Money Management

A $150,000 income might seem like a lot. But read on to see why in some parts of the country, it’s not a ton of money at all. [[{“value”:”

My friends Joe and Jill (not their real names) are hardworking folks. Joe’s an engineer of some sort (don’t ask me exactly what he does) and Jill’s a teacher in a low-paying district who loves her work and her students.

All told, they bring home a joint income of $150,000. And that’s an income you’d think would go pretty far, given that it’s about twice the median U.S. household income as of 2022.

But a big reason Joe and Jill are struggling financially is due to where they live. And unfortunately, despite having a pretty nice joint income, they’re barely scraping by.

When you live in a high-cost state

A lot of the reason Joe and Jill aren’t in a better place financially is because they live in New Jersey. They’re both from New Jersey, their families still live in New Jersey, and they can’t see themselves leaving New Jersey.

But the reality is that it takes a much higher income to live comfortably in the Garden State than in most of the country. Zillow puts the average New Jersey home value today at $503,432. Meanwhile, the average U.S. home value is $347,716. So generally speaking, homeowners in New Jersey are looking at larger mortgage payments.

Meanwhile, last year, the average property tax bill for New Jersey homeowners was $9,803. But based on recent numbers, the median property tax bill for U.S. homeowners is $2,971.

A big reason Joe and Jill have such a hard time saving money and managing their bills is that housing eats up almost 40% of their income, which is beyond the 30% threshold that’s generally recommended. Also, while Joe and Jill drove older cars for many years, they had to replace one of theirs a couple of years ago when vehicle prices were high. So now, they have an expensive car payment to make monthly, too.

Then there’s groceries, which is probably the biggest expense in their budget after housing and transportation. Feeding a family of four easily costs them $200 a week, and that’s with shopping at discount grocers and barely dining out.

All told, Joe and Jill have little savings and pretty much no money left over for extras beyond their basic bills. Their one big indulgence, if you will, is the money they pay so their kids can do extracurricular activities.

They don’t take vacations because there’s not enough money for it. And while they have been known to get financial help from their parents on occasion to cover expenses like home repairs, their parents don’t give them money on a regular basis because they can’t afford to. So all told, they’re a bit stuck.

It could pay to abandon a high-cost area

Joe and Jill feel stuck in New Jersey because they have roots here. Moving to a less expensive state would mean giving up their support system and struggling to see family. So for them, that’s not worth it.

You, on the other hand, may be someone who lives in a high-cost state without those same ties. If so, and your job is one you’re doing remotely, it could pay to run the numbers and see if it makes sense financially to move to an area with lower living costs on a whole. This could especially make sense if you’re self-employed, since conceivably, your income shouldn’t be based on where you live.

Now if you’re a remote employee, it may be the case that your company bases salaries on geographic location. So if you’re earning $100,000 a year now, your employer might slash your pay to $85,000 if you move to a ZIP code with much lower living costs attached to it. However, you might still benefit financially if you can pay a lot less for expenses like housing, so it may be worth looking into.

It’s easy to assume that a six-figure salary will make for a comfortable lifestyle no matter what. But in a state where the average property tax bill is almost $10,000 a year, that’s not a given.

Joe and Jill are trying to take steps to boost their income and improve their financial situation. You may want to do the same if you’re struggling. But also, if it works for you, consider relocating if the part of the country you currently call home is just overwhelmingly expensive.

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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.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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If you’re no longer paying for private mortgage insurance (PMI), you may want to save the extra money. Find out why one writer is making this money move. [[{“value”:”

Some homeowners pay for private mortgage insurance (PMI), an additional expense added to their monthly mortgage bills. This insurance coverage protects lenders when homeowners default on their home loans. I recently wrote about how I ditched my PMI after achieving 20% equity in my home. Find out what money move I’m making now that my monthly mortgage payment is more affordable.

Here’s why some homeowners pay for PMI

As noted above, PMI is an additional expense that some homeowners pay. If a home buyer purchases a home without a 20% down payment, their lender will charge them PMI, tacked on to their monthly mortgage payment. But those who make a 20% down payment when buying a home don’t pay for this insurance.

That’s why many financial experts suggest saving until you can afford at least a 20% down payment. But you don’t need to make a sizable down payment like this. I only made a 5% down payment when I bought my home. I couldn’t afford to put more down since I was paying nearly $20,000 after my 5% down payment, closing costs, and home appraisal and inspection fees.

It can be challenging for the average first-time home buyer to do this when additional fees like closing costs are involved. If you plan to make a smaller down payment when buying, you should budget for PMI so you’re not surprised when your first home loan bill arrives.

How much can you expect to pay for PMI?

PMI premiums vary, but it’s common for homeowners to pay between 0.5% and 1% of the total amount borrowed each year. If you buy a $340,000 home and make a 10% down payment ($34,000), you’ll be taking out a loan for $306,000. If your PMI premium is 1%, you’ll pay $3,060 annually or $255 monthly on this additional expense — which is a significant amount of money.

Here’s what I’m doing with the money I’m saving

Luckily, my PMI premiums were affordable. I was paying around $560 yearly for PMI. So it’s not a massive amount of money saved, but it’s something. Now that I have ditched my PMI, I will put the money I would have spent on this expense into my high-yield savings account.

Why? Owning a home is expensive, and surprise costs can pop up anytime. Even if you take good care of your home and handle necessary maintenance tasks, you may find yourself with an unexpectedly costly home repair bill. Being financially prepared can ease your stress.

I want to feel confident that I have plenty of money for upkeep and repairs as I continue to live in my home. By keeping my extra cash in a high-yield savings account, I’ll earn interest, which is bonus income. At this point in my financial journey, it makes the most sense to continue stashing extra cash in my emergency fund so I’m well prepared for the future.

Once you ditch your PMI, consider saving some of what you spent on the expense each month. Doing this can be a win for your personal finances. If you’re considering buying a home soon and will finance your purchase, review our list of the best mortgage lenders.

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If you need fast life insurance coverage as a senior, traditional policies may not make sense. Read on to learn about three smart policy options to consider. [[{“value”:”

Life insurance is typically pitched as something you should buy when you’re young and the rates are low. But if you didn’t get the chance until you became a senior, or your previous policy lapsed, you do still have options. That’s true even if you need to get covered quickly.

Here are three different types of insurance policies that you may want to consider.

1. Look into simplified issue insurance

According to LIMRA, there are over 100 million Americans who are either uninsured or underinsured. So if that’s you, you’re not alone. One quick option that you may want to consider to fix that is simplified issue life insurance. This type of policy doesn’t require a medical exam, but you will have to answer a few questions about your medical history.

So, unlike traditional life insurance, which can take weeks or even months to get approved due to the lengthier underwriting process, these policies can be quickly approved for qualified applicants. In fact, it may even be approved instantly, depending on the insurer. But the timing can vary.

Keep in mind, though, that rates can be higher than you’d find with traditional life insurance. And the available coverages can be lower, though still substantial. Most cap out at $100,000, with caps that are often subject to age restrictions, according to the Society of Actuaries. So you also need to shop around to find insurers that will both cover you based on your age and offer enough coverage if you go this route.

2. Try guaranteed issue life insurance

If you have significant health issues that could otherwise prevent you from being approved for traditional or even simplified issue life insurance, or would make it prohibitively expensive, a guaranteed issue policy may be the way to go. This type of policy does not have any medical requirements, such as an exam or questionnaire, to get approved. So, again, it can be issued quickly, especially compared to traditional life policies.

Just keep in mind that the death benefit may be graded. That means there would be a two- to three-year period after you first purchase coverage during which the policy would only pay out the premiums paid. After that, the full death benefit would apply.

As long as you fall within the age limits (which often top out at 80), you’re guaranteed to get approved. However, because these policies are available to anyone, the rates are often higher than traditional life policies for healthy individuals.

3. Consider a final expense policy instead

If the other life insurance options aren’t an option for you, but you still want a way to cover expenses such as funeral and burial costs, a final expense policy is an excellent option. It’s designed to cover those specific costs, though keep in mind that because of this, the payout may be significantly lower than what you’d find with a traditional life policy.

Typically, it covers up to $40,000 in expenses, though some insurers may only offer a few thousand dollars’ worth of coverage. As with the previous types of insurance, there is not typically a health-related requirement here, so approval can be swift. But keep in mind that the age cutoff may range from just 50 up to 85, depending on the insurer. So you’ll want to shop around to find the best option.

Buying life insurance as a senior can be expensive and time consuming. But if you’re willing to shop around for the best combination of speed and cost, you can likely find a policy that suits your needs.

Our picks for best life insurance companies

Life insurance is essential if you have people depending on you. We’ve combed through the options and developed a best-in-class list for life insurance coverage. This guide will help you find the best life insurance companies and the right type of policy for your needs. Read our free review today.

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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If you’re a busy gig worker, don’t miss out on valuable credit card perks and rewards. Here are some tips to help you choose the right credit card. [[{“value”:”

Being a gig worker or freelancer is hard work. As you grow your small business, using a credit card that earns rewards can be beneficial. Why? Earning rewards as you swipe your card for everyday purchases can be a win for your wallet. It’s essential to choose a credit card that meets your needs. Here’s how to choose the right credit card as a gig worker.

Keep your finances in mind

Be sure to keep your personal finances in mind. Some rewards credit cards have annual fees. If there is an annual fee, you’ll need to pay it yearly to access the benefits and earn rewards. However, there are also plenty of credit cards with no annual fee to consider.

Before applying for a new credit card, review your budget. If money is tight, don’t spring for a credit card with an expensive annual fee. The good news is that you can find a great rewards credit card with an annual fee of $100 or less. Here are a few no annual fee credit cards.

Review your spending habits

Some rewards cards and cash back credit cards offer flat-rate rewards for every purchase you make with your card. But others provide higher rewards for eligible spending in specific bonus categories. Review your spending habits to help determine the best credit card for you.

To maximize your rewards, you’ll want to choose a card that aligns with your typical purchases. A travel rewards credit card isn’t the best option if you don’t travel often. However, a dining and restaurant credit card might make sense if you dine out and order takeout regularly.

Don’t ignore card benefits

Many credit cards include valuable benefits that can improve your life. In addition to learning more about how the card earns rewards and how you can redeem your rewards, you should also review the included benefits. The best strategy is to choose a credit card with perks that you’ll use. Some credit cards have more plentiful perks, so compare multiple cards.

Consider a business credit card

You can apply for a business credit card if you’re an independent contractor who earns self-employment income. A business credit card can be a valuable choice for some gig workers. Explore personal and business credit card options to find the right card for your unique needs. Review our list of the best small business credit cards to learn more.

Choose a credit card that meets your needs

There are many excellent credit card options for gig workers like yourself. But make sure you choose one that works well for your lifestyle. Reviewing the card’s fees, benefits, and rewards program before applying for a new card can allow you to make a more informed decision.

Be sure only to spend what you can afford when using credit cards. You could overspend and rack up expensive credit card debt if you’re not cautious. Most credit cards have high interest rates, so credit card interest can quickly add up and cause financial stress.

If you need help managing your spending, one of the best budgeting apps may be helpful.

Ready to choose your next credit card? Check out our list of the best rewards credit cards.

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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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Is TikTok personal finance advice actually good? See what this expert thinks about TikTok finance ideas, without breaking your budget. [[{“value”:”

From “cash stuffing” to “loud budgeting,” TikTok has become a center of financial advice and video-friendly personal finance trends for Gen Z.

According to a survey from WallStreetZen, 76% of Gen Zers are using YouTube and TikTok to learn about personal finance. The most popular financial topics for Gen Zers to learn about on TikTok and other social media include budgeting (81% of Gen Zers), passive income (63%) and investing in stocks (59%).

But how much of TikTok’s financial advice is actually good? Personal finance is often too complicated to cover in a two-minute video, and not every “FinTok” influencer has professional training, official certifications, or fiduciary responsibilities. Is TikTok personal finance advice good overall, or could it be leading impressionable young investors down the wrong path?

We talked with Chris Rahemtulla, CFP®, ChFC®, CEPA®, and Wealth Senior Financial Planner, VP of Citizens Wealth Management, to see what an expert thinks about TikTok financial advice.

TikTok budgeting ideas are actually pretty good

“Loud budgeting” is one fun TikTok trend that took the personal finance world by storm — and it’s actually a healthy, useful attitude to bring to your monthly spending. This isn’t the only budgeting idea to come from TikTok. Chris Rahemtulla says budgeting is one area of advice found on TikTok that many find helpful.

“Budgeting can be one of the most challenging concepts in personal finance, regardless of someone’s age, or income,” Chris Rahemtulla said. “People can apply many budgeting strategies on TikTok to track their spending, build an emergency fund or save more. For example, one might use a budgeting app or name their bank accounts. Another idea is the 100 Envelope Challenge, which involves saving money in set envelopes ranging from $1 up to $100, with the idea that by the end, you’ll eventually save $5,050.”

If TikTok trends can help more people get proactive and creative about budgeting, and feel more in control of their spending, that is likely going to have good effects for Gen Z personal finances.

Good TikTok financial advice encourages saving and stability

Want to know the difference between “good” and “bad” financial advice on TikTok? Chris Rahemtulla says that the best TikTok personal finance advice is focused on saving and long-term investing, not get-rich-quick schemes.

“Good personal finance content on TikTok fosters financial stability and encourages growing wealth without exposing people or their families to unnecessary risk,” Chris Rahemtulla said. “This kind of content is fact-based and data-driven, using reliable sources such as a trusted, professional financial advisor.”

Chris says that TikTok finance trends have come up in financial planning conversations with his clients, which is a good sign that TikTok is motivating people to take some positive steps forward with their personal finances. “For example, #FrugalFebruary was a trending topic on TikTok that encouraged viewers to spend as little as possible to boost their savings,” Chris Rehemtulla said. “A client mentioned in a financial planning meeting that they were using Frugal February to save more. We used her interest in the budgeting trend to reset her financial habits and priorities and make sure she was doing the right things to remain on track to reach her financial goals.”

That’s a good rule of thumb for whether personal finance advice (on social media or in real life) is helpful: Is it helping you feel calmer and better-informed? Is it encouraging you to make small daily changes and long-term plans? Or is it making you anxious with aggressive sales pitches and excessive promises?

The best TikTok personal finance advice really can be good if it helps you achieve financial stability, instead of making risky bets. For example, WallStreetZen did an analysis of TikTok financial advice about buying stocks. The study found that out of all the stock picks and stock-buying advice on TikTok’s stock-related hashtags, 63% of TikTok stock advice was misleading.

TikTok financial advice can start larger conversations

Another benefit of TikTok personal finance advice, according to Chris Rahemtulla, is that it helps people start to talk more openly about money. When Gen Z (or people of all ages) can get more curious about finances or learn something new about managing money, even if it comes from a goofy social media trend or a short video, this can spark larger conversations that can help get people on the right track.

“Personal finance is a taboo topic for many and can be very difficult to discuss openly,” Chris Rahemtulla said. “However, the #FinTok hashtag on TikTok has helped many people overcome anxieties about money matters and empowered them to take ownership of their financial lives. Many of my younger clients decided to meet with a financial planner because they wanted to explore the savings and investment strategies they first saw on TikTok.”

Sometimes getting a baseline level of financial education on TikTok can give people the perspective and confidence that they need to go get further advice and expert help. If a TikTok video helps inspire more Gen Zers to get financial coaching or other professional financial advice, that will be a good thing.

Bottom line

Gen Zers often feel behind on their finances, because they’re young and just starting careers. Plus housing costs and auto insurance are more expensive than ever, and high inflation has been discouraging. TikTok personal finance advice can be a useful way for this younger generation to learn about money and start to make better moves as savers and investors. But try to use TikTok as a way to get inspired for budgeting and money-saving tips, not so much for “how to pick stocks.”

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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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