Money Management

An insurer totaling a car has financial consequences. Find out when an insurer decides this is the best course of action and what it means for motorists. [[{“value”:”

After a car accident, an auto insurance company usually pays the bills to repair a vehicle. This could be the policyholder’s own insurer if the crash was the policyholder’s fault. Or it could be the insurance company for another driver who was to blame for the accident.

In some situations, though, insurers don’t pay repair bills. Instead of covering the costs of fixing the car, they declare it a total loss. This is called totaling the car, and it potentially has some big financial consequences for the vehicle’s owner.

When does an insurer total a car?

An insurance company will typically declare that a vehicle is a total loss if the cost of repairing the car would equal or exceed what the car is worth.

Say, for example, a vehicle that’s worth about $15,000 suffers very serious damage and it would cost $20,000 to repair it. In this situation, it would make no sense at all for the insurer to spend $20,000 to repair a car worth only $15,000. Rather than doing that, the insurer will alert the vehicle’s owner that the car is being totaled instead.

What does having a car totaled mean for the owner?

When a car is totaled, the insurance company takes possession of the destroyed vehicle and sends the owner money to compensate them. The car’s owner will typically receive a payment equal to the market value of the vehicle at the time it was totaled.

If the payment is coming from their own insurer under their collision coverage, this payment will be made minus any deductible owed. If it’s coming from an at-fault driver’s insurer, the payment will be for the full amount of the car’s market value.

Unfortunately, the fact that the car owner just gets paid for what the car is worth can sometimes cause problems for the vehicle owner. That’s because:

The car may not be worth what the driver owed on it.The driver may not be able to buy a similar car for the amount of money they received.

Many people end up with a vehicle that they owe more on than it is worth, especially as people take longer car loans and make lower down payments. If the car is worth just $12,000 but the driver owes $15,000 on it, they’d have to come up with $3,000 out of their bank account to pay off the loan for a car they no longer own. Drivers can avoid having to pay this money out of pocket by buying a special kind of insurance called gap insurance, but that would have to be purchased before a crash happens.

A driver may not be able to afford a similar car

There are a few reasons this could happen. A driver who had an older model vehicle they maintained perfectly that was in great condition might simply not be able to find a similar car for the amount of a car insurance payout and may have to pay more for a newer model.

And new cars lose a lot of value after being driven off the lot. So someone with a relatively new car would find its fair market value well below what it would cost to buy a comparable brand new model. That’s why some insurers offer new car replacement to guarantee that a policyholder who totals a new car can get a similar model without being out a fortune.

Unfortunately, drivers don’t get a choice whether an insurer decides to total their car. They could try to appeal the decision and argue the car is worth more if there are grounds to do so. But an insurer simply won’t pay more than what a car is worth to repair it.

Motorists need to be prepared for this possibility and should consider buying gap insurance, as well as new car replacement insurance. This can help minimize the chances of big losses if their vehicle is declared a total loss.

Our best car insurance companies for 2024

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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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Taxpayers receiving a refund this year have an important decision to make. Take a look at three options to consider. [[{“value”:”

It’s funny how much time we spend trying to figure out how to save money on taxes, yet we don’t spend much time thinking about ways to make a refund work for us. For example, the average tax refund so far this year is a little over $3,200, but the average person doesn’t have much to show for it. What if this year was different, and you decided to make your refund grow? Here are three easy ways to make that happen.

RELATED: Best Tax Software

1. Jettison high-interest debt

If you have credit card debt, I don’t have to tell you that the current credit card interest rate is more than 22%. Let’s say you’re carrying $3,000 in debt, making a monthly payment of $85. At this rate, it will take nearly five years to pay the card off in full, and you’ll end up parting ways with $1,873 in interest payments.

That’s $1,873 you could have used to make small repairs around the house, enjoy a weekend getaway, or start a holiday fund.

If Benjamin Franklin was right and “a penny saved is a penny earned,” using your tax refund to pay off high-interest debt is like paying yourself $1,873.

2. Pad your emergency fund

Experts suggest we keep enough money to cover three to six month’s worth of expenses in an emergency savings account,. But let’s face it, saving that much sounds pretty intimidating. Whether your savings account is nearly at your goal or you haven’t begun to save, padding your emergency fund provides several benefits, including:

You’re less likely to panic if something unexpected happens, like an illness or a job loss.You’re less likely to be forced to use high-interest credit to pay bills if an emergency occurs.You’ll rest easier at night.

Again, imagine you deposit your $3,000 refund into an emergency fund. You decide to put it in a high-yield savings account to take advantage of today’s high interest rates. At a rate of 5.30% APY, your $3,000 would earn $159 in interest in one year. Better yet, if you let it ride, that $159 will earn its own interest. The longer you leave the money, the faster it begins to grow, thanks to compound interest.

3. Invest it

Roughly 25% of American households have no money saved or invested for retirement. That means no traditional IRAs, Keogh accounts, 401(k)s, 403(b)s, Thrift Savings Plans, or pensions. If you’re among those who have not begun to save for retirement, you may ask if there’s any point in doing so now.

The answer to that is yes. Here’s what would happen if you put $3,000 in a retirement account now, and that account averaged an annual return of 7%:

In 10 years, it would be worth $5,901In 15 years, it would grow to $8,277And in 20 years, it would be worth $11,609

But what if you added $200 per month to your IRA during that time?

In 10 years, you would have $39,061In 15 years, there would be $68,587In 20 years, it would grow to $109,998

Or you may already have a retirement account but want to save for something special in retirement, like a trip to see where your grandparents immigrated from or a classic car you can work on in the garage. You don’t have to start with a huge chunk of cash. Your tax refund will provide an excellent foundation for anything you add to it through the years.

Getting a tax refund feels good, even when we know it means we essentially loaned the government money interest-free. There’s a sense of feeling flush on the day that refund hits our checking accounts. Before you decide for sure what you want to do with your refund, though, determine whether you need to spend it now or if you can wait, watch it grow, and enjoy it later.

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

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“Loud budgeting” is a big TikTok trend with powerful effects on Gen Z’s personal finances. See how loud budgeters are saving over $600 per month. [[{“value”:”

“Loud budgeting” has arisen from unlikely origins on TikTok to be one of the hottest topics in personal finance. People are excited about loud budgeting because it’s a new way for Gen Z to talk about money — honestly, clearly, and “loudly.”

Gen Zers often feel overburdened by debt, underpaid in their paychecks, and overstretched at the grocery store. Loud budgeting is a way to openly discuss money, declare independence from “FOMO” and doom-spending, and regain control of your personal finances. According to a new survey from Clarify Capital, Gen Zers who use loud budgeting habits are saving an average of $629 per month.

Let’s look at the biggest benefits of loud budgeting, according to the Clarify Capital survey.

1. Reduced financial stress

Among the Clarify Capital survey respondents who are using loud budgeting, 57% said that these techniques and budget habits had reduced their financial stress. If money is keeping you up at night, it might be time to speak up about it — and start budgeting loudly.

Here are a few reasons why loud budgeting habits might lead to lower financial stress:

You’re aware of your monthly income and spending

Loud budgeters tend to devote time and attention to reviewing their finances. They don’t stick their head in the sand and avoid checking their bank balance — they face the situation head-on. Sometimes when you’re too stressed to look at the true picture of your personal finances, they become even more stressful. The problems become more manageable when you can size them up in the clear light of day.

You make intentional choices

Loud budgeting is about intention. Instead of helplessly “doom spending” because you feel like you’ll never have enough money and there’s no point in trying to save, loud budgeting lets you take control and make your money work for you. “No thanks, I’m not buying that,” you can say. “Sorry, I can’t go out for drinks tonight because I’m saving money.”

You set goals for your personal finances

Loud budgeters are good at prioritizing their most powerful financial goals. What’s more important to you: an expensive outfit or $500 in your bank account? Would you rather spend $2,000 on a vacation or boost your emergency savings fund? What if you could cook every meal at home for a month and save $600 on restaurants?

All of these loud budgeting habits can reduce your financial stress by helping you regain control of your money — and your life.

2. Financial empowerment

The second biggest financial benefit of loud budgeting, according to the Clarify Capital survey, was financial empowerment (52% of respondents). Loud budgeting is not just about numbers in the bank, it’s about how you feel about your personal finances and your self-image.

Gen Z is having a hard time. They feel financially stressed, and are bombarded with annoying social media images of young people their age who seemingly have unlimited money to spend on nightclubs, fancy restaurants, and international vacations. “What’s wrong with me, if I can’t afford those things,” they often think to themselves. “Am I a failure?”

Loud budgeting can help Gen Z declare their self-worth, in a way that has nothing to do with spending money. It’s a way to fight back against these unhelpful feelings of inferiority and “FOMO.” Just because someone on Instagram is having a happy-looking vacation in the Caribbean doesn’t mean their life is “better” — they might not even be able to afford those things; they might be living on credit card debt.

You never know the reality of someone’s financial situation unless you can see their credit score, bank accounts, and brokerage accounts. Loud budgeting lets you take care of your life, without comparing yourself to others.

3. Improved mental health

The Clarify Capital survey of Gen Z also found that “improved mental health” (44% of respondents) was the third most popular benefit of loud budgeting. Financial wellness can also mean better personal wellness. If you’re not stressing about money, if you’re not losing sleep about credit card debt, you’ll often have more energy and emotional bandwidth to take care of your body and mind.

Another aspect of budgeting that doesn’t always get measured by the numbers is how good it can make you feel. There are many ways to take better care of yourself that don’t require a lot of money, such as:

Cooking healthy meals at home from fresh ingredients instead of getting takeout every nightGoing for walks or bike rides at the park instead of joining an expensive gymHaving a “staycation” where you discover new sights in your own local community instead of going to a high-priced resort

Loud budgeting can be a new opportunity to not just realign your personal finances, but to rediscover simpler, healthier, more creative ways of life.

Bottom line

If you want to take control of your personal finances and save big money in 2024, consider jumping on the loud budgeting bandwagon. This is one TikTok trend that is actually offering good advice for your money and your life. Your bank account — and your mental health — might end up better off.

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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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The average cost of a wedding is around $30,000. Learn why borrowing that sum could be a bad move. [[{“value”:”

Weddings can be really expensive. In fact, the average wedding cost is about $30,000, which is a big chunk of change by just about anyone’s definition.

If you are tying the knot and don’t have $30,000 in your bank account just waiting to pay for your big day, you may be tempted to borrow for your wedding. A personal loan is one option to do that, as personal loans are flexible and many lenders are willing to offer loans valued at tens of thousands of dollars to qualified borrowers.

While you might be able to use a personal loan to pay for a wedding, there are three big reasons you could come to regret that choice.

1. You’ll start off your marriage with a new financial obligation

If you take out a personal loan to pay for your wedding, you’ll go into your marriage with a new shared obligation you have to deal with. While finding new ways to share your life is generally a good thing, bonding over a big new debt is not an ideal way to start off as newlyweds.

Research has shown that marital satisfaction decreases as debt levels increase. Further, couples with more debt fight about money more, spend less time together, and are more likely to end up divorced. Sadly, more than 70% of couples who end their marriage describe money conflicts as a contributing factor.

There’s no reason to purposefully create an additional potential source of stress before you even officially tie the knot. So, try to avoid taking on a big debt payment you’ll have to deal with just to have a lavish wedding.

2. Your wedding will cost you a lot more

Using a personal loan to pay for your wedding will make the high costs of this event even higher by tacking interest on.

The average personal loan interest rate is 12.35%. If you borrow $30,000 at 12.35% over five years, you will end up paying $10,359.09 in interest charges. So your $30,000 wedding — which was already expensive — actually becomes a $40,359.09 wedding!

Think about whether you’re really OK with paying so much — including thousands in interest — rather than scaling down to an affordable wedding you can afford to pay for with cash in your savings account.

3. Your monthly payments could make it harder to accomplish other financial goals

Finally, if you’ve committed to paying back a personal loan for years, that’s money you will not have available to do other things as a couple. That $30,000 loan at 12.35% would come with $672.65 in monthly payments if you took five years to pay it back. For the entire next five years, all that money will have to go toward paying for an event that’s long past, instead of toward saving for a shared early retirement or to buy a house.

You do not have to buy into the big wedding craze, especially if doing so would mean borrowing money to afford it. A simple, inexpensive wedding will get you just as married and make it more likely you’ll stay that way!

Our picks for the best personal loans

Our team of independent experts pored over the fine print to find the select personal loans that offer competitive rates and low fees. Get started by reviewing our picks for the best personal loans.

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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Do you love credit card rewards? See why the Capital One/Discover merger could help you keep earning points and miles in 2024. [[{“value”:”

Capital One recently announced that it’s buying Discover® for $35.3 billion. This deal would make Capital One the largest credit card company by loan volume.

But the deal is not done yet; it still has to be approved by federal regulators. Some Democrats in the Senate, including Senator Elizabeth Warren, are critical of the deal, warning that the creation of such a large credit card company would be bad for consumers.

The Federal Trade Commission (FTC) could sue to stop this deal. Sometimes the FTC intervenes and prevents corporate mergers from happening because it doesn’t want any company getting too big. The FTC is supposed to maintain competition in America’s free market so no company gets the power to fix prices or hurt its competitors with unfair business practices.

But I believe this deal deserves to go through. Capital One buying Discover is ultimately going to be a good thing for average credit card customers because it will create new competition for Visa and Mastercard. And the best thing about Capital One buying Discover is that it might save credit card rewards from being killed by Congress.

Let’s look at the surprising implications of Capital One buying Discover — and why credit card customers should root for this deal to be approved by the FTC.

1. Capital One is trying to compete with Visa and Mastercard, not eliminate competition for credit cards

The biggest reason why Capital One is buying Discover is because it wants to own Discover’s payment network. Discover currently has the fourth-largest payment network — Visa and Mastercard are the two biggest by far, and American Express is third largest.

Even though Capital One would become the biggest credit card company in some ways as a result of this deal, it’s not trying to wipe out smaller credit card companies. It’s trying to boost the performance of the smallest payment network.

I’m not an antitrust lawyer, but it seems that Capital One buying Discover is more likely to increase competition with the two biggest payment networks (Visa and Mastercard) than it is to reduce competition among credit card companies. There are still going to be plenty of other credit cards on the market for consumers to choose from.

But by becoming a bigger player in the payments network space, Capital One could motivate Visa and Mastercard to offer better deals to other credit card companies — and to merchants, restaurants, and retailers. Even if you’re not a Capital One or Discover card customer, your credit card experience might get better as a result of this deal.

2. Capital One buying Discover supports the goals of the Credit Card Competition Act

Before the Capital One/Discover merger was announced, Congress was considering a bill called the Credit Card Competition Act (CCCA). The goals of this bill are to change the way credit card companies work with payment networks to create more competition for Visa and Mastercard.

Supporters of the CCCA believe that more competition for payment networks would (hopefully) create lower-cost credit card swipe fees. And this would (ideally) drive down costs for consumers and small businesses. For example, what if swipe fees went down by 1%, and your restaurant tab or grocery store bill ended up being 1% cheaper, too?

However, opponents of the CCCA have warned that the bill — if it becomes law — could kill credit card rewards programs. That’s because credit card companies might have less financial flexibility to turn credit card processing fees into reward points.

I believe that anyone in Congress who supports the CCCA should also support Capital One buying Discover because the Capital One/Discover merger would help accomplish the biggest goal of the CCCA: creating more competition for Visa and Mastercard.

Dave Grossman is a credit card loyalty program expert and CEO of MilesTalk. He agrees that there’s a strong argument to be made that Capital One buying Discover is ultimately good for competition in the credit card industry.

“The theory behind the Credit Card Competition Act (CCCA) is that Mastercard and Visa have a duopoly, although I believe that this theory discounts the power of American Express, which is right on the heels of Visa and Mastercard in acceptance within the U.S. market,” Dave Grossman said. “Capital One will make Discover, over time, a formidable fourth player — increasing competition all on its own without the government intervention envisioned by the CCCA. And I believe that the CCCA would ultimately be bad for consumers.”

If the Capital One/Discover merger is allowed to go through and the CCCA doesn’t pass, that means your credit card rewards are likely to continue. And because of the new competition and innovative products that Capital One can offer by owning Discover’s payment network, the best rewards credit cards might get even better.

“This Capital One/Discover deal accomplishes what the CCCA set out to do, and on that merit the merger should be approved,” Dave Grossman said. “Whether or not it survives the politics of such a large merger is, of course, another matter entirely!”

Bottom line

No one knows for sure if the Capital One/Discover merger will survive FTC scrutiny. The FTC recently sued to block a proposed $24.6 billion merger of the Kroger and Albertsons regional supermarket chains. But if Capital One is allowed to buy Discover, there could be upsides for consumers. More competition for Visa and Mastercard could bring interesting innovations and better deals to the world of credit cards.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. The Motley Fool has positions in and recommends Mastercard and Visa. The Motley Fool recommends Discover Financial Services and Kroger and recommends the following options: long January 2025 $370 calls on Mastercard and short January 2025 $380 calls on Mastercard. The Motley Fool has a disclosure policy.

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