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Life Changes

With record-high home prices and soaring mortgage interest rates, homeownership has become increasingly unaffordable.
To make matters worse, everyday home expenses cost the average homeowner $14,155 a year, not counting the typical mortgage payment, according to a June report from Zillow and Thumbtack.

Prospective buyers visit an open house for sale in Alexandria, Virginia.
Jonathan Ernst | Reuters

With record-high home prices and soaring mortgage interest rates, homeownership has become increasingly unaffordable — and hidden costs can surprise first-time buyers, experts say.
Indeed, everyday home expenses, including utility bills, property taxes, insurance and home maintenance, cost the average homeowner $14,155 a year, not counting the typical mortgage payment, according to a June report from Zillow and Thumbtack.

Many homebuyers just focus on the principal and interest of their mortgage payment, said certified financial planner Vince Darling at the Stonebridge Group in Forest Lake, Minnesota. “This can lead people to penny-pinch once they move into a new home.”

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Here are three of the most common surprise homeownership expenses and how to prepare for each one, according to experts.

1. Property taxes

As a first-time homebuyer, it’s easy to overlook property taxes since you’ve never paid those levies directly. Rates often vary widely by city or county, making it harder to plan for the bill.
Based on your home’s assessed value, it’s important to know which jurisdictions levy the taxes and how often reassessments happen, said Richard Auxier, senior policy associate at the Urban-Brookings Tax Policy Center. “A good person to call up would be the local representative,” he suggested.

2. Homeowners insurance

Another major expense can be homeowners insurance, with an average yearly premium of $1,428 for $250,000 in dwelling coverage, according to Bankrate.

However, it can be significantly higher in disaster-prone areas, said CFP Kevin Brady, vice president at Wealthspire Advisors in New York. These policies may not cover key weather events, so check your coverage carefully, he said.
Typically, you’ll need separate policies for floods and earthquakes. You may face a separate deductible and provisions for hurricanes and other windstorms.
With premiums on the rise, you may start shopping for a policy and gathering quotes before putting in a home purchase offer.

3. Home maintenance

The cost of home repairs and maintenance can also be a hidden expense for first-time homebuyers.
Annual maintenance costs soared to an all-time high during the second quarter of 2023, reaching $6,493, compared with —$5,984 one year prior, according to Thumbtack.
While a good home inspector can prepare prospective buyers by sharing the condition of a roof or major systems that typically need replacing at set intervals, many experts recommend extra savings for inevitable expenses.

As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least.

Nicole Sullivan
Co-founder of Prism Planning Partners

“As a first-time homebuyer, you need to make sure you have a sufficient cushion for surprises — I’d argue 5% of the home’s purchase price at least,” said Nicole Sullivan, a Libertyville, Illinois-based CFP and co-founder of Prism Planning Partners.
“Be aware that anything that comes up on the home inspection will need to be addressed and could happen sooner rather than later,” she added. More

Job openings and layoffs dropped slightly for another consecutive month in July, according to government data released Tuesday. 
“It’s not because things are necessarily contracting, it’s just normalizing somewhat,” said Elise Gould, a senior economist at The Economic Policy Institute, of the job market.

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Job openings and layoffs dropped slightly for another consecutive month in July, according to government data released Tuesday. That slowdown is a sign the labor market is getting back to pre-pandemic patterns, economists say.
The number of job openings edged down to 8.8 million in July, dropping from 9.58 million in June, reported the U.S. Bureau of Labor Statistics in its monthly Job Openings and Labor Turnover Survey. Quits also declined 3.5 million, while layoffs and discharges slightly fell to 1.6 million.

While the drop in job openings was significant, the reduction is due to little turnover, said Elise Gould, a senior economist at The Economic Policy Institute. The elevated amount of job openings observed in the past few years was not necessarily signaling an overheated job market, but rather a higher rate of “churn” as people quit and found new jobs at a faster rate, she said.
However, as that churn declines, so will the number of job openings.
“It’s not because things are necessarily contracting, it’s just normalizing somewhat,” she said of the labor market.
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Where workers are still quitting at high rates

The number of quits increased 18,000 for state and local government education, JOLTS data shows.

However, it’s typical to see more quits around this time. July 1 is when the fiscal year typically starts for state and local governments, so contracts change on this date, said José Fernández, an economist and associate professor at the University of Louisville.
While education is also highly cyclical, data has yet to show if this jump in quits was a seasonal effect or a long-term trend, Gould said.

Meanwhile, the number of quits declined in accommodation and food services, down 166,000, and arts, entertainment and recreation, down 17,000.
Positions in these lower-wage sectors tend to have the highest turnover because workers can lose their jobs more easily, Gould said. Quit rates coming down in these sectors show that workers may not see other opportunities to pursue.
“Wages haven’t been rising at the same rate in those lower-wage professions as they had been earlier on in the pandemic,” Gould said.
Workers are staying put, she added.

What to expect in Friday’s jobs report

The labor market has shown consecutive declines in the past few months. Here are a few indicators economists are monitoring ahead of Friday’s jobs report.
The Black unemployment rate serves as an indicator for signs of trouble, since recessionary times often hurt historically disadvantaged groups first, Gould said. 

It will also be important to see job growth for prime age workers continue to rise and nominal wage growth to continue its deceleration. The Federal Reserve pays attention to wage growth to make policy decisions on interest rates.
“Somehow we’ve had a soft landing so far, the labor market has been incredibly resilient to the Federal Reserve’s actions against raising interest rates so quickly and so high — I hope that we continue to see that,” Gould said. 
“But I also hope that we let the labor market feel the full effects of the interest rate hikes that we’ve already had before they raise them again,” she added. More

Workers are reporting financial stress amid higher prices due to inflation and more expensive debt due to rising rates.
New provisions that were signed into law to help employers offer emergency savings may take time to implement, experts say.

A shopper makes their way through a grocery store on July 12, 2023 in Miami, Florida.
Joe Raedle | Getty Images News | Getty Images

As high inflation persists, many workers may be struggling to come up with the cash to cover an unexpected emergency expense.
To that point, 63% of employees are unable to cover a $500 emergency expense, according to a new survey from SecureSave, a provider of a financial technology platform to help employers provide emergency savings benefits.

In another sign of trouble, hardship withdrawals, whereby emergency money is taken from a retirement account, are on the rise, according to recent reports.
“All people are really looking for in life is to be secure, to not have to worry about if something goes wrong, what are they going to do?” said personal finance expert Suze Orman, a co-founder of SecureSave.
“The only way you can ever be secure is when you have savings,” Orman said.
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New changes included in Secure 2.0 — a law signed into law in December that focuses on improving retirement savings — aim to make it easier for workers to build and access emergency cash.

But experts say it may take some time before workers have access to those features.

‘Scratching and clawing’ to find emergency money

Respondents told SecureSave they would either turn to a friend or family member for money, with 19%, or cover the expense with a credit card, with 18%. Just 4% would ask their employer for help, according to the survey of 1,600 adults taken between June and July.
Even high earners are struggling, with 64% of employees who are earning more than $100,000 indicating that financial stress has affected their productivity at work. Meanwhile, 35% said they are living paycheck to paycheck, and 64% said their financial stress has affected their work productivity.
“People are out of pandemic money” and have racked up credit card balances and are still paying higher prices due to inflation, said Devin Miller, co-founder and CEO of SecureSave.
“They’re scratching and clawing to find money they can anywhere,” Miller said.

Secure 2.0 emergency savings provisions

The Secure 2.0 legislation that was signed into law in December included two changes aimed at helping to make it easier for workers to access emergency cash.
The first change made it so employees may save up to $2,500 in after-tax money in a separate account alongside their retirement accounts. Workers would potentially be automatically enrolled in the programs, which would defer the money automatically through payroll deductions.
The second change would allow workers to withdraw up to $1,000 per year penalty free from their retirement plans per calendar year to cover emergency expenses. Those funds would need to be repaid within a certain time frame before an employee could make another similar withdrawal.

While those new optional features were slated to be included in retirement plans as soon as 2024, there may be some delays.
“It looks like the $2,500 in the in plan is not going to be immediately adopted until there’s a much more certain regulatory world,” said Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute.
It may take another two to three years before the $2,500 emergency savings provision makes a difference, Copeland estimated.
Meanwhile, the $1,000 provision may be more easily adopted next year, particularly for plans that are already providing hardship withdrawals, he said.
The Secure 2.0 legislation includes a lot of mandatory changes for 401(k) plan record keepers that need to be built and deployed, Miller noted. The IRS recently announced a two-year delay to a Secure 2.0 change that would have required retirement catch-up contributions made by high earners to be done with after tax money.
Because the $2,500 emergency savings feature is optional, it may take more time to develop, Miller said.

New awareness of need for emergency savings

However, experts say the legislative changes are still a big step forward for emergency savings.
“This whole conversation has really brought to the fore the importance of emergency savings and emergency savings accounts,” said Emerson Sprick, senior economic analyst at the Bipartisan Policy Center.
Now, the financial industry, consumer advocates and others are starting to think about what comprehensive emergency savings coverage could look like, he said.
“We’ve made this permanent connection between retirement security and short-term emergency savings,” Miller said.

“There is this important dynamic between improving people’s short-term liquidity and how that improves their retirement readiness,” he said.
Employers who are interested in offering emergency savings benefits are largely focusing on plans outside of the Secure 2.0 provisions, Copeland noted.
SecureSave, which provides those plans, is anticipating rapid growth in the next 15 years, according to Miller.
Some employers like Starbucks have added emergency savings plans for workers. Meanwhile, BlackRock has a philanthropic emergency savings initiative that is working with companies like Levi’s to make plans accessible to employees.
For workers, these benefits offer a new opportunity to change their savings behavior, according to Orman.
“The employees understand very well why they want it, why they need it,” Orman said. “Who really needs to understand it is the employer.” More

After a three-year pause, millions of Americans with federal student loans will have their first payment due in roughly a month.
Here’s how the lending system has changed during the pandemic.

Jlco – Julia Amaral | Istock | Getty Images

After a three-year pause, millions of Americans with federal student loans will receive their first bill in roughly a month.
When borrowers get their bills in October, they’ll be interacting with a lending system that has undergone several changes since before the pandemic.

Here are four of the adjustments you can expect.

1. A new servicer, for some

Millions of federal student loan borrowers will have a different servicer when payments resume in October.
That’s because several of the lenders that managed the debt for the government — including Navient, the Pennsylvania Higher Education Assistance Agency (also known as FedLoan) and Granite State — stopped doing so during the pandemic-era pause on bills.
Impacted borrowers should get emails about the change, said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for federal student loan servicers. These notices are supposed to explain any steps you need to take, Buchanan said.
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Higher education expert Mark Kantrowitz has been tracking the transfers.
Borrowers previously with FedLoan should be transferred to MOHELA, or the Missouri Higher Education Loan Authority, he said.
Meanwhile, those who were serviced by Granite State will now be with EdFinancial Services. Accounts with Great Lakes Higher Education should be managed by Nelnet going forward, Kantrowitz said.
And Navient’s borrowers will be moved to Maximus Federal Services/Aidvantage.
You can check to see if you have a new servicer at StudentAid.gov, Kantrowitz said.

2. Another repayment option

Federal student loan borrowers can now sign up for the Biden administration’s new loan repayment plan, and they could be enrolled in it by the time the bills resume.
The administration estimates that up to 20 million people could benefit from the additional Saving on a Valuable Education, or SAVE, plan, which will cut many borrowers’ bills in half.
Some of the benefits of the plan won’t fully go into effect until next summer, due to the timeline of regulatory changes. But eventually, instead of paying 10% of their discretionary income a month toward their undergraduate student debt under the previous Revised Pay As You Earn Repayment Plan, or REPAYE, borrowers will pay just 5% of their discretionary income under SAVE.

Even before the drop to 5%, many people will see lower bills. That’s because the SAVE plan also increases the income exempted from the payment calculation to 225% of the poverty line, from 150%.
As a result, single borrowers earning less than $32,800 or a family of four making under $67,500 will not owe loan payments anymore if they enroll in the option. If your student loan servicer can’t process your application for the SAVE plan by the time payments resume, it should place you in a temporary forbearance.
“The SAVE plan is very generous to borrowers, almost like a grant after the fact,” Kantrowitz said.

3. A smoother road to loan forgiveness

The Biden administration has recently taken a number of steps to improve the various loan forgiveness programs offered by the federal government, including income-driven repayment plans and Public Service Loan Forgiveness.
On the income-driven repayment plans, the Education Department will make sure borrowers’ previous and ongoing payments are properly calculated so that they get the debt forgiven they’re promised after a certain amount of years (usually 20 or 25). Borrowers should also get credit for certain previously ineligible periods, including any months during which they made late payments.
Similar improvements have been made to Public Service Loan Forgiveness, and a recently released tool makes it easier to apply for the debt cancellation after 10 years of payments and employment in an eligible public service job.
In the meantime, President Joe Biden has said he’s pursuing another path to deliver broad student loan forgiveness after the Supreme Court blocked his first attempt at doing so in June.

4. Protection from late penalties

For an entire year after student loan payments restart in October, borrowers will be shielded from the worst consequences of missed payments.
For example, loans will not go into default and delinquencies will not be reported to credit reporting agencies, Kantrowitz said. Late fees won’t be charged, either.
But as is the case with a forbearance, interest will continue accruing on your debt while you don’t make payments. As a result, Kantrowitz recommends borrowers start repaying their bills, if they can.
“Doing otherwise will eventually hurt them,” he said. More

The number of Americans who say they are stretched thin has remained stubbornly high, according to several reports.
Federal Reserve Chair Jerome Powell recently called for continued vigilance in the fight against inflation, warning there may even be more interest rate increases to come.

Inflation ‘remains too high’

But in recent remarks, Federal Reserve Chair Jerome Powell said inflation “remains too high” despite those positive indicators, and warned that more interest rate hikes are still possible.
Central bank officials have already raised rates 11 times, pushing the Fed’s key interest rate to a target range of 5.25% to 5.5%, the highest level in more than 22 years. 
Already, four out of five consumers’ spending habits have been affected by inflation, according to TD Bank’s annual consumer spending index.

“Consumers are undoubtedly continuing to feel the impact of inflation and rising interest rates,” said Chris Fred, TD Bank’s head of credit cards and unsecured lending.

Lower-income workers have been the hardest hit by higher prices, particularly for food and other necessities, since those expenses account for a bigger share of the budget, studies show.
Now, 78% of consumers earning less than $50,000 a year and 65% of those earning between $50,000 and $100,000 were living paycheck to paycheck in July, both up from a year ago, LendingClub found. Of those earning $100,000 or more, only 44% reported living paycheck to paycheck. 

Financial stress all around More

The Consumer Financial Protection Bureau has been cracking down on so-called junk fees, especially from financial institutions.
Many banks have lowered their overdraft and non-sufficient funds fees as a result, but now ATM fees are hitting new highs, according to a recent report.

eclipse_images | E+ | Getty Images

ATM fees rise while overdraft and NSF fees fall

“ATM fees are biting harder than ever,” said Greg McBride, Bankrate’s chief financial analyst.
The average total fee a customer pays for an out-of-network ATM transaction rose to $4.73, a record high, Bankrate found, based on data from non-interest and interest accounts. This total combines the average fee the out-of-network ATM owner charges, $3.15, with the average fee the customer’s own bank charges the customer for the out-of-network transaction, $1.58.

On the upside, overdraft fees and non-sufficient funds fees are now significantly lower. The average overdraft fee fell 11% to $26.61 from last year’s average of $29.80, while non-sufficient funds fees hit an all-time low of $19.94, on average, according to Bankrate.

However, few banks have done away with them altogether: 91% of banks still charge overdraft and 70% charge non-sufficient funds fees, Bankrate also found.
Last month, the CFPB ordered Bank of America to pay more than $100 million to its customers and $150 million in penalties for double-dipping on overdraft fees, among other violations.
“Despite recent progress in addressing overdraft fees, the job is far from complete,” said Nadine Chabrier, the Center for Responsible Lending’s senior policy counsel, in a statement.

Monthly fees can be hard to avoid

While free checking accounts are widely available, many banking customers are encountering monthly service fees and rising balance requirements, Bankrate found.
More than a quarter of checking account holders, or 27%, are regularly hit with fees, which can add up to an average of $24 per month, or $288 per year, according to another survey from Bankrate. 
The average fee on an interest checking account is typically even higher, while the average yield is just 0.05%.

“Avoid accounts that require stranding a balance to avoid [monthly service] fees when you can get a free checking account and move your excess funds into an online savings account at a time when yields exceed 5%,” McBride said. (Here are a few more competitive options worth considering.)
“Consumers can almost always avoid other account fees by using direct deposit, maintaining a minimum balance or limiting the use of ATMs that are not affiliated with their bank,” said Mike Townsend, a spokesperson for the American Bankers Association. “If you must use an ATM outside of your bank’s network, consider a larger withdrawal to avoid having to go back multiple times or using the free cash-back feature on debit card purchases.”
Some banking interest groups countered that offerings such as overdraft protection provide a much-needed safety net.
Without the option of overdraft protection, “people are more likely to turn to predatory lenders, hurting the same people the administration seeks to help,” Jim Nussle, president and CEO of the Credit Union National Association, said in a statement.
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Following the lead of buy now, pay later plans, credit cards are also offering similar plans for existing borrowers.
Experts say it’s important to read the fine print and consider all your borrowing options.
Credit card buy now, pay later plans include American Express Pay It Plan It, My Chase Plan and Citi Flex Pay.

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After making a big purchase with your credit card, you may log in to see your card balance and notice a new option to segment that purchase out and pay a lower interest rate on it over a fixed amount of time.
The offer may sound tempting, given today’s record-high interest rates on debt, which now average 20.5% for credit cards, according to Bankrate. But experts say you should think carefully before clicking “agree” to those terms.

Credit card buy now, pay later plans include American Express Pay It Plan It, My Chase Plan and Citi Flex Pay.
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The options rival BNPL options from companies such as Affirm, Afterpay and Klarna that let borrowers pay for purchases over time. While those started with a typical model of four interest-free payments over six weeks, offerings have since extended to higher rates over more time, according to Ted Rossman, senior industry analyst at Bankrate.
While those BNPL companies are acting more like credit card issuers, the latter, in turn, have taken on features similar to BNPL, he noted.
The choices come as rising interest rates have made carrying debt more expensive. The latest data shows consumers are struggling under rising balances, with total credit card debt recently topping $1 trillion for the first time.

For consumers considering their borrowing options, credit card BNPL programs are like “the least dirty shirt in the laundry,” Rossman said.
The credit card deals may carry more costs than other BNPL plans and may come with more extended timelines, noted Matt Schulz, chief credit analyst at LendingTree.
“These programs can vary fairly widely, so it’s really important people do their homework,” Schulz said.

1. Weigh the costs

While credit card interest rates average 20.5%, the BNPL credit card programs often come with a 9% or 10% rate, Rossman noted.
“One of the nicest things I can say about the 10% rate is just that it’s not 20%, but is that really your best option?” Rossman said.

Part of what people love about buy now, pay later is its predictability and transparency.

Matt Schulz
chief credit analyst at LendingTree

While that BNPL-like rate is better than what a credit card would generally charge, it’s still at or near a double-digit rate, he noted.
Other BNPL options offered by fintech companies may offer a range of interest rates between 0% and 36%, he said.
“Part of what people love about buy now, pay later is its predictability and transparency,” Schulz said, with regular monthly payments that make it easier to budget.
“But you have to weigh whether that predictability is worth potentially paying a little bit extra for,” Schulz added.

2. Beware the fine print

Prostock-studio | Istock | Getty Images

Generally, credit card BNPL options include either a set monthly fee instead of interest or paying a certain amount of interest over the life of a loan, Schulz said.
Additionally, there may be minimum purchase amounts required to access credit card BNPL options.
“Fine print is always important, but especially when you’re talking about significant purchases that you’re trying to finance,” Schulz said.
Generally, you are still able to earn credit card rewards on these purchases, he said.
But because BNPL options on credit cards kick in after you’ve made a purchase, the balance will count toward your total credit utilization, a measure used in determining your credit score. Consequently, choosing to pay a balance off over time may lead to a higher utilization ratio — the amount of credit you’re using versus the total credit available to you — which may lower your credit score.

3. Consider other options

Images By Tang Ming Tung | Digitalvision | Getty Images

Other companies specializing in BNPL options may not report those balances to credit bureaus, though the Consumer Financial Protection Bureau is working on changing that.
However, having multiple BNPL plans is not ideal.
Other borrowing options, such as offers for a 0% balance transfer or 0% introductory annual percentage rate card, may be a better choice, Rossman noted. Those deals may last as long as 21 months, he said.
Retailer-specific financing programs may also help plan for bigger purchases. However, it’s important to beware of deferred interest, which can leave you paying retroactive interest if your balance isn’t paid in full after a stipulated timeframe.
For borrowers with existing debt, nonprofit credit counseling may provide rates of 7% to 8% over four or five years that may rival the best personal loan rates, Rossman noted. More

Putting hundreds of dollars a month toward student debt may leave some borrowers unable to save for retirement.
With student loan bills about to restart after a three-year pause, experts have tips on making progress on both fronts.

Francisco Javier Ortiz Marzo | Istock | Getty Images

In a month or so, millions of Americans will have to adjust their budgets to once again put hundreds of dollars a month toward their student debt.
Their retirement savings may suffer as a result, experts warn.

“Workers are already facing obstacles to saving for retirement, especially inflation and market volatility,” said Adrian Miguel, director of advice at Schwab Retirement Plan Services. “The resuming of student loan repayments poses another challenge.”
Before the pandemic-era pause on federal student loan payments, which has now been in effect for over three years, research showed the debt was making it harder for borrowers to salt away money for their old age.
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Around a third of employees who had student debt were not contributing to a workplace retirement plan for which they were eligible, according to findings by Fidelity. The share of student loan borrowers saving at least 5% of their salary in their 401(k) retirement plan swelled to 72% during the payment pause, from around 63% prior to the Covid-19 pandemic.
“The payment pause is the first time that many borrowers received any sign of relief since they took on their loans, which for some could mean 10 or more years,” said Jesse Moore, senior vice president and head of student debt at Fidelity Investments.

Experts shared tips on how borrowers can pay down their student debt and keep growing their retirement nest egg.

‘Every little bit helps’

Before student loan payments restart, borrowers should make sure they know how much their monthly bill will be, Moore said. Shifting to a plan with a lower monthly payment, if available, can free up money for retirement savings and other goals.
If your payment seems too high to allow you to also save for retirement, explore the different repayment plans offered by the U.S. Department of Education. The Biden administration is working to roll out a plan in which borrowers pay only 5% of their discretionary income each month to their education debt. It’s also worth researching debt forgiveness programs.

It’s understandable to be eager to get out of debt, but if you delay saving in favor of accelerating your student loan repayment, you’ll miss out on the decades of compounding growth it takes to accumulate a healthy retirement savings. In fact, the younger you begin saving, the less you need to put away each month to meet your retirement goals.
“Remember, every little bit helps,” Moore said.
Starting in 2024, many companies will start to offer retirement match contributions when employees make their student debt payments.
“Be sure to check in with your employer on any updates to your benefits,” Moore explained.

Try to get full employer match

Paying down your debt is a form of saving, said Boston University economist Laurence Kotlikoff. That’s because it’ll free up more money for you down the road.
“So don’t worry excessively about saving less in the short term” for retirement, Kotlikoff said.
At the same time, you want to at least contribute enough to your workplace retirement account to get your employer’s full match, if they offer one, he said. The most common matching formula is 50 cents for each dollar contributed by the employee, up to 6% of pay, according to research from the Plan Sponsor Council of America.
You won’t be able to get that kind of return anywhere else, experts say. If you don’t contribute, you miss out on those matching dollars.

Consider lifestyle changes

Experts recommend examining your spending over the past few months and seeing where you can cut back as the resumption of student loan payments nears.
Cutting out even a few small expenses, such as a second coffee a day or a few subscriptions, can free up extra money you can redirect to bigger financial goals.
Some people might explore bigger changes, such as pursuing a different line of work or asking for a raise. Others might explore moving to another city where the cost of living is lower, particularly if their employer allows for full-time remote work. More