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This Week In Your Wallet: Summer Travel Steals

Jean Chatzky  |  February 22, 2022

Plus taxable surprises, mortgage rates on the rise, & your latest millionaires next door.

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This Week In Your Wallet: Summer Travel Steals

I hope everyone had a great Presidents Day weekend. Maybe it was all the mattress sales that got me thinking about rest and relaxation (if you ever wondered what’s up with all those, we break it down for you here) or maybe it was seeing our new HerMoney book — How To Money —  on a list of must-reads for summer, but I started planning my first vacation in years. What I found was that prices are up — way up. For starters, rental car prices are up by 27% over this time last year, and hotel bookings are back up to where they were in 2019, with weekend room rates “higher than they’ve ever been” thanks at least in part to the wedding boom of 2022. There is one surprising bright spot, though — even with 50% more passengers expected to fly this year than last, airfares are down by 18% overall from 2019, according to Airlines for America, which represents seven major airlines. My advice? Grab some friends, snag the cheapest flight you can find, and check out short-term rentals on Airbnb or Vrbo with several bedrooms, then do the math. A HerMoney staffer discovered this week that while a nice London hotel room will set you back around $300 a night, a three-bedroom apartment in the same neighborhood (with excellent reviews) will only cost you $600. Split that three ways, and you’ve reduced your lodging costs by a third over what you’d pay for a hotel. Let us know if you see any incredible travel bargains on the horizon this summer, and we’ll put together a roundup of the best buys. 

Other costs to keep an eye on… 

Hotels aren’t the only skyrocketing cost these days. Mortgage rates are also set to rise before the year is over. So, what does that mean for those of us who want a house? For starters, the bad news: Rising mortgage rates won’t necessarily be a deterrent for other buyers, so, if you were hoping for an uptick in rates to yield a decrease in competition, think again. But, as Ron Lieber writes in The New York Times this week, there’s no need to rush in — this is actually a terrible time to be a buyer. (Professional investors are still buying homes, with all-cash bids that most buyers, particularly first-timers, simply can’t match.) So, if stiff competition has left you shut out of the real estate market, take this moment to breathe, and continue to save. Generally, when lenders look for their ideal customer, it’s someone who is spending no more than 35% of their income on housing. So, if you were already going to be pushing those boundaries before the market got white hot, then just keep squirreling away your funds for that as-yet-to-be-determined moment when the real estate skies clear to reveal the perfect property for you. 

Of course, healthcare. 

There’s an incredibly touching story on the devastating emotional and financial impact of caregiving in this week’s Wall Street Journal — it’s one I’ve heard before from my friend Amy Goyer, AARP’s family and caregiving expert. Amy spends her days understanding and advising on the challenges of elder care faced by an estimated 53 million of our nation’s family caregivers — but the situation in our country is so extreme, so utterly unnavigable at times, that she found herself filing for bankruptcy due to the costs related to caring for her parents. I’ve always been struck by Amy’s strength in sharing her story, and how she unflinchingly discusses how the unexpected costs of daily caregiving can be life-changing. Unfortunately, her story is not an uncommon one. On average, caregivers spend 26% of their personal income on caregiving expenses, according to AARP, and 12% end up taking out a loan in order to make ends meet. If you’re facing financial hardship due to caregiving responsibilities, know that you’re not alone. AARP has a caregiver resource guide that offers a breakdown of assistance and services by state — and don’t forget that your financial planner can be one of your best resources for all things related to budgeting and estate planning. Also, if it’s not too late, you can help your parent be strategic about when they claim Social Security, and what their moves for Medicare/Medigap need to be, in order to earn (and save) the most. 

Taxable Surprises 

We all know our wages are taxable, so what is it about our end-of-year bonus that always makes us wish we could just take it all, free and clear? There’s just something about that check that seems more like a gift for our hard work, somehow… but did you know that any big-ticket (non-monetary) gift from your employer may also be taxable? Yep. We’re talking about that new set of golf clubs, or that fancy handbag you were given for a job well done. You might owe taxes on that. You’ll also owe (at least federal) taxes on unemployment benefits, some scholarships, and Bitcoin profits, which would be taxed at your capital gains rate… If any of these are a surprise to you (some of them were for me) check out this full list of 11 surprising things that are taxable from Sandra Block at Kiplinger, at some point before April 15. 

The Millionaires Next Door… 

Lastly, if the warnings of a recession now looming at over 50% have you worried about the overall health of the economy and everyone in it, I’ve got a bright spot of news to share this week. In its quarterly retirement analysis, Fidelity Investments just reported that the number of millionaires who own IRAs, Thrift Savings Plans and 401(k)s has hit an all-time high. The number of 401(k) millionaires in the fourth quarter of 2021 jumped 32% to 442,000, while the number of IRA millionaires was up by 30%, to 376,100. As Michelle Singletary points out, They didn’t take a chance on speculating in cryptocurrency with its crazy volatility, or start a business that they then sold to some billionaire… Many never earned six-figure salaries. They’ve been investing for nearly three decades, taking every dollar offered by their employers in matching retirement plan contributions.” In other words, slow and steady really does win the race. (And if you’re curious how to get started with an IRA or 401(k), we’ve got you covered.) 

Have a great week, 

Jean 

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