Now is the perfect time to assess and work toward your financial goals. Ground Picture / Shutterstock.com
Editor’s Note: This story originally appeared on Living on the Cheap. Are you spending too much and saving too little? Do you not even know where your money is going? If the answer is yes, it’s time to get your financial life in order. Even if you’re doing well financially, the beginning of the year is a good time to take a look at your savings, your spending and your processes to see what…
A $10,000 deposit can earn a very tidy sum in a high-yield CD. Read on to see how the math works out.
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Although you shouldn’t tie up your emergency fund, a certificate of deposit, or CD, can be excellent ways to grow your mid-term savings. For instance, if you’re saving up for a house down payment, a CD can help you grow the money while keeping it available on your timeline.
Some of the top CDs have high minimum deposits, but $10,000 will pass muster for the vast majority of them. You’ll still need to do a bit of exploration to find the best rates, however, but it can really pay off. Let’s look at the numbers.
At the high end of the spectrum, I’ve seen many great offers for 6-month CDs in the 4.5% to 5.5% range. With a $10,000 deposit, here’s what you’d earn by the end of the term depending on the specific annual percentage yield (APY):
As you can see, the low end is still a whopping $227.12 in earnings. Considering all you did was let your money sit there for six months, that’s not a bad return. And 6-month CDs with a rate around 4.5% are fairly easy to find, and are even being offered by some of the big national banks.
If you’re willing to do some searching for the best rate you can find, it could pay off: At the top end, you’d net an extra $51.05 for getting a 5.5% APY instead.
(Calculations were performed assuming monthly compounding. CDs that compound daily will earn about $1 more, give or take a few cents.)
Not all CDs are made equally. If you have a standard brick-and-mortar bank, you may wind up with a laughably low rate. I’ve seen big banks with 6-month CDs as low as 0.03% APY. And that’s not a fluke. The national average is just 1.49%.
If you don’t do a bit of comparison shopping and just choose any old CD, that low rate could cost you hundreds of dollars. Here’s how much $10,000 earns in a sub-par CD:
The lesson here is never assume every CD is going to give you a good rate. Always, always, always read your rate charts before signing up. Once you commit to a CD, it can be costly to withdraw your funds early.
Online banks are often a good place to find competitive CD rates. Your local credit union may also offer remarkably good rates.
Although CDs offer great opportunities for growth, they aren’t without drawbacks — the main issue being that you’re essentially locking in your funds for the duration of the CD. Nearly all CDs charge expensive fees for withdrawing your funds early.
Sure, six months isn’t that long. But a lot can happen in six months. If you’re at all worried about losing access to your money, a CD might not be the best place for it.
Don’t despair. You may not need a CD to get a stellar APY on your savings. The best high-yield savings accounts are also offering APYs in the 5% range right now. Even better, you can often find savings accounts offering lucrative new account bonuses. Win win win!
In either case, be sure you’re earning at least 3.4% on your savings to combat the loss of value from inflation. This will ensure you’re at least breaking even.
Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 11x the national average savings account rate. Click here to uncover the best-in-class accounts that landed a spot on our short list of the best savings accounts for 2024.
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.Brittney Myers 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.
The people who save the most sometimes develop a surprising financial issue. Find out what it is and how it can hold you back in life.
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There’s no debating that saving money is an important financial habit. If you don’t do it, you’re bound to run into financial issues. A popular guideline is to save 20% of your income and divide it between your savings and your investments.
Some people get very good at this. They may set aside an even larger portion of their income and end up with an impressive amount in their savings accounts. This puts you in a strong, secure financial position, so it might seem like you can’t go wrong if you do this.
Surprising as it may be, there is a common issue with being a super saver. It doesn’t get discussed that much, but it can drastically impact your quality of life. If you focus on saving at all costs, you should know about the hidden downside of this lifestyle.
Saving a large amount of money takes financial discipline. The people who accomplish it often get into the habit of living with less and cutting expenses wherever they can. This habit is hard to shake, no matter how much money you save.
As a result, the best savers can be bad at spending money. Not bad in the sense that they spend too much. It’s the opposite — they worry so much about spending money that they hoard it. They never use their money to improve their life.
My favorite podcast right now is Ramit Sethi’s I Will Teach You to Be Rich, where he talks to couples about personal finance. He has spoken with people from all kinds of backgrounds, and at just about every level of wealth.
One of the most fascinating aspects of these money conversations is the number of people with a high net worth who are reluctant to spend any money. Sethi has spoken with couples worth millions, who still do things like:
Not going to the restaurant they want because it’s too expensiveDriving across town to get a slightly better price on groceriesBooking a flight with two layovers just to save $20 per person
If you’re strict about your spending, you might assume that you’ll loosen up once you have more money saved. You probably figure that you wouldn’t be one of those people. You’d spend more if your net worth was in the millions.
But people’s financial habits and worries don’t necessarily change as their savings go up. What often happens is you continue thinking that you need to maximize your savings, and you keep feeling guilty at the thought of overspending. So while knowing how to save money is important, it’s also important to know how to spend it.
Spending money is a skill, and getting better at it can make life much more enjoyable.
Start by thinking about where you’d love to spend your money, and how you can use money to raise your quality of life. This can be anything you want. For example, you could decide you want to hire a housecleaner so you have more time to relax, go out for dinners and drinks with your friends more, or take a luxurious vacation for two weeks every year.
Next, set aside a portion of your income to spend wherever you want. Ramit Sethi calls this “guilt-free spending,” and he recommends setting aside 20% to 35% of your take-home pay for this. If you take home $5,000 per month, that means $1,000 to $1,750 to spend guilt free. Here’s exactly how he recommends you divide up your take-home pay:
Fixed costs: 50% to 60%Investments: 10%Savings goals: 5% to 10%Guilt-free spending: 20% to 35%
You can adjust those guidelines to fit your current income, expenses, and financial goals. If money’s tight, your fixed costs may be higher, which means you’ll likely need to pull back in other areas. If you want to retire early, then you’ll need to invest more. But make sure you dedicate at least some of your income to guilt-free spending.
It’s smart to save money, and being a super saver is better than the alternative. However, it can become a problem when your identity gets wrapped up in saving as much as possible. Find the places where you’d love to spend money, and remember that you’ll still reach your goals with a healthy balance of spending and saving.
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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.
A child tax credit expansion could put more money in parents’ pocket this filing season. fizkes / Shutterstock.com
A bipartisan group of lawmakers is pushing a tax package that could expand the child tax credit as soon as this filing season. Their bill — currently called the Tax Relief for American Families and Workers Act of 2024 — would increase access to the tax credit for lower-earning families that don’t have enough taxable income to fully capitalize on it under current rules. The $78 billion proposal…
The cost of homeowners insurance has taken a leap in the past few years. Take a look at how experts say you can trim your premiums.
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According to Quadrant Data Sources, the average cost of homeowners insurance nationwide is $1,787. However, depending on the state in which you live, rates may be much higher or much lower. For example, the average annual premium in Hawaii is $372, leaving more money in Hawaiians’ bank accounts. In Nebraska, it’s a whopping $4,398.
No matter where you live, though, experts offer these tips for trimming your insurance premiums.
Unless you feel strongly that you owe your loyalty to a specific home insurance company, shop around. In fact, it can pay to shop annually. As mentioned, the average annual rate for homeowners insurance in Nebraska is $4,398, but that average includes a wide range of rates. USAA rates average $5,401, and Allstate rates average $4,369. On the other end of the scale, Farmers’ rates come in at $2,786, and American Family offers an average annual rate of $2,783.
You may be a policyholder with a single company for 10, 20, or 30 years, but if you never shop around to see if there’s a better policy out there for you, you might be spending too much.
Bundling your different policies is one of the simplest ways to lower your rates. As a reminder, the average cost of homeowners insurance nationwide is $1,787. When a policyholder chooses to bundle their homeowners coverage with auto coverage, the average rate drops to $1,455. That’s a 19.5% savings.
If you’re not already bundling, ask your insurance agent how much you can save.
A homeowners insurance deductible is the amount you’re expected to pay before your insurance company kicks in the rest. Let’s say you have a small kitchen fire that’s going to cost $10,000 to repair. If you carry a $1,000 deductible, you’ll pay the first $1,000, and your insurer will pay the remaining $9,000.
The tricky bit is this: The lower your deductible, the higher your insurance premiums. By raising your deductible from $1,000 to $1,500 or $2,000, the price of your policy should go down. If you decide to raise your deductible, make sure to put the funds you’ll need to cover it in a savings account that you can easily access in case of a claim.
If you wonder what your credit score has to do with homeowners insurance, it’s this: Insurers rely on studies showing that people with low credit scores tend to make the most insurance claims. To hedge their bets, insurance companies raise the rates on those homeowners.
If your credit score is poor, your best bet is to take steps to give your score a boost. It won’t be easy and doesn’t happen overnight, but millions of people have done it. The payoff is certainly worth it. According to Quadrant Data, pushing your credit score from poor to average can cut up to 59% off the cost of your homeowners policy.
The safer your home, the less likely it is that you’ll make a large insurance claim. For example, national averages show that you can slash rates by:
Installing smoke alarms (6%)Installing a burglar alarm (8%)Having a fire extinguisher (6%)Installing a sprinkler system (10%)
Deadbolt locks, hurricane shutters, upgraded roofs, and upgraded heating and plumbing systems are also money savers.
According to experts, there are plenty of ways to keep the cost of premiums down. As you shop around, make sure to ask about discounts. You may just find that you qualify for more than one and can cut your rates even more.
There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.
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.
This technique has gone viral. Can it transform your grocery-shopping experience, too? Prostock-studio / Shutterstock.com
A new grocery shopping method has gone viral, promising to get you to eat more healthfully while also adding a dash of fun to mundane trips to the store. New York-based chef Will Coleman introduced the technique — known as the “6-1 grocery method” — in a TikTok video, which quickly topped 1 million views. The concept is simple. When creating a list for your next trip to the grocery store…
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