Simple tips for money, life, and more,
just using a little common cents.
Is it always smarter to pay cash for a car if you can afford it? Not necessarily. Avoiding a monthly payment can feel like the safest choice in retirement. You buy the car, eliminate the debt and have one less bill to worry about each month. But the bigger question is where that cash will come from. If you have enough money in savings to pay for the car and still maintain a healthy emergency fund, paying cash may make sense. You avoid interest charges and do not have to work a car payment into your retirement budget. The decision becomes more complicated if you need to pull a large amount from a retirement account. Money withdrawn from a traditional IRA or 401(k) is generally treated as taxable income. Taking out enough to buy a car could increase your tax bill. It may also push your income high enough to affect what you pay for Medicare in a future year. That means a $50,000 car could require a withdrawal of more than $50,000 once taxes are considered. Financing may allow you to spread those withdrawals over several years. It can also help you keep more cash available for medical expenses, home repairs and other unexpected costs. The interest rate matters too. If the loan has a high rate, paying cash becomes more attractive. If affordable financing is available and your money can remain invested or earning interest, financing may be worth considering. But future investment returns are never guaranteed. A possible return in the market should not automatically be treated as better than the guaranteed cost of a loan. The monthly payment also needs to fit comfortably within your retirement income. A car payment that forces you to withdraw more from savings every month could create another financial problem. The better choice is not simply cash or financing. It is the option that protects your taxes, monthly income and available savings. Before buying, look at the full cost of each option. Include the interest, possible taxes on withdrawals and how much cash you would have left afterward. A financial or tax professional can also help you understand how a large withdrawal could affect your specific situation. Having enough money to pay cash does not always mean paying cash is the smartest move. In retirement, keeping your overall financial plan healthy matters more than avoiding one monthly bill. Source: Forbes
When you think about successful stocks, you probably think about big technology companies or businesses that seem to be in the news every day. But one of the most consistent companies in the stock market does something much less exciting. It provides water. American States Water recently increased its dividend by 8.2 percent. That marks the 72nd year in a row the company has given shareholders a larger annual dividend. The company has paid dividends every year since 1931. A dividend is money a company pays to people who own its stock. If you own shares, you may receive a payment every three months. It can provide income without requiring you to sell your investment. American States Water now pays about $2.18 per share annually. Its dividend has grown at an average annual rate of about 8.7 percent over the past decade. The stock currently has a dividend yield of around 2.5 percent. So how has a water company kept this going for so long? Water is something people need regardless of what is happening with the economy. American States Water operates regulated water and electric utilities. It also provides water services to military installations through long term government contracts. That does not mean the stock is guaranteed to go up or that its dividend will always increase. Utility companies spend heavily on pipes, treatment systems and other infrastructure. They can also be affected by debt, interest rates and decisions from government regulators. The larger lesson is not that everyone should rush out and buy this particular stock. It is that investing does not always have to be exciting. A business that provides an essential service, earns steady income and regularly shares some of that money with investors can quietly build wealth over time. Sometimes the companies getting the least attention are the ones doing the same important job year after year.
Thinking about buying a house? You are probably watching mortgage rates almost as closely as the price of the house itself. And right now, those rates are keeping a lot of people from making a move. Existing home sales fell 1.7 percent in July compared with June, according to new housing data released this week. That puts sales at an annual pace of about 4.06 million homes. That is the second straight monthly decline. The biggest problem is pretty simple. Buying a house is still expensive. Mortgage rates moved higher during July and recently reached around 6.7 percent for a 30 year mortgage. When rates rise, even a little, the monthly payment on a house can change enough to push some families out of the market. But here is the interesting part. Fewer sales have not necessarily meant cheaper houses. The median price of an existing home in July was about $434,100. That is 2 percent higher than a year ago and not far from the record set in June. There are also fewer homes available. About 1.54 million homes were on the market at the end of July, slightly fewer than both the previous month and a year ago. That creates an unusual situation. Buyers are struggling with high prices and high interest rates. At the same time, many homeowners who already have mortgages at much lower rates have little reason to sell their house and take on a new mortgage near 7 percent. So both sides are waiting. First time buyers may be feeling this the most. They represented only 29 percent of July home sales. Historically, that number has been closer to 40 percent. For anyone thinking about buying a home, the number to keep watching may not be home prices. It may be mortgage rates. A meaningful drop in rates could make monthly payments more manageable and bring more buyers back into the market. It could also convince more current homeowners that it is finally time to sell. Until then, the housing market may continue to feel like what it has become for many families. A waiting game.
