Money Management

Do you need a lot of time to open a CD? It depends. Read on to learn more. [[{“value”:”

Because CD rates have been pretty generous these past few months, a lot of people have decided to open certificates of deposit. And I was part of that trend.

Over the past six months, I’ve opened a few different CDs. And for the most part, the process was smooth.

But in some cases, opening a CD can require a bit of a time commitment on your part. So it’s important to know what to expect.

It’s the research that takes the most time

Opening a CD isn’t something you should dive into. Different banks have different rates on offer. It’s a good idea to research your options, which could take anywhere from a few minutes to an hour or more.

When I was looking at new CDs, it helped me to go in with a term in mind. For example, recently, I decided to lock in a 60-month CD, so I knew I only had to compare rates for that specific term across different banks.

And if you’re curious, the reason I opted for a 5-year CD is that I think the Federal Reserve is going to start cutting interest rates this year. And the reason I think that is because the Fed has basically said it.

Once that happens, CDs are likely to start paying less. So I wanted to lock in a good deal for a relatively long period of time while I could.

Opening a CD at your current bank could take minutes

One of the recent CDs I opened took under five minutes. The reason, though, is that I already held other accounts, like a savings and checking account, at that institution.

But while setting up my actual CD took almost no time, once that account was opened, I had to take some additional steps to designate beneficiaries. That took longer.

The CD I opened was a joint one with my husband. We wanted to make sure our three children were noted as beneficiaries on the account. To do that, I had to dig up each one’s Social Security number, since I don’t know them by heart, and enter additional information. So that process took about 15 minutes. That’s not terrible — but it’s a step you may want to budget some time for.

Opening a CD at a new bank could take longer

In researching long-term CDs, the best rate I found was at a bank I didn’t already have an account with. The process there, however, took a lot longer — almost 30 minutes. Not only did I have to enter more financial information (since the bank didn’t already have it, whereas my existing bank did), but I also then had to wait for different verification codes to arrive in my email so I could complete the process securely.

To be fair, this experience may have been unique to the specific bank I went with. You may find that opening a CD at a new bank is a faster process. But for me, it was a notable time difference compared to opening a CD at an institution I already banked with.

All told, you may have to put in a little time to research CD rates. The process of actually opening one may be quicker for you. But these days, there are plenty of CDs that are paying a higher interest rate than savings accounts. So if you have money you can afford to lock up for a period, then it pays to make the effort.

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Tax refunds are already coming in. Read on for ways to make the most of yours. [[{“value”:”

A lot of people dread the idea of having to sit down and file their taxes. And while you may not exactly be jumping for joy over the prospect, the sooner you submit your 2023 tax return, the sooner any refund you’re owed can hit your bank account.

The IRS has issued more than 2.6 million tax refunds so far this year. And as of Feb. 2, the average refund issued was $1,395.

Now it can be argued that it’s not really a good thing to get a tax refund, because if you do, it means you gave the IRS an opportunity to hang onto your money for a while interest free instead of you collecting it upfront. But if you’re due a refund, it’s also not something to cry about.

In fact, no matter how much your refund amounts to this year, you have a prime opportunity to use that money to better your financial picture. Here are a few ways you can put your upcoming refund to good use.

1. Boost your emergency fund

Do you have enough money in savings to cover three full months of essential bills? If not, then it definitely pays to take your refund and stick it into your savings account. Having a solid emergency fund could make it so that you aren’t forced to resort to debt when unplanned expenses suddenly pop up.

2. Pay off your credit cards

Maybe you racked up a balance on your credit cards during last year’s holiday season. Or maybe you had to charge some medical bills due to an accident that had you in the ER. Applying your tax refund to your credit card balance could save you a lot of money, since credit card interest can accrue daily. And if you owe money on a few different credit cards, aim to first pay down the balance with the highest interest rate attached to it.

3. Address home or car repairs you’ve been putting off

A home or vehicle repair might fall by the wayside if you don’t have the money to cover it. Once your tax refund comes in, address issues with your home or car so that they don’t escalate or put you in a position where you have to whip out a credit card to cover them. And if your car is older and beyond repair, use your refund toward a down payment on a replacement vehicle.

How to get a higher tax refund

If you haven’t yet filed your 2023 tax return, there may be a few things you can do to eke out a higher refund. First, if you didn’t max out your IRA in 2023, you have until this year’s April 15 tax-filing deadline to pump more money into that account. That could shield more of last year’s income from taxes, resulting in a higher IRS payday for you.

Next, make sure you’re claiming all of the credits and deductions you’re entitled to. A good rule of thumb is to compare the credits and deductions you’re claiming now to last year’s return to see if you’ve missed anything.

Finally, you may want to consider hiring a tax professional to handle your return. They might spot tax breaks you didn’t know you could claim, resulting in a higher refund.

Either way, the sooner you get your taxes done, the sooner you’ll have that extra money at your disposal. So if you’ve been putting off your taxes so far, consider that once you get moving, you can potentially start to address some important financial matters like the ones above.

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Unexpected vet bills can cause major stress. Here’s how to decide if pet insurance is the right investment for you. [[{“value”:”

Inflation drove up the costs of nearly everything in 2022 and 2023, but few expenses rose as quickly as vet bills. Veterinarian services climbed 10.8% from December 2022 to December 2023, according to the Bureau of Labor Statistics. And in some areas, the increase was even greater.

While some are comfortable continuing to pay for their pet’s expenses out of their own pocket, many are turning to pet insurance to ease the strain on their wallets. Here’s how to decide if you should invest in a policy this year.

What is pet insurance?

Pet insurance is similar to health insurance for humans. It pays for a portion of our furry companions’ vet bills if they become ill or injured. It may also cover common surgeries, like spaying or neutering. But a lot depends on the policy.

The cheapest pet insurance policies cover only accidents, while comprehensive policies cover illnesses and chronic conditions too. Some companies also offer add-ons that cover wellness treatments or routine visits.

Emergency vet visits for dogs can cost anywhere from $160 to $1,290, according to Rover.com, while cat emergency visits run anywhere from $215 to $1,615. By purchasing a pet insurance policy, pet owners can lessen the blow of these large bills by trading the occasional unexpected expense for predictable monthly payments. Many find this more manageable. It can also help them avoid choosing between their finances and their pet’s life if their dog or cat becomes gravely ill.

But premiums aren’t the only cost associated with pet insurance. There are deductibles the owner must pay before the pet insurance policy kicks in. And just about every policy has copays as well. This can be as high as 30% of the vet bill. So even with insurance, owners will still need to set aside some money for emergency costs.

It’s up to each pet owner to decide whether pet insurance is a wise investment for them. It doesn’t hurt to get a few quotes to see what’s out there, though.

How to find the best pet insurance

Finding the best pet insurance begins the same way as shopping for any other type of insurance. First, pet parents need to think about the coverage they want. As mentioned above, accident-only coverage is the most affordable option, but it also has a lot of gaps. A comprehensive policy is a better choice for those who want all their bases covered. Once this has been decided, it’s easy to rule out providers that don’t offer all the desired coverage options.

Next, it’s time to get quotes. Most pet insurance companies have online quote tools that can give a price estimate in minutes. Applicants only need to enter a little information about their pet, including their species, breed, sex, and date of birth, as well as some information about their location.

When that’s done, pet owners will have the option to customize their quote by choosing their deductible and copay. Increasing one or both of these will reduce monthly premiums. But it also means policyholders will owe more out of pocket in the event of an accident.

It’s also worth the time to read through a sample policy before purchasing pet insurance. Sometimes, there are hidden limitations or restrictions the website may not advertise. Knowing this upfront can help pet parents rule out unsuitable matches and avoid surprises when they file a claim.

With all that done, compare the options and select the best one. Then, compare this to the out-of-pocket costs that could arise with skipping pet insurance. A quick call to the local vet to learn about common costs associated with emergency vet services could be helpful here.

The final decision is a personal one. For some, pet insurance brings peace of mind that’s worth the extra cost. And for others, it’s easier to save for vet bills on their own in a savings account. It’s possible to change your mind later too, if need be.

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There are lots of myths and misconceptions about millionaires. Learn about one of the most damaging millionaire myths that many people still believe. [[{“value”:”

If you spend much time learning about personal finance, you’ll run into a common cliche: The out-of-touch millionaire who champions frugality.

They say, without a hint of irony, that the secret to success is not wasting money on things like lattes and avocado toast. All while they wear $20,000 watches and drive $100,000 cars. But just avoid spending money on anything you enjoy, and you’re on your way to being rich.

It’s advice that gets repeated often. It’s also a total lie.

The myth of the frugal millionaire

The idea that you’re going to save millions one day by cutting small expenses might sound reasonable. And how you spend money is important, to be fair.

But it’s not the key ingredient to being a millionaire or a multimillionaire. People like to gloss over the truth, which is that the most common way to get rich is family wealth. Only 27% of multimillionaires are self-made, according to a Bank of America study in 2022. The study concluded that wealth is often (but not always) connected to prior generations.

That’s not to say you should waste money, or that it’s impossible to be wealthy without a rich family. The point is that extreme frugality isn’t necessary, and despite what some claim, it’s not how most rich adults built their fortunes.

They’ll tell you to cut out small expenses because it’s simple, down-to-earth advice. And it plays a whole lot better than, “Ask your parents for millions to go build your real estate portfolio.” Keep in mind that the wealthy often aren’t nearly as frugal as they’re portrayed. For example, Warren Buffett is frequently called frugal for eating McDonald’s and living in the same house for decades. He also has a private jet — how many coffees do you need to skip to buy one of those?

Frugality alone isn’t going to make you rich

The focus on frugality is problematic for a few reasons. Most importantly, frugality alone doesn’t work.

I’d know — I tried it. When I was fresh out of high school, I worked a few entry-level jobs. I did everything the rich gurus recommended. I made coffee at home, I rarely went out, and I kept my spending extremely low. And I got nowhere, because I was hardly making any money. I’ve been able to build my savings and investments since then, but it’s all because I’ve significantly increased my income.

It’s not just about how much you spend. Your income is even more important, because it determines how much you can save. Here’s an example of the difference this makes:

If you invest $100 a month for 40 years and get an 8% annual return, you’ll have $310,868.If you invest $500 a month for 40 years and get an 8% annual return, you’ll have $1.55 million.

Trying to cut every discretionary expense isn’t nearly as effective as raising your income. It can also make you miserable, and it’s not sustainable. You probably don’t want to spend the rest of your life never going out for coffee with friends.

The three keys to being a millionaire

It’s possible to become a self-made millionaire, and potentially even a multimillionaire. But it’s hard to do by getting rid of small expenses, and that’s not exactly an enjoyable way to live.

Becoming a millionaire primarily depends on three things:

Income: The more money you make, the more you can save and invest. You don’t need to be in the top 10%, but if you have a below-average income, increasing it will make the biggest difference in building wealth.Spending: How much you spend is important, but you’re better off focusing on the big expenses. What gets people into trouble isn’t buying the occasional coffee or sandwich. It’s taking on a huge mortgage or car payment, or falling into a pattern of spending more than they can afford on discretionary expenses.Investing: It’s also important to invest your money so it grows. One of the most effective options is to invest in stocks. The stock market has historically averaged a return of about 10% per year.

You don’t need to go above and beyond in any of these areas. It’s fine if you don’t earn a large salary, cut your spending to the bone, or invest a huge amount of your income. If you do reasonably well in each of these areas, that can be enough to build wealth and retire with a nice nest egg.

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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.Bank of America is an advertising partner of The Ascent, a Motley Fool company. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

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The number of centenarians is increasing, but many people may not have enough saved for old age. Find out what steps you can take to retire comfortably. [[{“value”:”

There’s an ever higher possibility you’ll one day be able to blow out the candles on your 100th birthday cake. Recent research from the Pew Institute predicts the number of centenarians will quadruple in the next 30 years. Right now there are just over 100,000 Americans aged 100 or more. By 2054, Pew thinks that figure could be as high as 422,000.

If you’ve been watching Live to 100: Secrets of the Blue Zones on Netflix, you might have thought more about what type of old age you want, and what kinds of habits might get you there. But what about money? If you retire at 65 and live to be 100 or more, we’re talking at least 35 years when you won’t be working.

Nobody knows exactly how much they’ll need to see them through their twilight years. A lot depends on where you live, your lifestyle, and other factors. Even so, some people might need more than $1 million stashed away to be able to live comfortably. That can be a tall order if you’re living paycheck to paycheck right now.

What to do if you don’t feel ready for retirement

A Gallup poll last year showed that only 43% of non-retired adults felt ready for retirement. If you’re one of the 57% of Americans who don’t feel they’re on track, here are some steps you can take now to turn things around.

1. Work out what you might need

The first step is to put some numbers on paper around when you might retire and what income you want to have. It’s true, there are a lot of unknowns, including health, family, and the wider economy. All the same, you can take the things you do know and guesstimate the rest. A retirement calculator can help you experiment with different numbers.

One rule of thumb is to calculate 80% of your current income and work from there. For example, if you earn $50,000 a year now, you might need your investments, Social Security, and other income streams to generate $40,000 a year once you retire. Let’s say Social Security will pay $20,000 a year. You’d need to get $20,000 a year from other sources.

So, how much money might you need in your investment accounts to generate that $20,000? Without wanting to bamboozle you with figures, this is where another useful guideline comes in: The 4% rule. This says that your income in your first year of retirement income should be around 4% of your nest egg. The theory is that you’ll then be able to increase your withdrawals as living costs increase, and your money would still last 30 years or more.

By that logic, you’d need $500,000 ($20,000 ÷ 0.04) to generate what you need in your first year. There are lots of ifs and buts attached to this, such as the balance of assets you hold in your portfolio. But it’s useful to have a rough figure to work with. You might consider speaking to a financial advisor to make a more specific plan for your circumstances.

2. Increase the gap between what you earn and what you spend

Once you have an idea of where you want to be, the next step is figuring out how to get there. One side of that is what investment strategies you follow. The other is how much you’re able to invest.

Various experts recommend investing about 15% of your income. If that doesn’t feel possible right now, sit down with your budget and see how much you could put aside. The more you can cut your spending and/or increase your income, the more cash you’ll have for your retirement fund.

Cut unnecessary spending: Go through your recent bank statements and see if there are any areas you can cut back on, such as subscriptions you aren’t using. This isn’t about living on nothing but bread and water until you retire. It’s about living more frugally so that you can have a more comfortable old age.Look for ways to increase your earnings: There’s a limit to how much you can cut your spending. Look for ways to earn a little more. That might involve a side hustle, extra hours at work, or seeking a pay raise. Put that extra money straight into your retirement account.

3. Maximize your tax-advantaged contributions

Saving money on taxes can mean you have more for your old age. One option is a tax-deferred account such as a traditional IRA or a 401(k), which lets you reduce your tax bill today and pay tax on the money you withdraw later in life. Another is a tax-exempt account such as a Roth IRA where you pay taxes on the money you contribute now, but can withdraw it tax free further down the line.

If your company has a 401(k) plan, find out how it works. See if your employer will match your contributions, and if so, by how much. This can be an excellent way to boost your retirement savings. If that’s not an option, understand how much the IRS will let you put in your retirement IRA each year and which type of account will suit you best.

Do what you can

When you look at the numbers, you may feel as if you have an impossible financial mountain to climb. This feeling can make us give up before we even start. Instead, see if you can break down your retirement goals into achievable steps. Even investing a small amount today can make a big difference.

Where to invest $1,000 right now

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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.Emma Newbery has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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If you spot any of these big red flags, you may end up wishing you hadn’t followed through on your home purchase. Learn what to watch out for. [[{“value”:”

Buying a house should be a great thing for you — if you do it right. Not only do you get to own your own place and customize it the way you want to, but you can also build equity in your property as you make payments to the mortgage lender. This, in turn, helps you build wealth — which partly explains why homeowners end up with about 40 times the net worth of renters.

Unfortunately, not everyone ends up happy with their home purchase. And that’s a big problem, since this is one of the biggest and most influential purchases of your life. To make sure you don’t end up wishing you’d made different choices, watch out for these key signs that you could come to regret buying your property.

1. You spend too much on it

Spending too much on your home is one of the biggest reasons you could come to regret your purchase. That’s because you’re most likely going to be stuck making a mortgage payment for the next 30 years or so after buying your property.

If you spend more than around 30% of your income (at most) on housing costs, you could find yourself “house poor.” With so much money committed to covering your home expenses, you could struggle to even buy furniture for your place — much less do important (and costly) things like saving for retirement.

To avoid ending up with this regret, figure out what your housing costs will be for any property you’re interested in. If they’re more than you’re paying now, do a “practice run” by putting the extra into savings for at least a few months. If you can comfortably live on what’s left over after covering the bigger house payment, then you can move forward. If you can’t, walk away before you end up stuck in a house that causes you decades of financial stress.

2. It’s in an inconvenient location

If your house is not convenient to work, school, family, restaurants, and leisure activities, you could find yourself really regretting buying it. One study found adding 20 minutes to your commute could make you as unhappy as a 19% pay cut, and that makes perfect sense. Having to sit in the car and waste your precious hours in traffic is just a recipe for misery.

Pay attention to both how far away the home is from the places you go and also what the drive is like, as a 15-minute drive on pleasant country roads is a lot different from spending 15 minutes sitting at traffic lights. Do a test run of your commute from the house to your job and other common destinations at a few different times of day to make sure the ride is reasonable and comfortable for you.

If you find you cannot easily get where you want to go from a house you’re considering buying, pass it up and search for a different place with a better location. Remember, you can change a lot about a house, but not where it is.

3. You don’t know what the HOA rules are

Finally, if your new home is in a neighborhood with a homeowners association, you’ll want to find out exactly what the rules are. Some HOAs are very strict in what you can do with your home, even limiting things like what color you can paint your house or what color your curtains must be.

You don’t want to move in only to find out you can’t keep your boat in the driveway or that your dreams of a natural garden in your front yard will be thwarted by rules against it. Check out all of the details before you commit.

Fortunately, now that you know about these red flags, you can make a better choice about which house you buy — and will ideally end up in the perfect place for you.

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