Money Management

Drivers need to have auto insurance beyond what’s required. Find out about four crucial types of protection almost every driver should sign up for. [[{“value”:”

Auto insurance isn’t a fun purchase but it’s a crucial purchase to avoid financial disaster. More than 6 million auto accidents happen across the United States each year, and auto thefts are on the rise with more than a million vehicles stolen in 2022. Cars can also be damaged or destroyed by many other causes, including falling trees or vandalism or hail.

Every driver needs to make sure they aren’t forced to drain their bank account to pay for repairs or replacement of their vehicle when something happens. Sadly, many only buy the minimum coverage and are left without financial protection.

To make sure this doesn’t happen, drivers should check to see if they have these four kinds of coverage because without them, they could be faced with a personal finance crisis.

1. Collision coverage

The average cost of a new car is over $48,000, with prices driven up by the fact that car makers tend to focus on pricey SUVs and have been dropping entry-level vehicles from their lineups. Unfortunately, this means that if a car is totaled in a crash and a driver must buy a new one, they’re looking at spending a lot of money. Repairs can also be expensive, so a driver could be out thousands even when a car is damaged but not destroyed.

If another driver caused the crash, their insurance should pay. But in single-vehicle accidents or when the policyholder is at fault, their insurance won’t offer any coverage at all unless they have collision insurance.

While some lenders require collision coverage for this very reason, it’s not required by law so some people view it as optional — but unless a policyholder is rich enough that they won’t care about paying cash to replace their car, collision coverage really shouldn’t be skipped.

2. Comprehensive coverage

A crash isn’t the only thing that could lead to buying a new car or needing extensive repairs. A lot of other things could go wrong, like a hailstorm, a tree falling on the car, vandalism, or car theft. These problems won’t be covered without a comprehensive policy.

Comprehensive policies pay for non-crash related costs, and they could save a policyholder thousands when a problem happens. Again, they’re optional unless lenders require them, but those who pass them up will be left with regrets if they have to pay personally to replace their car that fell into a sinkhole or was damaged by a tornado.

3. Rental car coverage

When a car is destroyed beyond repair, it can take a while for an insurer to cut a check and the policyholder to buy a new car. When a vehicle is being replaced, it can also take days or even weeks to be finished.

During this time, most people are going to need some kind of vehicle to get around — and that will probably have to be a rental since most people don’t just have a spare car sitting somewhere. Rental cars are expensive, though, typically coming in at more than $100 a day.

Rental car coverage is optional and usually not required by auto lenders. But it covers these costs, so policyholders don’t go broke paying to get around while they wait for a covered loss to be repaired or a check to buy a new car.

4. Gap insurance

Finally, gap insurance can be crucial for anyone with a car loan who may owe more than their vehicle is worth. That’s a lot of people, as data shows American consumers owe, on average $6,054 more on their loans than the market value of their cars.

Insurers typically only pay what a car is worth if it is totaled. If that’s not enough to pay off the remaining car loan balance, drivers get stuck paying it out of pocket for a car they don’t have anymore. Gap insurance can prevent this by picking up the difference.

Again, some lenders do require gap coverage, but it’s not required by law so it may be tempting to pass up. Don’t do that, though, as paying off a large loan for a totaled car could be a huge financial burden.

Passing up any of these four kinds of coverage is a bad idea for most people. Drivers should check their policies today to make sure they have all these coverages in place — and should let their car insurance company or agent know they want to buy them ASAP if they don’t.

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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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It’s Women’s History Month. Keep reading to learn why you should focus on retirement, saving more, budgeting smartly, and staying prepared. [[{“value”:”

Financial success is a journey that combines discipline, knowledge, and the willingness to act upon sage advice. Drawing inspiration from the practices and insights of some of the world’s most financially successful women, we can uncover the habits that underpin their achievements. Let’s delve into these personal finance habits, now enriched with specific advice from industry titans.

1. Have a retirement plan

Abigail Johnson, CEO of Fidelity Investments, hammers home one thing: knowing your money is crucial, especially when eyeing retirement. So, what’s her golden nugget of advice? It’s pretty straightforward — get yourself a retirement plan that does more than just guess your future expenses. Think you’ll need about $50,000 a year to live comfortably? Start figuring out how your Social Security, pensions, and savings can cover that.

Let’s break it down a bit. Say, for example, you calculate your must-have expenses (we’re talking the non-negotiables like your home, healthcare, and keeping the lights on) to be around $30,000 a year. Still, your guaranteed income (like pensions and Social Security) only adds up to $30,000. You’ve got to have a plan for covering the rest. Where’s that extra $20,000 going to come from? Investments in an IRA, a side hustle, savings?

2. Incrementally increase savings

Co-CEO and president of Ariel Investments, Mellody Hobson, suggests regularly increasing contributions to savings accounts like a 401(k), especially with salary raises. Say you’re earning about $50,000 a year. If you kick off by putting away 5% into your 401(k), that’s $2,500 yearly. Not too shabby, but here’s the kicker — with each raise, you bump up that percentage just a notch.

Over time, not only does this become a game of watching your savings balloon, but you’re also playing it smart by maxing out your contributions sooner than you’d think. It’s like turning a slow trickle into a powerful stream. This strategy is golden because it’s about making your future self seriously thank you, all while getting the hang of living well within your means today.

3. Budget religiously

Elizabeth Warren famously endorsed the 50/30/20 rule. It’s like the Holy Grail for managing your dough, and it’s something financial whizzes like Abigail Johnson probably nod along to. Why? Because it’s all about getting real with your expenses and ensuring you’re covered for the future.

So, here’s how it breaks down: 50% of your income goes to those must-have expenses (think rent, groceries, and, yeah, those pesky utility bills). Then, 30% is your fun money — this is for those dinners out, the latest gadgets, or maybe that yoga class you’ve been eyeing. Lastly, 20% is tucked away into savings or paying off debts. Simple, right?

But let’s put some real numbers to it. Imagine you’re bringing home $4,000 a month. According to this rule, you’d allocate $2,000 for essentials like rent and food, $1,200 for those “nice-to-haves,” and then $800 goes straight into your savings account or to chip away at any debt.

This approach isn’t just about keeping your finances tight now; it’s about ensuring your future self is sitting pretty.

4. Build an emergency fund

Ever wonder how folks like Oprah stay on top while some stars go from riches to rags? In a 2002 chat with Fortune, Oprah spilled the beans, revealing her secret weapon: a whopping $50 million tucked away just in case the skies turn stormy. It’s her way of ensuring she never finds herself financially in a tight spot.

Now, we might not all be aiming to stash away millions, but Oprah’s on to something. The idea? Keep some of your dough on the sidelines for those “just-in-case” moments. Whether it’s a surprise bill, a bumpy patch with your investments, or a sudden job hiccup, having an emergency fund is like having a financial safety net.

How much should you squirrel away? The pros suggest enough to cover your bills for three to six months. And if you can pop it into a high-interest savings account, that would be even better. Your emergency fund will slowly grow while giving you that Oprah-level peace of mind. Alright, maybe not Oprah-level, but you get the idea.

5. Use coupons

You might find it surprising, but actress Kristen Bell, yes, the star with a cool $40 million to her name, swears by couponing. And it’s not just about the thrill of scoring a deal; it’s a legit savvy financial move. Picture this: she went on Conan and spilled the beans about her love for snagging discounts, especially those 20%-off gems at former houseware retailer Bed Bath & Beyond.

It’s a brilliant reminder that stretching your dollar is always in style, no matter how much dough you’re rolling in. This isn’t just about pinching pennies — it’s about financial discipline, making every cent count, and managing your budget like a pro. So next time you’re about to pass up on clipping that coupon or using a discount code, remember, it’s not just for those watching every penny — it’s smart money management, Hollywood-approved.

By integrating these habits, inspired by the insights and experiences of financial leaders, any individual can pave their path to financial success. It’s about embracing literacy, planning meticulously, investing wisely, and living within your means, while keeping an eye on the long-term horizon and the broader impacts of your financial decisions.

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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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Many healthcare providers promote medical credit cards as an easy way to pay. But don’t apply before you know the risks involved. Here’s what to know first. [[{“value”:”

If you’ve been to the doctor or dentist recently, there’s a good chance you’ve seen promotional materials for medical credit cards. A medical credit card is a credit card that’s designed specifically to pay for healthcare expenses, though you can often use them for veterinary bills as well. The pamphlets you see often advertise no-interest financing.

These offers can be tempting when you’re dealing with the stress of a major medical bill or your pet needs expensive care. And given that about 14 million adults in the U.S. have medical debt in the amount of $1,000 or more, you’re certainly not alone if you’re struggling with the high costs of healthcare. But here are three risks you need to know about before you apply for a medical credit card.

1. The no-interest period isn’t quite what it seems

If you see a medical credit card that advertises a no-interest period, read the fine print carefully. Often, you’ll find that deferred interest will accumulate during that period.

Suppose you got a regular credit card with a temporary 0% APR. If you charged $5,000 on the card and still had a $1,000 balance remaining at the end of the no-interest period, you’d only get hit with interest on the $1,000 you owe.

But with deferred-interest financing, you get charged with the interest on the entire amount you financed. So in the example above, you could wind up owing interest on the $5,000 you charged to the medical credit card, even though you only had $1,000 remaining when the promotional period ended.

This may not seem important if you’re confident you can pay off your charges before the no-interest period ends. But according to the Consumer Financial Protection Bureau (CFPB), people paid deferred interest on about 20% of purchases made using a medical credit card between 2015 and 2020. When interest is charged, it inflates the cost by around 23%.

2. You could wind up with more costly care

Even if you don’t pay interest on your charges, a medical credit card could cause you to get pricier care than you needed. A 2023 CFPB report found that medical credit card companies sometimes market their products to providers with the promise that they’ll be able to offer more expensive treatments.

For example, one medical finance company advertised to providers that its credit product “gives you, the business owner, the power to upsell and increase your sales” if someone doesn’t want to pay the full upfront amount for a treatment.

3. You lose credit reporting protections

When you owe money directly to a healthcare provider or hospital, the debt won’t appear on your credit report until it’s at least six months delinquent due to recent credit reporting changes. Medical collections of less than $500 no longer appear on credit reports, either.

But medical debt becomes credit card debt when you charge it to a credit card — be it a medical credit card or a regular credit card. Once you use a credit card, you lose the reporting protections that apply to medical debt. Charges you make to a medical credit card have the same impact on your credit score as any type of credit card debt.

Alternatives to medical credit cards

It’s essential to take care of your health, and sometimes a medical credit card can be the best way to pay for the treatment you need. But be sure you consider the alternatives.

If you have health insurance, be sure you’ve contacted your insurance company to find out whether it’ll cover any of the cost. You can appeal the decision if your insurer refuses to pay for a service that you believe should be covered.

Also discuss whether you can work out a payment plan directly with your provider. This option is less widely available than it used to be, as many providers are steering patients who can’t afford to pay upfront toward third-party medical credit cards and payment plans, but it’s still worth asking. If you have a large hospital bill, you’re more likely to be able to work out a payment plan directly through the hospital, as many offer patient assistance programs.

Finally, if you need to pay with credit, be sure to compare your options. If you’re not sure whether you’ll be able to pay off a medical credit card before the no-interest period ends, you may be better off paying with a regular credit card with a temporary 0% APR. Once interest starts to accrue, the rates on a regular credit card are typically lower than you get with medical credit cards, plus you can avoid deferred interest.

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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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