Money Management

Your home might be a very valuable asset in retirement. But here’s why you should make a point to save money instead. [[{“value”:”

Many people struggle to save for retirement because, well, it’s not easy to part with money that can be used for other things. But not saving for retirement could leave you cash-strapped as a senior, and that’s a scenario you don’t want to face.

But what if you own a home and you’re on track to have its mortgage paid off in time for retirement? And what if your plan is to downsize your home and use the money you make from its sale to live off of?

It’s not an unreasonable idea in theory. But here’s why it might fail in practice.

When moving isn’t so easy

Rather than fund a retirement plan during your working years, you may choose to put your money into a mortgage with the goal of owning your home outright by the time your career ends. From there, you can always downsize, bank the difference, and live off of those savings.

So for example, let’s say you expect your home to be worth $1 million by the time you retire. And let’s say you expect to downsize to a home that you only have to spend $250,000 on.

You could conceivably take that remaining $750,000 (a bit less if you have to pay a real estate agent commission), invest it, and then live off of that sum. And in some ways, that’s really not so different from having a $750,000 IRA or 401(k) to take withdrawals from.

Here’s the problem, though. When you’ve lived in your home for many years, leaving it can be easier said than done.

Buying a much less expensive home could mean having to move to not just a different neighborhood, but a different city. From there, you could lose your social network and the other comforts you’ve come to love, like the park down the street or the cafe around the corner where the person behind the counter knows your daily order by heart.

Also, while plenty of retirees do successfully downsize, you never know if finding a replacement home will be a challenge. What if there’s very limited inventory at the time your retirement kicks off, kind of like there is now? What if you encounter mobility issues that make it so moving to a third-floor condo isn’t as good as staying in the oversized ranch you raised your family in?

These are all points to strongly consider before you make your home and its equity your back-up plan for retirement income. You don’t want to bank on selling your home, only to find that it’s not as feasible as you thought it would be.

Try to save something

You may find it difficult to fund a retirement plan when you’re already covering so many bills. But do try to save and invest some amount of money each month, even if it’s a modest sum. Over time, it could add up to a lot.

In fact, let’s say you contribute $300 a month to a retirement account over a 30-year period. If your investments in that account deliver a 10% average annual return, which is consistent with the stock market’s average, at the end of that savings window, you’ll be sitting on about $592,000.

Once you bring money with you into retirement, that money is yours. But it may prove harder than expected to convert a home you own into retirement income. So don’t make that your go-to plan for your senior years, as it could seriously backfire on you.

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Many adults don’t know how much it costs to raise children before becoming parents. You may want to review these shocking child care stats before having kids. [[{“value”:”

Being a parent is hard work. In addition to preparing for the everyday responsibilities of raising a child, it’s wise to consider the financial implications of being a parent before having kids.

Child care is an essential but costly expense for working parents and can significantly impact their finances. I’ll outline a few statistics about child care costs in the United States. Some stats may surprise you, but it’s better to be informed so you can financially prepare accordingly.

1. Parents spend an average of $766 weekly to hire a nanny

Care.com, a platform connecting parents with caretakers, examines the average child care costs yearly in its annual Cost of Care Report. According to Care.com’s 2024 Cost of Care Report, Americans spent $766 weekly to hire a nanny for their child. If you want to hire a nanny, which is an option for your child to have more personalized care and attention, you should prepare to spend a significant amount of money on this child care expense.

2. Parents spend an average of $321 per week on daycare

The study examined other child care costs. In 2023, parents spent an average of $321 on daycare costs. This is an increase of 13%, considering parents spent an average of $284 per week on daycare expenses in 2022.

It’s worth mentioning that care costs can vary greatly depending on your child’s age and whether you’ll be enrolling one or multiple children. But as you might imagine, spending hundreds of dollars on care every week can quickly drain a family’s checking account.

3. Families spend 24% of their household income on child care

The above Care.com study also found that the average U.S. family with kids spends 24% of their household income on child care. Considering other living costs like rent and mortgage payments are typically high for many households, that’s a lot of money to spend on child care.

If you’re considering raising kids, review your current household expenses and determine whether you can afford to spend 20% or more of your income on child care. Budgeting apps can help you assess your current spending and follow a budget to maximize your household income and stretch your dollars further.

4. It costs over $310,000 to raise a child

If the above stats weren’t shocking, this one likely will be. According to estimates from the U.S. Department of Agriculture, it would cost $233,610 to raise one child to age 17.

However, this stat was issued in 2015, and everyday living costs, including child care expenses, have increased significantly. Parents of young children or adults considering having children in the coming years should plan to pay more to raise a child to adulthood.

According to a 2022 Brookings Institution analysis of the above USDA data, assuming an inflation rate of 4% for a child born in 2015, it would cost $310,605 to raise a child until age 17. The cost will likely continue to rise over the coming years.

Plan accordingly to avoid additional financial stress

While these stats may be shocking, it’s good to know them. If you plan to have kids, you want to ensure you can afford to cover their needs. Preparing for the financial responsibilities of parenthood can help you reduce your stress and allow you to give your kids a comfortable life. Check out our personal finances resources for additional financial tips and guidance.

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A balance transfer could make it easier to shed your debt — but only under the right circumstances. Read on to learn more. [[{“value”:”

As of the fourth quarter of 2023, U.S. credit card balances sat at $1.05 trillion, according to TransUnion. So if you’re carrying a balance yourself, you’re certainly not alone.

The problem with credit card debt, though, is that the longer it lingers, the more interest you could end up accumulating. And that could make your debt very costly.

Let’s say you owe $5,000 on a credit card charging 18% interest. If it takes you three years to pay it off, it’ll cost you $1,507 in interest. If you end up needing four years to pay off your balance, it’ll cost you $2,050 in interest.

Tip: You can use a credit card interest calculator to figure out what your balance will cost you based on your payoff window.

That’s why it’s in your best interest to try to pay off your credit card debt as quickly as possible. And you may decide to do a balance transfer to make that process easier.

If you move your existing credit card balances over to a new card with a 0% introductory rate, you’ll get a break from racking up interest for a period of time. That could make it easier to dig your way out of that hole. But if you’re going to do a balance transfer, there’s one important detail you’ll want to be mindful of.

See how long your introductory period lasts

Balance transfer cards usually give you a limited period of 0% interest. But the length of that period can vary substantially from one card to the next. So it’s important to pay attention to that specific detail when choosing your balance transfer offer.

Some balance transfer cards, for example, give you 0% interest for only 12 months. But you may find a card that gives you 0% interest for 18 or 21 months. The more time you get without accruing interest, the greater your chances of being able to whittle your debt down to $0.

But be warned — once your introductory period comes to an end following a balance transfer, the interest rate on your remaining balance could soar. So it’s actually really important to try to pay your balance off by the end of that introductory window.

A personal loan may be a better bet

While a balance transfer might offer you a limited-time reprieve from accruing interest on an existing balance, if you’re not convinced you’ll be free of your debt within that timeframe, then you may want to look at a personal loan instead. Note that a personal loan won’t give you 0% interest for a limited period of time. You’ll automatically sign up to pay some amount of interest with a personal loan.

However, the upside is that you might pay a lot less interest on a personal loan than on a credit card. And knowing your interest rate on that loan is fixed could help you tackle your debt with less stress.

In fact, it’s important to be realistic about your time frame when you’re looking at paying off debt. If you don’t think you can get rid of that debt within a given credit card’s intro period, then a personal loan may be a better choice.

You can always try to pay off that personal loan ahead of schedule, to potentially minimize the interest you pay on it. But that way, you won’t run the risk of going from 0% interest on your debt to a really exorbitant rate that keeps you trapped in that unwanted cycle.

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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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My husband and I want to make sure we’re on the same page about money and making progress in building our net worth. Find out how we do it. [[{“value”:”

Managing your personal finances is an ongoing project, and you’ll most likely be working on building your net worth throughout your lifetime. If you are married or in a committed relationship, this is probably something you’ll be doing with your spouse or partner. Your shared life means your money management skills will affect each other.

Since my husband and I want to end up with a good amount of money in our bank and brokerage accounts over time, we have a few key money conversations each year to make sure we’re on track toward the financial success we’re hoping to achieve. Here’s what those conversations are — along with why it can be helpful for you to do the same.

Are we still excited about the goals we’re working toward?

The first big thing we look at is whether the long-term and short-term financial goals we’ve set for ourselves are still appropriate.

In many cases, accomplishing big goals requires sacrifice. We can’t necessarily just spend whatever we want if we need to make sure we’re saving enough. And this can sometimes lead to resentment, conflict, or even outright dishonesty. In fact, a survey conducted by The Motley Fool Ascent found that 82% of couples have argued over a purchase, and 71% have committed some form of financial infidelity, such as hiding an item’s purchase price or lying about a purchase altogether.

Having an annual conversation about whether we’re both excited about the goals we are working toward can help us reframe all this sacrifice into something worthwhile. If we are both really passionate about what we’re trying to achieve, then we can both be committed to doing what’s necessary to make it happen.

If you’re in a relationship, you should have this talk, too. It helps you recast the sacrifices into something exciting to look forward to. And it also ensures you’re both OK with the things you’re giving up to get something better in the future.

Do we need to set any new long- or short-term goals?

The next big thing we discuss each year is whether we need to set some new objectives. We don’t use our credit cards or finance most purchases using loans. Instead, if we want to go on vacation or buy a new car, we pay cash to do so.

Because of this, we need to check in with each other and see if there’s anything we need to add to our list of things we’re working towards. If one of us really wants to go on a special trip or if we will need a new car soon, we need to discuss and plan for it.

Having this conversation is also important for couples. You don’t want to have a dream vacation in your brain, only to discover too late that your husband’s car is on its last legs and the money you’ve been socking away has to go for that instead.

Do we need to make any changes to our expenses?

Finally, we consider whether we need to make any big changes to our expenses. See, we’ve stopped living on a budget. Instead, we keep our fixed expenses to below 50% of our income, save 20%, and spend the difference. Since we don’t watch every dollar, it’s helpful to check in with each other once a year or so and make sure we haven’t started overspending too much in any one area.

Whether you live on a more traditional budget or not, though, it’s helpful to discuss any spending changes upfront once a year. This helps you ensure that your spending aligns with both of your values. You can do this by reviewing credit card and bank statements to see where your money is going and discussing whether that works for you both.

By having these conversations, you can ideally head off conflict by looking at the big picture. You’ll be making certain that you’re both on track and working toward building a financial future that will provide the security and happiness you both deserve.

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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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