What I’ve Been Up To

This Week In Your Wallet: How Much To Have In Your Savings Account

Dear Evan Hansen cleaned up at the Tony Awards Sunday night. That was expected. So is the fact that — unless something wildly unforeseen happens — the Federal Reserve is going to announce another quarter-point hike in the fed funds rate tomorrow.

Both have ramifications for you as a consumer. Re: the former: If you haven’t snagged tickets yet, prices are likely going nowhere but up if you want to see 23-year-old Ben Platt, who snagged an individual award for the role. (Nothing has been confirmed, but I’m hearing whispers that he’s likely leaving in December.) As for the latter, that benchmark rate set by the Fed affects interest rates for almost all credit products with variable interest rates — credit cards, adjustable-rate mortgages and home equity lines of credit — and it will probably mean paying at least a few dollars more via on your monthly bills, reports CNBC. The change in all products tied to the prime rate should follow on the heels of the Fed’s   bumped-up interest rates, reports CNBC.

The decision, when it’s released, will tell us more about the Fed’s overall view of the U.S. economy and where rates could head over the long term. Another hike is penciled in for September, but Fed expressed a “tepid” economic outlook in its March statement, meaning rate hikes could come at a slower pace in the future. I’ll give you a recap on Twitter when it happens.

For Home Buyers And Sellers

While we’re on the economy… If you’re about to dip a toe into the housing market, know this: It’s a seller’s market. Demand for homes has surpassed supply in most areas of the country, which means buyers should expect “heavy competition,” reports The New York Times. In April, the national median sale price for previously owned homes was $244,800, a 6 percent increase from the year before, according to the National Association of Realtors. Adding to the competition? The fact that three million would-be first-time home buyers have been “shut out” of buying a home in the past ten years, but they’re returning to the market, reports CNN Money. There were two million first-time buyers in 2016, which represents a 15 percent increase from the year before.

All of which means: If you’re a buyer, the best strategy is to prepare. Calculate ahead of time how much you might need to save for a down payment and how much it will cost to live in the place once you own it. This affordability calculator from Zillow can help. I also wrote a piece for The Balance that gives an idea of “unexpected” home buying costs you might incur. And if you’re a seller? You may want to paint the place to pad your pocket even more. Exhibit A: Homes with rooms painted in light blue or pale blue/gray shades can sell for up to $5,440 more than expected, reports Zillow.

Saving Your Way To Independence

I get this question all the time: “How much do I really need in my savings account?” First, know that just asking means you’re taking steps to be engaged with your financial future. That’s a step in the right direction. When it comes down to concrete numbers, the Federal Reserve Bank has determined $2,000 is the average amount a consumer will need to resolve a crisis, reports CNN Money. So make that your first  goal. Once you’re there, it’s time to set a new one, especially since crises often come in groups, and a lost job can mean you’ll need a much larger cushion. And if you’re having trouble, consider putting the Digit app on your phone, which analyzes your spending patterns and silently socks away money according to your savings goals. The first 100 days are free; after that it’s $2.99 a month, but users are saving an average of $70 to $180 monthly.

Making Your Money Work As Hard As You Do

And don’t just stop at saving. Make sure you’re putting your money to work. “If you are human, you are a good candidate to be investing your money.” That’s a quote from my Facebook Live interview with Business Insider. Twitter liked that. And I stand by it. Money in savings is good in an emergency, but it will likely mean losing money over time. (The average U.S. inflation rate is around 3 percent, so if you kept money in a savings account with less than 1 percent interest, the cash would depreciate. The markets, on the other hand, have a historical return of about 7 percent — making up for inflation plus growing beyond that.)

On that note, CNN Money has a piece on becoming financially independent in five years. The key? You might’ve guessed it: Investing. “The sunshine that makes most retirement funds grow is compound interest,” they write, “and it takes time to grow.” So whether you’re planning to retire 5, 10 or 50 years from now, it’s important to figure out how much of your after-tax income you need to save to get to your retirement target — and then automate those savings. I have a calculator here.

Have a great week,

Jean