Money Management

All out of emergency savings? Read on for ways to rebuild. 

An emergency fund is something everyone should have at all times. Without money in a savings account, you could end up forced into expensive debt when unplanned bills, like home or car repairs, arise. Similarly, without an emergency fund, you might rack up a ton of credit card charges in a situation where you’ve lost your job but still have all of your bills to pay.

But since the whole purpose of having an emergency fund is to be able to tap your cash reserves in a pinch, it’s conceivable that you might reach the point where that fund is depleted. This holds true even if your emergency fund is pretty large.

Recent data from New York Life found that among Americans who have an emergency fund, the average amount saved is around $16,776. But even a sum like that could run out on you pretty easily if you end up needing a costly home repair, like having to replace your entire heating or air conditioning system.

If you recently depleted your emergency fund, you may be feeling angry, frustrated, and downright anxious. Here are some steps you can take to rebuild your savings and regain that safety net.

1. Turn to the gig economy

If you’re currently working full-time, the idea of squeezing a second job in may seem undesirable. And while you certainly don’t have to do that forever, you may want to do it now so you can give your savings a relatively quick boost.

The good news is that you really do have the option to find a job that works for your schedule. That could mean doing an hour of data entry before bed or driving passengers around town during those weekends when you’re home with no other obligations.

Of course, the more you’re willing to work at a second job, the sooner you might manage to build your emergency fund back up. That’s something you can remind yourself if you start to get burned out. And remember, if that happens, you can always cut back temporarily until you feel better equipped to handle more working hours.

2. Reduce a big expense

If you had $15,000 in emergency savings and now have none, canceling Netflix and skipping your once-a-week Dunkin’ coffee run probably isn’t going to make a huge dent in your progress. So rather than focus on those things and deny yourself small luxuries that make your days better, think big.

Maybe you live in a city where having a car is a nice thing, but it’s not an absolute necessity. Unloading it could save you hundreds of dollars each month.

3. Bank your windfalls

You may end up coming into extra money this year outside of your regular paycheck or side gig earnings. The IRS might send you a nice refund check this April, for example. Or, you might get a generous dividend payment in your brokerage account that you can cash out and put into the bank as needed.

Pay attention to when extra money comes in, and resist the urge to spend it. Even smaller contributions can go a long way toward rebuilding your emergency fund.

It can be beyond disappointing to see the savings you’ve built get whittled down to nothing. But try to remind yourself that’s what your savings were for, and that the silver lining is that you covered your surprise expense without debt. And if you follow these steps, you may find that you’re able to replenish that emergency fund sooner than expected.

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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 Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.

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Building a home gym can save over costly gym memberships. But watch out for these insurance gotchas. 

In all the fun and bustle of comparing shopping equipment and designing your perfect home gym, it may not occur to take time to consider your homeowners insurance. This could end up being a costly mistake. Before you start buying and building, make sure your current policy has your home gym — and its expensive equipment — covered.

Personal property insurance protects pricey equipment

Alright, so if you have a frugal home gym with some affordable basics, you probably don’t need to worry too much about property insurance. But if you’re the type of enthusiast who has dropped thousands on a stocked home gym, you’re really going to want to make sure your homeowners or renters insurance policy has a robust amount of personal property coverage.

Unless exercise/fitness equipment is specifically excluded for some reason (I haven’t personally seen this), it should be covered under most standard personal property policies. However, it’s still worth scanning your policy to ensure there are no surprises.

When you need extra property insurance

The total amount of property you can get reimbursed for will be limited by your policy. While these limits can be quite high, they’re not infinite. If you own a lot of high-end and/or specialty workout equipment, you could be pushing the limits of your policy without even realizing it.

If you’re worried about the value of your home gym exceeding your coverage, ask your insurance agent about adding to your policy.

Accidental damage

Another bit of fine print to verify is what sorts of accidental events are covered. Particularly strict policies may specifically list covered events — sometimes referred to as “named perils” — and won’t cover anything not listed.

This could bite you in the behind in the case of accidental damage from your home gym. For example, if you drop a heavy weight and damage your flooring, or if an improperly installed pull-up bar rips out some drywall.

Look for “open perils” or “all perils” coverage. This type of coverage will have a specific list of exclusions, and it will be more likely to offer coverage for events not on the no-go list.

Don’t forget liability if working out with friends

We all like to think we’d ever end up in legal trouble with a former friend. But if the worst happens and a workout buddy gets injured in your home gym, the fallout could be damaging to your friendship — and your finances.

Personal injury liability coverage can help pay for the medical bills should someone wind up injured on your property. It can also help cover legal fees if you wind up sued over the incident.

Make sure you read through any fine print on your liability coverage carefully. Some policies may only cover injuries on fitness or exercise equipment if you have certain safety measures in place.

Trainers will need business insurance, too

If you’re using your home gym for business, you need to get proper business liability and property insurance. (And yes, this applies no matter how robust that business may be. Even if you don’t think your little side hustle is much of a business, your insurance company very likely will.)

Most homeowners policies have strict limits on how much business property they’ll cover. Given how pricey a decent machine can be, your home gym will likely exceed those limits and then some. Commercial property insurance can ensure you aren’t out of luck if the worst happens to your equipment.

Similarly, the injury liability coverage of your homeowners policy probably won’t apply if someone is injured in your home gym while you’re offering professional services. Instead, you need to pick up a general liability policy meant for small business owners.

Many insurance companies will offer tailored coverage specifically meant for people in the wellness and fitness industry. These bundled packages may offer better rates than more general business insurance policies.

Whether you’re using a home gym just for yourself, sharing with friends, or putting clients through their paces, make sure you have the right insurance coverage. It’s always better to have it and not need it than the other way ’round.

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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.The Motley Fool has a disclosure policy.

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Investing can seem daunting, but if you start small you can still make a big impact over time. Check out how much investing just $1 a day would net you. 

Investing money in a brokerage account can help you build wealth as you get your money into the stock market and begin earning returns. Unfortunately, not everyone feels as if they can put a ton of money into their investment account to buy stocks.

The good news is, you don’t have to have a ton of extra cash in your bank account and transfer tens of thousands of dollars into investments in order to make a meaningful impact on your future. Investing as little as $1 a day could help you to begin building wealth — especially if you do it over a long time period.

Would $1 a day really actually amount to anything, though? Here’s what you need to know.

Your $1 a day could turn into more money than you think

Although $1 a day doesn’t seem like much, it can really add up over time as the table below shows. It’s based on earning a 10% average annual return (in line with the market’s performance over the last 50 years) and contributing $365 a year to an investment account every year.

As you can see, over time, the money really starts to add up — and the returns you earn become pretty impressive. Over 30 years, for example, if you invested $1 a day, you would have contributed a total of $10,950 of your own money — but you’d have more than $66,000 to show for it!

Your small investment would have snowballed because the returns each dollar that you invested would have earned returns of their own. Those returns could then be re-invested, helping your account balance grow even without any extra contributions on your part.

Start with $1 a day and go up from there

Investing $1 a day not only allows you to start taking advantage of compound interest. It also helps you to get comfortable with investing and develop the habit of putting your money to work for you.

As you can see, that single dollar can make a huge difference in helping you to become more financially secure. But the more you can contribute, the faster your wealth will grow and the better off you’ll be. So, even if you can only start with $1, do it today. Many brokerage firms allow you to buy fractional shares, which are partial shares of stocks or ETFs, so you really don’t have to wait long to start buying investments. Then, your money can start working for you.

To get started, sign up for a brokerage account if you don’t have one already. Arrange to have money transferred over to it — you could do $7 a week or $31 a month or whatever works for you. Then, research low-cost exchange-traded funds (ETFs) that track the performance of the market and start buying them. Over time, try to increase your contributions as much as you can — chances are, you’ll be excited to do that once you see your money growing.

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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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A Roth IRA can make sense if you qualify to contribute based on your income and if you think you’ll be in a higher tax bracket as a retiree. Find out more here. 

You should be saving money for retirement if you don’t want to end up struggling to live on Social Security alone. Social Security is meant to replace just about 40% of pre-retirement earnings, which isn’t nearly enough to maintain the standard of living for most people.

You have a lot of options for where to save for retirement. A Roth IRA is one of those options. But, is opening a Roth IRA the right choice for you? Here’s how to decide.

Are you eligible to contribute to a Roth IRA?

There are strict income limits for who can contribute to a Roth IRA. You need to make sure you’re eligible before you find a brokerage account and open one. If you make too much money, you cannot invest in this kind of retirement account. The table below shows how much you’re allowed to earn and still make Roth IRA contributions.

If your income is above the limit, you’ll need to consider other retirement investment options.

Do you think you’ll owe higher taxes as a retiree than you do now?

A Roth IRA works differently than many other retirement accounts. You don’t get tax breaks when you contribute. Instead, you put after-tax money into your account, so your tax bill won’t be reduced when you invest. However, you can withdraw money as a retiree without being taxed.

Other accounts, like a traditional IRA and 401(k), give you an upfront tax break. Those would likely be better for you if you think your tax bracket is higher now than it will be as a retiree and you want to get your tax breaks at a time when you’re paying more. But, if you expect your taxes to increase in the future, that’s a good reason to open a Roth and start investing in it.

Are you in a financial position to invest in a Roth IRA?

You’ll need money to put into a Roth IRA before you open one. It’s typically a good idea to prioritize retirement savings over many other financial goals, because you’ll need money to live on as a senior. Unless you have high-interest debt you’re working to pay off, this means you should be investing something for your future.

Most brokerage accounts don’t have minimum contributions for IRAs. So, even if you can only invest $10 a month, it may still be worth opening an account and getting started.

Have you maxed out your employer’s 401(k) match?

Finally, you’ll need to check whether you are currently contributing enough to your 401(k) to earn all the matching funds your company provides.

Most employers match contributions workers make to a 401(k), up to a certain percentage of salary. This is basically free money, and you should contribute enough to claim it before using a Roth IRA. If you don’t have the money to max out your 401(k) and contribute to a Roth, there’s no use in opening this account since your 401(k) should be the priority.

If you’re already earning your maximum employer match, though, then it can be a smart choice to put some of the remaining retirement contributions into a Roth so you diversify your tax savings and claim some now and some later.

By asking yourself these questions, you can make the best and most informed choice about whether opening a Roth IRA in 2024 is the right move for you.

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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.Christy Bieber 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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