Money Management

Years ago, I spent a fortune after an accident due to an auto insurance mistake. Learn what it was so you don’t make the same error. 

Many years ago, I was involved in a car accident. I had auto insurance coverage, which I thought would protect me against the losses a collision caused. But unfortunately, I had failed to learn the key details of my policy at the time, and I was missing a very important type of coverage.

Because of this oversight, I ended up being out hundreds of dollars following the incident. Here’s what happened and why I’ll never make that mistake again.

I found out I was missing this insurance coverage after it was too late

When I was involved in the accident, my boyfriend at the time was driving my vehicle and there were questions about whether my insurance would be responsible or the insurance of the other driver who was in the crash. Unfortunately, the accident was a pretty serious one, and my car ended up being totaled. This means the damage was so bad, it would have cost more to fix than it was worth, and the insurer would be giving me a check for the value of the vehicle.

The problem was, there were a lot of issues that had to be worked out before I got that check. The insurance companies were investigating to try to determine who was actually to blame for the accident, and the insurer also needed to make an assessment of how much my vehicle was actually worth so it could pay me a fair amount.

All of this ended up taking weeks and, since my car was totaled but I still needed a vehicle to get to school, I had to get a rental car. And here’s where the problem came in. When I bought my auto insurance coverage, I neglected to buy rental car reimbursement coverage. Without that, my insurance company didn’t pay anything for the rental car that I needed to have for about three weeks.

Today, the average daily cost of a rental car is around $93 to $132, depending on the metro area where you rent one. My accident happened a long time ago. At that time and with the discounts that I got for my extended rental and the fact I chose a small compact car, I ended up paying just under $1,000.

That’s still a lot of money out of my checking account, though, and much more than I wanted to spend. And it could have been avoided had I just had the right insurance coverage, since adding rental car reimbursement to auto insurance costs around $4 a month.

Make sure to have the right auto insurance before an accident happens

Unfortunately, I didn’t discover that I was missing important insurance coverage until after an accident had happened, when it was too late to buy it. But others don’t have to make that mistake.

Every driver should check their insurance policy carefully to make sure they have the coverage they need, including insurance to pay for a rental car if they would need transportation after an accident while waiting for their insurance check to fix or repair their car. It is far better to find out before a crash when there’s still time to buy more coverage than to learn a hard lesson when there’s no insurance to pay for big expenses when something has gone wrong.

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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.Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. Christy Bieber has no position in any of the stocks mentioned. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.

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The best path out of debt is the one you can stick to, but you need to consider other factors, too. Here’s how to understand your best options. 

Getting out of debt is a common financial goal, but as anyone who’s ever attempted it will know: It’s much easier said than done. Here are some strategies you can utilize to create a debt payoff plan in 2024, including what factors to consider to make a plan that works for you.

Debt payoff methods to consider

At a high level, there are a couple common methods for getting out of debt that can provide different benefits: The debt snowball and the debt avalanche method.

The debt snowball method is often better at providing a sense of accomplishment, which may help you stick to the plan. It requires you to list out your debts by debt amount, from smallest to largest. You pay off the smallest debt first, then move on to the second-smallest, and so on. Meanwhile, the debt avalanche method has you order your debts by highest interest rate to lowest interest rate. By focusing on the highest-rate debts first, you’ll be able to save more money long term.

With both methods, once you paid off a debt, you’d include the minimum payment amount that that debt carried over to the next debt to increase the impact. For instance, if you were paying $200 a month extra toward a debt with a $100 monthly payment, you’d start paying $300 extra toward the next debt on your list.

The best option will be whichever one you can see through to the end. And if that means getting rid of the debt that causes you the most stress first, that may be the way to go, even if it means paying more over the long term. Regardless, you’ll need to pay more than the minimum payment due to pay off your various debts faster. So reducing spending and increasing your earnings is always going to help.

Tips to get out of debt faster and easier

There are several financial tools that you can use to get out of debt faster, but you’ll need to know a few basic things about your finances first, like:

Existing debt amounts and interest ratesYour current credit scoreWhat types of relationships you have with your existing creditors

If you have high-interest debt, and can qualify, you may want to consider using tools like a debt consolidation loan or balance transfer credit card to lower your rates and save money. That will not only help you save, but it will also mean that the money you do put toward that debt will go further. You’ll usually need good credit (that’s a score of 670 or higher) to qualify, but some credit unions will be more flexible on their requirements if you have a long, positive relationship with them.

Refinancing, like taking out a debt consolidation loan, can be tricky in a high-rate environment, like we’re seeing in early 2024. So it’s important to use a refinancing calculator to make sure it’s worth paying a balance transfer or origination fee.

That said, you also need to understand your risk for taking on additional debt (based on things like your health, job or income security, and the types of debt you have). It can be tempting to throw all of your extra cash at getting out of debt and speed up the process. But effective debt payoff strategies should always consider the savings side of your finances.

As a general rule, try to build up an emergency fund that can cover at least three to six months’ worth of necessities, like rent, utilities, and minimum debt payments. That way, you may minimize or even avoid having to take on more debt, which will cost more in the long term.

Examples of debt payoff strategies

Let’s say you have the following debts:

Assuming you have $500 a month to contribute beyond those minimum payments, here’s how a few different payoff methods would play out:

Minimum payments only: It would take you 36 months to get out of debt, assuming you’d never make another charge on any of your cards. And you’d end up paying about $6,704 in interest alone.Debt snowball method only: You’d pay off your debts in the following order: Credit card 3, 2, 1, and then you’d pay off your personal loan. Overall, you’d be debt free after 19 months, and you’d pay about $3,469 in interest.Balance transfer card: If you got a balance transfer credit card with a 0% APR for 21 months, and paid a 3% balance transfer fee ($615), you’d have to pay about $1,006 per month to pay that off before the introductory period is up. That’s just $186 more than the current minimums. In that case, you could also pay off your personal loan in 19 months, paying just $629 in interest.

Paying off debt is challenging, and you may run into setbacks along the way. But with careful planning, you may be able to pay off your debt faster, and save money in the process.

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Luxury cars are expensive, and most don’t hold their value well. Here are five that you might want to avoid. 

Buying a car is more expensive than ever, considering that the average price of a new vehicle is now $48,759. Other car-related expenses have spiked as well, including repairs and insurance.

Many buyers may not consider resale value when they buy a vehicle, but now could be an important time to consider it because some owners are underwater on their car loans.

This makes it all the more important for buyers to avoid vehicles that have low resale value. Here are a few that lost their value the quickest, according to data from iSeeCars.

1. Maserati Quattroporte

Five-year depreciation: 64.5%

Maserati’s flagship sedan offers buyers unique styling from the Italian carmaker, bringing together exotic luxury with sports car-like driving.

But you’ll pay dearly for that combination. Not only is the starting price of the Quattroporte an eye-watering $139,000, but iSeeCars research shows that its value plummets 65% in the first five years of ownership. Ouch.

Maserati also introduced an electric vehicle version for the 2025 model year, which could be a double whammy for owners worried about their car’s value. EVs typically have lower resale values and higher auto insurance costs.

2. BMW 7 Series

Five-year depreciation: 61.8%

BMW’s 7 Series sedan has long been an icon of luxury and sophistication. If you want to drive a top-of-line luxury sedan or, better yet, be driven around in one, the 7 Series is the way to go.

When I was in high school, one of my friend’s dad bought a used one, and now I know why. Most luxury vehicles depreciate quickly, but the 7 Series nearly sets the standard. Within just five years, a 7 Series loses an average of nearly 62% of its value — or the equivalent of $72,444 below its original price tag.

3. Cadillac Escalade ESV

Five-year depreciation: 58.5%

I’m skipping a couple of vehicles at the top of the iSeeCars list since they’re repeat brands. Instead, let’s move on to America’s luxury brand, Cadillac. The Escalade is a popular large SUV that has become such a mark of status that it regularly makes its way into pop culture — being mentioned at least eight times in hip-hop songs, according to Car and Driver.

Unfortunately, the Escalade reaches near the top of another chart as well. GM’s SUV loses an average of 58.5% of its value just five years after you drive it off the dealer’s lot.

4. Infiniti QX80

Five-year depreciation: 58.5%

A powerful 400-horsepower V-8 comes standard with the QX80, giving buyers plenty of get-up-and-go when they need it. But while you won’t be short of power with the QX80, you might get the short end of the stick when you trade it in.

Infinit’s QX80 is one the least expensive full-size luxury SUVs on the market, but you’ll still lose a staggering $47,399 in value in five years of purchase, according to iSeeCars.

5. Jaguar XF

Five-year depreciation: 57.6%

At a starting price under $50,000, the Jaguar XF is the cheapest vehicle on this list, but don’t mistake it for a good value.

Not only is the XF’s styling feeling a little long in the tooth — this version debuted back in 2016 — but the sedan’s value tumbled quickly after its purchase. iSeeCars says the XF value drops 57.6% five years after its purchase, leaving you with an outdated model that’s not worth much.

You can’t control depreciation, but you can control this

While you can’t do much about your vehicle losing value, you can control how much it costs you in other ways. For example, car insurance prices have risen rapidly over the past few years, weighing on many people’s finances.

Many people stick with their current insurance company to avoid the potential hassle of changing policies. But it’s possible to save significant money on car insurance by doing a little online comparison shopping. Taking a few minutes to compare quotes between car insurance companies could save you money on your monthly premiums, regardless of your car’s value.

Our best car insurance companies for 2024

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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.Chris Neiger 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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Homeowners insurance is getting more expensive. But read on for a few ways to lower costs. 

If it feels as if your homeowners insurance premiums are a lot more expensive than they were a few years ago, it’s not just you. Homeowners insurance cost is up 8.8% on average over the past year and a staggering 30.7% since 2018, according to S&P Global.

Inflation may be the first thing we all blame when it comes to rising costs, and it’s definitely a factor in rising insurance premiums, but many companies are raising prices for another reason, too.

Namely, more extreme weather is making insurance expensive.

Why homeowners insurance is so expensive

The latest data from the Insurance Information Institute shows that in the first nine months of 2023, companies experienced insured losses of more than $50 billion — the costliest year ever.

The expenses came mainly from severe weather events and storms that caused flooding, hail, tornadoes, and lightning- and wind-related damage.

Inflation exacerbates the problem of insurance losses, driving up the cost of materials and labor and adding to the overall cost of repairing or replacing damaged property.

And some homeowners insurance companies paid out so much from property damage recently that they’ve stopped offering coverage in certain parts of the country and left some states altogether.

The problem for you and me is that all the costs insurance companies are taking on are eventually passed on to the consumer. The National Association of Mutual Insurance Companies says that reinsurance prices were up 30% to 50% last year.

Here are a few tips for finding cheaper insurance

With homeowners insurance prices rising quickly, you may pay far more for your premiums than expected. The good news is that there are a few things you can do to improve your situation.

1. Switch insurance companies

Not all companies write policies in the same way, and not all offer the same coverage for the same price. If you last shopped around for homeowners insurance a while ago, now may be the time to do it. It’s simpler than ever to do this online, and you might be able to find better or cheaper coverage in just a few minutes.

2. Reduce coverage or increase your deductible

This may not be the right move for everyone, but if you’ve shopped for insurance and can’t find a better deal, you may save money by reducing your coverage. You’ll need to look at your current policy to see if there’s anything you’re paying for that you don’t need. If you can’t cut back on coverage, consider raising your deductible to reduce your premiums.

3. Bundle your homeowners insurance

One simple way to potentially lower your homeowners insurance is to bundle it with your other insurance policies, like auto. State Farm says the average savings for bundling home and auto insurance policies is $1,073 annually, a savings of more than $89 per month.

4. Improve your home

Finally, making certain improvements to your home can sometimes lower your insurance premiums. The Consumer Financial Protection Bureau says improving your home, like installing a fire alarm and security system or updating your roof, plumbing, and electrical, could also reduce your insurance costs.

You can’t control why homeowners insurance costs have risen over the past few years, but you can shop around for a better rate, adjust your coverage, or bundle insurance to help reduce costs. No matter which avenue you choose, it may be a good idea to contact your insurance agent to see if there’s a way to reduce your monthly premium.

Our picks for best homeowners insurance companies

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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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Saving a bundle for retirement often means contributing steadily and letting the magic of investing do its trick. Read on to learn more. 

My first financial priority as a college graduate was to build emergency savings. Since I paid for school, most of the money I earned during college went toward my expenses at the time. So I wanted to build up an emergency fund so I’d be protected from things like unplanned bills or job loss.

Because I was focused on building emergency savings and also paying off educational debt, I didn’t start funding a retirement account until my mid-20s. But in the course of 15 years, I managed to accumulate a nest egg worth $250,000. And if that’s a goal you’re willing to commit to, you, too, might end up with a similar balance by the time your 40th birthday arrives.

Slow and steady wins the race

My first few years of retirement savings had me contributing a few thousand dollars a year at most. But as my earnings grew, so too did my contributions.

In my 20s and early 30s, I worked for different companies and participated in their 401(k) plans. Once I went freelance on a full-time basis, I began funding a solo 401(k), which is a 401(k) that you manage yourself.

The downside of a solo 401(k) is that you don’t get to enjoy employer matching contributions, since the whole premise of being able to fund one of these accounts is working for yourself and therefore not having an employer. The upside, though, is that these accounts come with higher contribution limits than regular 401(k)s.

This year, for example, if you’re under 50, the contribution limit for a solo 401(k) is $69,000. However, the amount you’re able to put in is limited to a portion of your income, so you may not be able to put in $69,000 even if you earn more than that and can afford to part with that sum of money.

What I did each year between my mid-20s and age 40 was increase my retirement plan contributions as my income rose. Not only that, but I set up automatic transfers so that my retirement account would get funded each month with a preset amount before I got a chance to spend that money.

That’s something I definitely recommend doing if you want to stay on track with your retirement savings. If you have a 401(k) through a job, that’s basically how it’ll work — you’ll tell your employer how much you wish to contribute and your long-term savings will get funded via payroll deductions. If you have an IRA, you can set up automatic transfers from your checking account to fund that plan, too.

Investing was a big part of the equation

I may have reached $250,000 in retirement savings by age 40. But that doesn’t mean I contributed $250,000 to my various accounts.

In reality, I put in a lot less money than that. The reason I was able to grow my balance to $250,000 was that I invested it fairly aggressively throughout my entire savings window.

And when I say “aggressively,” I mean I put my money into stocks, which I recommend going heavy on if you’re at least 10 years away from retirement. If you’re closer to retirement age, stocks are still a good idea, though you should also, at that point, be investing in less volatile assets, like bonds.

Over the past 50 years, the stock market’s average annual return has been 10%. This means that if you put $650 a month into a retirement account over a 15-year period and your portfolio delivers that same return, you’ll have about $250,000 yourself.

I’m not done saving for retirement yet

I’m pretty happy with the progress I’ve made on the retirement savings front — especially since I had expenses like college to grapple with that forced me to delay my savings efforts a bit. I also had kids in that 15-year savings window. And when they were super young and needed me for pretty much everything, I worked less and wasn’t able to earn as much. So those years, I contributed less toward retirement savings.

But all told, the average 40-something today has $77,400 saved for retirement, according to Northwestern Mutual. So a balance that’s more than three times as high isn’t something to scoff at.

Still, I’m not finished saving for retirement. I don’t have a specific savings target in mind, but I want to put as much money away as I can to hopefully avoid financial stress down the line.

If you’re not sure how much to save for retirement, don’t sweat it — it’s a really hard number to nail down. But I suggest coming up with an annual savings goal and automating your contributions to meet it. Keep investing your savings and increasing that goal as your income rises, and you may find yourself in a great position to retire comfortably once that period of life rolls around.

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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.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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