often makes sense to prioritize paying off your credit card debt. You may have a 0% introductory APR on your card or be able to consolidate your debt into a loan. But if you’re paying more interest on debt than your savings and investments might generate, use any windfalls to pay it down.

Key takeaway

There are many different ways to invest $5,000, and you don’t have to put it all in a single asset class. Think about taxes, potential returns, and how long before you’ll need to use the money. Most of all, look for ways to diversify your portfolio so if one industry or asset class performs badly, it won’t derail your wealth-building plans.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.

“}]] Read More 

Car shopping and looking for a hard car to steal? Look no further, we’ve got the list for you. [[{“value”:”

Shopping for a new car or even a pretty lightly used one? It might be important to consider how frequently your future dream car is stolen while you’re kicking the tires and trying out the heated seats. The Highway Loss Data Institute (HLDI) reports that over a million cars were stolen yearly in both 2022 and 2023, and that number has been rising steadily since 2019.

The category of vehicle least likely to be stolen are SUVs, followed by pickup trucks, but there are specific vehicles with higher and lower risk in every category. Knowing where your future car stands can not only ensure you don’t get surprised by high insurance rates but also that you don’t go to get in your vehicle one day and it’s simply not there.

Cars that are hardest to steal

Having been a victim of grand theft auto myself once, I can tell you it’s both unsettling and incredibly violating to discover your car has just…vanished. In my case, it was a beloved cherry-red short bed Chevy pickup that I had driven for years. Fortunately, my ride was recovered a week later, like approximately 85% of stolen passenger vehicles.

Still, you never want to have to deal with that if you can avoid it by simply choosing a car that’s harder to steal. The chart below shows the 20 cars least likely to be stolen, according to the most recent HLDI report. Because of their lack of serious claims, these cars are also relatively cheap to insure.

As you can see, the most frequently stolen of these unlikely-to-be-swiped cars are stolen at a rate of less than seven times the national average, which is, frankly, where you want to be if you own a car that you don’t want to lose.

What makes cars hard to steal?

So what is it about these cars that’s keeping them safe from criminals? It’s certainly not their looks, even though some are definitely cuter than others (shoutout to the adorable Nissan Leaf electric).

For many of these cars, simply being an electric car makes them less likely to be stolen. Electric cars are generally charged at night, kept indoors or in a well-lit place outside near a charger, and often have external cameras on them due to that. Six of these cars are electric and, for now at least, these are relatively conspicuous options for thieves.

Volvos, of which there are four on the list, have amazing security systems that include both standard audible alarms for anybody breaking into the car, as well as movement sensors for anybody who might be inside the car without a key. They’re also relentless noisemakers, with alarm cycles that may repeat 10 times if not shut off. The alarm sounds for 30 seconds during each cycle, and the hazard flashers start a disco party for five full minutes. That’s one heck of a theft deterrent.

Fortunately, these are common security systems in all the cars mentioned above, making them just really not worth the effort should a thief come upon one unattended and vulnerable. That also makes them beloved of the best insurance companies out there, which is great for your wallet, too. Peace of mind, piece of cake.

Choose a hard car to steal and be happy for the rest of your life

Well, I can’t actually guarantee that you’ll be happy for the rest of your life with a hard-to-steal car, but I can assure you that you’ll never walk out of your apartment to a sinking feeling because you know you left your vehicle right there, and now it’s gone.

I got lucky — my pickup was recovered whole, and it wasn’t crashed into a tree or in a ditch somewhere. But you never know. If you really are in love with the popular sports car, by all means, live your joy. But if you want something that you don’t have to worry about as much, check out these cars and see if any spark your imagination.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2025

This credit card is not just good – it’s so exceptional that our experts use it personally. It features a 0% intro APR for 15 months, a cash back rate of up to 5%, and all somehow for no annual fee!

Click here to read our full review for free and apply in just 2 minutes.

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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Kristi Waterworth has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

“}]] Read More