Money Management

Want to open a CD? What if the Federal Reserve doesn’t cut interest rates in 2024? See how to decide if now is the best time to open a CD. [[{“value”:”

One of the biggest debates in banking and personal finance in 2024 is if now is a good time to open a CD. As of May 28, 2024, the best certificates of deposit (CDs) are paying interest rates of 5.00% APY or higher. You might be tempted to open a CD and lock in a high APY for one year or more.

But CD investors are also looking at the latest moves from the Federal Reserve. So far in 2024, the Fed keeps…not cutting interest rates. This is not what many investors had expected. If interest rates stay this high, you should not be in a big rush to open a CD.

Let’s look at a few reasons why you should open a CD (or not) based on the latest Fed interest rate decisions.

The Fed hasn’t started cutting interest rates (yet)

Back in December 2023, the conventional wisdom on Wall Street (and here at The Ascent) was that the Fed was likely to cut interest rates in 2024.

But much to the surprise of many economic forecasters, the Fed has not cut interest rates (so far) in 2024. Inflation has stayed a bit higher than expected, which has prompted the Fed to leave interest rates “higher for longer.”

Why interest rate cuts are bad for savings accounts

Falling interest rates would be bad news for savings accounts, because savings account APYs go up and down along with the latest changes to the Fed’s federal funds rate.

But CD rates are fixed. If you open a CD, the bank is agreeing to pay you that guaranteed rate of interest for the full length of the CD’s term. If you open a 1-year CD at 5.00% APY (for example), you will get 5.00% APY for the full 12 months — even if the Fed cuts interest rates over the course of that year.

How a Fed rate cut would affect your CD and savings accounts

The fixed rates on CDs can make them a better place to keep your savings than savings accounts. And no one knows for sure when (or if) the Fed will cut interest rates, but if you are fortunate enough to get the timing right, your CD can give you a fixed yield that ends up being higher than the best savings accounts or money market accounts.

For example, the Fed’s next meeting to discuss interest rates is June 11-12, 2024. Let’s say that you open a 1-year CD on June 10 at 5.00% APY, and then the Fed announces on June 11 that it’s cutting interest rates by 25 basis points (0.25%). Because you already locked in your money with a 1-year CD, you will still get 5.00% APY on your savings for the next 12 months. But a typical high-yield savings account might immediately reduce its APY from 5.00% to 4.75% APY after a Fed rate cut announcement.

When is the right time to open a CD?

But what if the Fed leaves interest rates “higher for longer” for the rest of 2024, or even decides to raise interest rates? That could make a savings account a better deal than a CD, because you could get similarly high (or better) APYs, without the risk of early withdrawal penalties.

The right time to open a CD is ultimately up to you. It depends on your personal financial goals, risk tolerance, and how much cash you have in the bank. Don’t use a CD to hold your emergency fund — any emergency savings should be liquid and easy to withdraw in case you need that money tomorrow. But if you want to lock in a favorable APY and you’re confident that you can leave the money alone for the full length of the term, any time can be the right time to open a CD — regardless of the Fed’s latest statements.

And even if you can’t manage to time the Fed’s interest rate decisions perfectly, how much money will you really lose? The Fed usually cuts interest rates by 25 basis points (0.25%) at a time, so you might only miss out on 0.25% of additional yield on your savings. Unless you are managing hundreds of thousands of dollars, that doesn’t add up to a huge difference.

Bottom line

The best CDs are paying 5.00% APY or higher. Unless you believe that the Fed will raise interest rates in the near future, now could be a fine time to open a CD. Or if you want more flexibility for your cash, with no early withdrawal penalties, open a savings or money market account instead.

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 

Need to borrow for a home? Read on to see which mistakes you should make every effort to avoid. [[{“value”:”

Given that the median U.S. home just sold for $407,600, according to the National Association of Realtors, it’s fair to assume that most of us can’t afford to just buy one outright. For many buyers, getting a mortgage is an absolute necessity to make homeownership possible.

But your mortgage might be the single largest sum of money you borrow in your lifetime. So it’s important to be strategic when you’re getting a home loan. And that means avoiding these all-too-common mistakes.

1. Not shopping around

The average 30-year mortgage rate at the time of this writing is 6.94%, according to Freddie Mac. But remember, it’s up to each mortgage lender to figure out what rate it wants to offer you based on factors like your credit score, income, and loan amount.

So don’t just accept the first mortgage offer you get. Instead, shop around with different lenders so you can compare offers.

But also, do your rate shopping quickly. If you apply for different mortgages within a 14-day period, you shouldn’t have to worry about each application counting as a separate hard inquiry on your credit report.

That’s important, because each hard inquiry on your record could drag your credit score down a bit. The lower your score, the more expensive it usually is to borrow — in the context of a mortgage or any other loan you might need.

2. Assuming you can afford the amount a lender is willing to loan you

Each mortgage lender you apply with will look at your financial information to figure out how much you can borrow for a home. Lenders consider your down payment, current salary, and any other income streams you have.

But don’t assume that the amount your lender says you can borrow is the amount you should borrow. Your lender will have a basic sense of your financial picture based on the information you provide. But there are certain factors your lender won’t know.

For example, your lender will know about monthly debts you’re currently paying off. But it may not know that you’re spending $600 a week on daycare for two children. So if your lender says you’re able to borrow $250,000 for a mortgage, don’t just take its word for it. Instead, run your own numbers.

Generally, your total housing costs, including mortgage payments, homeowners insurance, and property taxes, should not exceed 30% of your take-home pay. Once you have a mortgage offer, you can run the numbers to see if you’re within that limit. (This mortgage calculator might help.) But if you have exceptionally large expenses, like daycare, then you may want to keep your housing costs to 20% or 25% of your pay.

3. Not boosting your credit score before applying

The higher your credit score, the lower a mortgage rate you might qualify for. The result? Lower monthly payments.

Let’s say you’re taking out a 30-year, $200,000 mortgage. With great credit, you might snag a 6.7% interest rate, leading to monthly payments of $1,290 for principal and interest. With credit that’s only OK, you might end up paying 7.3% on that same loan, resulting in monthly payments of $1,371. That’s roughly an extra $1,000 a year.

To boost your credit score fairly quickly, get a free copy of your credit report from annualcreditreport.com and make sure it’s accurate. If your credit report shows a mistake, like a delinquent debt that’s actually current, correcting it could lead to a credit score increase.

You can also boost your credit score by paying your creditors on time and paying off credit card balances you’re carrying, if possible. These moves, however, may take time. Try to be patient and give your credit score an opportunity to rise before putting in your mortgage application. It could make a huge difference in your monthly payments for many years.

Applying for a mortgage is a major step on the road to homeownership. Avoiding these mistakes could leave you with a loan that’s less expensive to pay off.

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 

It’s easy to overspend once you buy a home. Read on to find out how Costco can help you stay under budget. [[{“value”:”

The first time I bought a home, I was shocked at how much I spent once I moved in. I easily spent more than $1,000 in just the first few weeks on furniture, a lawnmower, paint, and minor upgrades throughout our home.

If you’re a first-time homeowner or soon will be, you’ll likely want to fill up your new space and make it your own. Luckily, you can do it without busting your budget. Here’s why first-time home buyers can benefit from a Costco membership.

1. Buy furniture for new rooms

My first house wasn’t big, but it had two more bedrooms and a much larger living room than my one-bedroom apartment. My wife and I immediately went out to buy a new sofa and a guest bed for one of the rooms, so we could put our newly acquired square footage to good use.

That was the fun part. The not-so-fun part was paying for it after we spent money on closing costs and a down payment. If I had a Costco membership at the time, I probably would have saved some cash.

I recently found a leather sofa on Costco’s website for $1,799, which is $500 off the original price. The couch also has fantastic reviews, earning 4.6 stars from nearly 1,600 reviewers. Sweetening the deal even further is the fact that delivery, setup, and package removal are all free.

2. Create an outdoor oasis

At my old house, I converted a shed into an outdoor office, complete with windows, an air conditioner, carpet, and insulated walls. It was a fun project that allowed me to take advantage of a shady and unused part of our backyard.

With your new house, you’ll likely have your own backyard projects. Whether it’s grilling out or creating a perfect outdoor living space to watch the big game, many homeowners try to use their backyard as a small oasis.

Costco has great deals to make it all happen. I found a three-burner Weber gas grill for $849.99, which is $100 off the original price. There’s also a four-piece Sunjoy outdoor furniture set for $2,499.99, which is $500 off the original price.

3. Help complete a home remodel

Sometimes, the house you buy doesn’t quite look how you want it to. Paying someone to renovate the house could get very expensive, especially with the average home renovation cost reaching $22,000.

But if you get some help from a craftsperson partnered with Costco, you could save big bucks. Costco offers a 10% Shop Card when you purchase one of its home services like new flooring, cabinet replacement, or countertop installation.

So, if you spend $1,000 on a Costco renovation service, you could earn a $100 Shop Card. These are like gift cards for use on Costco purchases. That’s a nice bonus for something you’d spend money on anyway!

4. Save money on moving day

There are many hidden costs when moving, like packing supplies, renting a temporary storage unit, and paying movers to help you load up your stuff. The average cost of a local move is $1,250.

Costco members can get a little relief on moving day costs by taking advantage of the 25% discount when renting a moving truck through Budget.

Depending on the size of the truck you rent and for how long, this could significantly reduce your moving expenses and make your move a little less stressful.

5. Bundle your home and auto insurance

When I first bought homeowners insurance, I never looked closely at the policy or its price. I took my real estate agent’s recommendation and never considered comparing quotes. I could have saved money by bundling home and auto insurance, but I didn’t even know about that concept at the time.

Costco says its members save an average of $595.86 in auto insurance savings the first year when they switch to its CONNECT insurance, which is offered by American Family Insurance.

Moving is stressful and expensive, but using your Costco membership to save some cash could make the process a little less painful. Whether you’re renovating your new digs, buying new furniture, or shopping for home insurance, there’s likely a Costco discount you can take advantage of. I wish I had!

Top credit card to use at Costco (and everywhere else!)

If you’re shopping with a debit card, you could be missing out on hundreds or even thousands of dollars each year. These versatile credit cards offer huge rewards everywhere, including Costco, and are rated the best cards of 2024 by our experts because they offer hefty sign-up bonuses and outstanding cash rewards. Plus, you’ll save on credit card interest because all of these recommendations include a competitive 0% interest period.

Click here to read our expert recommendations for free!

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.Chris Neiger 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.

“}]] Read More 

You don’t need a lot of money to start some businesses. Read on to find out which ones you can launch with low start-up costs. [[{“value”:”

More than 5 million businesses were started last year. But while many people have an entrepreneurial streak, coming up with business ideas can be challenging.

Even more difficult is knowing which business ideas won’t require a large initial investment. As someone who’s been self-employed as an independent contractor for 12 years, I understand how important it can be to keep start-up costs low.

Here are five affordable business ideas that almost anyone can start.

1. Consulting

I once worked for two national associations doing public relations and online marketing. When I became a full-time writer, I thought I wouldn’t use those skills anymore. I was wrong. I’ve been asked to work on projects on a freelance consulting basis for similar organizations, using my experience in a new way.

Many companies need experienced professionals who understand the nuances of their industry. If you have years of experience in a field, your skills in creating marketing plans, business management, or financial oversight could be in high demand. For example, Indeed says technology consultants — who help companies decide what tech to use for their services — are paid an average annual salary of $82,885.

2. Dropshipping

If you’ve ever bought a dayplanner from a specialty website or ordered a custom-made T-shirt for an event, you’ve probably interacted with a dropshipping company.

With dropshipping, you set up an e-commerce site with your own products, such as stickers, socks, artwork, etc., but outsource the printing and shipping to another company. Without the need to have lots of inventory on hand, you can start your dropshipping business with little cash.

To host an e-commerce site through Shopify, you’ll spend about $29 per month, plus a fee when you make a sale.

3. Sell something on Etsy

While there’s a lot of competition on Etsy these days, it’s still a very affordable place for people to sell their goods online. Etsy charges $0.20 per listed item on its site and takes a small cut for each item sold. Those start-up costs are low compared to launching a brick-and-mortar store with rent costs, utility expenses, insurance, and employee payroll.

Just be sure to temper your expectations for how much you’ll earn. While some people successfully tap into niche markets on the platform, the average annual income of Etsy sellers is between $2,900 and $46,000. That’s a huge range, which means you’ll likely have to start slow before making this your sole source of income.

4. Subscription boxes

This past Christmas, I bought a wooden box at a craft store, painted it, decorated the inside with greenery and Spanish moss, and added my wife’s personalized gifts. When I was all done, it looked exactly like an expensive subscription box (if I do say so myself!).

Packaging materials and gifts can be relatively inexpensive when found online, and so can bulk items for gifts. I’ve seen many subscription boxes on Etsy, some selling for $144 per box.

While competition is increasing, there’s also a lot of demand. Payment processor Stripe says the global subscription box market was worth $31 billion last year.

5. Start a newsletter

Creating your own daily, weekly, or monthly newsletter is relatively inexpensive, and nearly anyone can do it. With a newsletter, you can combine your writing skills with a topic you’re passionate about, like investing, cars, or the environment, to gain a following and earn income.

I’ve read plenty of great content through Substack newsletters and have seen a few colleagues launch their own paid subscription newsletters.

You can launch a Substack newsletter and start accumulating subscribers for free. Just know that once you turn on paid subscriptions, Substack charges a 10% fee for each transaction, and you’ll have to pay applicable credit card fees.

Still, a newsletter is a low-cost way to start a side business, with nothing more invested than your time.

There are many ways to start a small business, but these ideas are good places to start if you don’t have a lot of cash. It’ll likely take a significant investment of time to get your business started and generating income, so remember to be patient with the process.

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.Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Etsy. The Motley Fool has a disclosure policy.

“}]] Read More 

New construction has its benefits. But check this must-do off your list before signing a contract for a home build. [[{“value”:”

There are many reasons why today’s housing market is a frustrating one. There’s the fact that home values are up, mortgage rates are high, and inventory is scarce.

In April, there was a 3.5-month supply of homes for sale, according to the National Association of Realtors. It can take a six-month supply of available homes to meet buyer demand, and a lack of available homes is what’s been driving property values up.

If you’re tired of spinning your wheels to find the perfect home, you may be ready to consider building one yourself. Some new construction opportunities allow you to sign a contract that allows you to customize your home’s features to your liking. And while a newly built home might come at a higher cost — and lead to more expensive mortgage payments — the benefit is not having to make improvements or repairs when you first move in.

But if you’re going to buy new construction, there’s one important thing you need to do first. Take it from me — someone who bought new construction and had a truly awful experience.

Know what you’re getting yourself into

Years back, my husband and I sold our starter home and wanted to upsize. There was little inventory in our area, so we decided to work with a builder to create the house we’re still in today.

Before we signed that contract, I looked at photos of our builder’s work. I also took a tour of the home they’d completed on our street just a couple of months prior. I liked what I saw, and the price worked, so I moved forward. But I made a huge mistake.

One thing I didn’t do was ask people who had worked with our builder what their experience was like. Had I done so, I may have learned that while the work ultimately got done, our builder was hard to communicate with, inaccurate with timelines, and shady in terms of charging extra for upgrades.

Here are some of the major issues I had with the building process:

My home’s completion was delayed for about five months beyond its estimated date, forcing me to pay for temporary housing and storage.My builder frequently blew off update requests, leaving me to scramble when it came to renewing my temporary month-to-month lease.My builder up-charged me for items that were supposed to be included in my purchase contract, like granite countertops.

I suggest you read more about my experience to get a sense of the many things that can go wrong when building a home from the ground up.

Now, that doesn’t mean those things will happen to you. The best way to know, though, is to see what experiences other homeowners had with your buyer before signing a contract.

Do your research before buying new construction

If you have a good real estate lawyer, they can protect you from certain “gotchas” in a new construction contract. Our builder tried to sneak in an escalation clause allowing them to charge us up to 10% more of the price we initially agreed on in the event that their costs came in higher. My lawyer negotiated that out of our contract, potentially saving us up to $50,000. It’s important to find a great lawyer and have them review your contract with you.

But it’s not your lawyer’s job to vet your builder. That’s your job, and it’s something you should make sure to do before moving forward with a new build.

What I suggest is talking to at least three homeowners who have worked with your builder before, and in different developments if possible. Ask them questions that include:

Was the builder responsive and easy to communicate with?Was the builder’s completion date accurate?Was the builder honest?Was the work up to your standards?

It’s common for people who do home improvements to ask for endorsements before signing on with a given contractor. Given that you’re talking about your entire home, it definitely pays to do the same with your builder.

Unfortunately, I only relied on my builder’s final product when deciding whether to work with them or not. Had I dug deeper, I would’ve potentially spared myself a world of aggravation and disappointment.

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