Money Management

Home insurance won’t cover flood damage, among other things. Read on to learn what insurance won’t pay for. 

Homeowners insurance is an extremely important purchase for anyone who is buying a house or who already owns one. When a home buyer gets a loan to purchase a property, the lender requires insurance — the lender wants to make sure there’s money available if the home is destroyed. Even those who pay cash or own their homes free and clear should get coverage.

But while homeowners insurance will pay for a lot of things that could go wrong with a property — like a fire or vandalism — there are certain situations when a policy will provide no help at all. It’s important to understand these limitations to avoid unpleasant surprises when something goes wrong.

Here are a few things that homeowners should not be surprised to find their home insurance doesn’t cover.

1. Flood damage

Flooding caused by a busted washing machine should be covered by standard homeowners insurance. But any flood damage caused by weather or natural disasters won’t be covered.

Standard homeowners insurance policies do not pay for floods caused by so-called “acts of God.” Homeowners would be on their own if a hurricane or even a bad rainstorm caused damage to their personal property.

It is possible to buy separate flood insurance coverage, though. And those who live in designated flood zones — areas the Federal Emergency Management Agency (FEMA) has determined are at an elevated risk of taking in water — may be required by their mortgage lender to get covered.

Anyone who is in a flood zone, whether they have a mortgage or not, needs to get a policy in place ASAP. Water can do a ton of damage and no one wants to be left paying to pick up the pieces on their own. Flood insurance can be purchased through the National Flood Insurance Program overseen by FEMA. Homeowners should look into getting covered now if they are at risk of flooding and don’t have protections in place.

2. Routine wear and tear

Houses are lived in, and a lot of things can happen to them over time (just a quick look at my kitchen cabinets with two kids and my hardwood floors with two dogs demonstrates that). Unfortunately, home insurance doesn’t cover routine wear and tear (or the stress a toddler places on a home).

Just like a car insurance policy won’t pay for gas or new brakes, a homeowners policy won’t pay for things like a new air conditioner, appliances that need fixing, or new carpet. Unless those things are destroyed by a covered disaster — like a furnace fire or a fridge water line that leaks — homeowners will have to pay on their own for the stuff that simply gets old or broken.

3. Mold damage

Mold damage typically happens over time when other problems aren’t fixed — like a leaky roof or pipes, or a faucet that drips, or an area with too much moisture and too little ventilation. Homeowners insurance is not generally going to pay anything for mold remediation even though it can be expensive, coming in anywhere from $1,500 to $9,000 in most cases.

4. Damage from pests

Finally, damage from pests like mice or termites or other insects or vermin is also not going to be paid for by homeowners insurance coverage. Property owners need to know the signs of damage and, potentially, to have regular inspections by a pest control professional to avoid things going wrong.

It’s important to understand what home insurance won’t cover, before it’s needed and unavailable. Homeowners can ask their insurer or look at their policy language to see where the gaps in coverage are and either buy standalone policies or start saving in a home repair and maintenance fund in case a problem happens that they’ll have to pay for themselves.

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Increasing your emergency savings this year could be a smart decision. Read on to see how you can tell if you need a bigger emergency fund. 

Having emergency money set aside in a high-yield savings account is really important. Without a financial cushion, any unexpected expenses could send you reaching for the credit cards. And unexpected expenses are inevitable in life, with as many as 60% of Americans reporting experiencing an unexpected financial shock over the course of a year.

One big question you may have, though, is how to tell if you have enough set aside. Specifically, you may be wondering if you should increase your emergency savings in 2024. If you’re trying to figure that out, here are two questions to answer.

Do you have a lot of high-interest debt?

If you owe a lot of money to creditors, you should have some emergency savings even if it may seem as if you should be concentrating on debt payoff first.

While it may seem crazy to stick money in a savings account if you’re paying upward of 20% interest on a credit card, the reality is that you don’t want to just send every dollar to your card and leave yourself with no cash cushion for emergencies. If you do that, any small setback will send you right back into debt and you’ll be trapped in a terrible cycle.

Instead, save a small emergency fund of around $500 or $1,000, and then focus on debt payoff. If you already have that much saved, then you shouldn’t increase your emergency savings and should instead get serious about paying down your credit cards.

After you’ve gotten rid of high-interest debt (typically defined as debt with financing charges of 10% to 15% or more), then you can work on increasing the amount you have saved for a rainy day.

Do you have three to six months of living expenses saved?

As a general rule of thumb, it is a good idea to have about three to six months of living expenses put aside for emergencies. Many people don’t, however, since 63% of workers can’t pay a $500 unexpected expense (according to data from SecureSave).

If you don’t have high-interest debt and you are short the recommended amount for an emergency fund, you should increase the amount you’re saving for a rainy day this year. There’s a good reason for this recommendation: You don’t want an interruption in income to cause you to become unable to pay important bills so you find yourself facing repossession, foreclosure, or damaged credit.

Research from LinkedIn found that it could take about six weeks for entry-level workers to find a new job, and about seven weeks for people in more senior positions. Other issues, like a medical emergency that leads to time off, could mean your income is interrupted for longer.

Having three to six months of expenses in the bank could give you time to find new work or to make big cuts to expenses if need be. It could also help ensure you can cover most major home or car repairs. So, get serious about increasing your emergency savings in 2024 if your account balance isn’t that big yet.

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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.
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You should not open a brokerage account until you’ve completed a few important steps. Learn how to properly prepare your finances for a brokerage account. 

Opening a brokerage account is important if you hope to build wealth. Working with a broker allows you to buy stocks, which have historically earned a better return than savings accounts or most other assets.

But, while it’s a good financial move to start investing in a brokerage account at some point in your life, you actually don’t want to rush into doing this. There are a few key tasks you need to check off your to-do list first, including the following.

1. Pay down high-interest debt

Before you start investing, it can be a good idea to pay down debt that has a high interest rate. When you repay loans or credit cards at high rates, the return on investment you get is saved interest.

If you have a credit card with an average interest rate of 21.47%, it’s unlikely you’ll find any reasonable investment that can come close to providing such a high return (if you do, can you send it my way!). So, you’d be better off in this situation devoting extra money to paying your card balance off in full before deciding to invest.

Just don’t use your debt to put off investing forever. If you’re waiting to open a brokerage account because of your credit cards (or other debt), make a plan to pay it off in a specific time frame so you can get started investing as soon as possible.

2. Save up money in an emergency fund

Before you invest, you’ll also need some emergency money. You don’t want to put all your spare money into the stock market, have the market crash, and then experience a job loss or other emergency and have to immediately sell your stock at a loss. Alternatively, if you left the money invested for a while, you’d most likely see the price of your shares rebound (assuming your investment was a reasonable one) since market recoveries have always followed market crashes.

In general, you’ll want enough money saved for emergencies to cover between three and six months of living expenses. It usually doesn’t make sense to wait until you have that much to begin investing, as saving so much money can take months or even years and you’d miss out on compound growth if you waited so long to invest (that’s when returns are reinvested to earn more returns).

You should try to save enough money to have a few thousand dollars set aside for emergencies, then you can split your extra cash between investing and emergency savings so you can start investing and growing your wealth.

3. Earn your full 401(k) match

Finally, if your company 401(k) has a matching program where your employer matches some of your contributions, you should make sure you’re maxing out the employer matching funds first.

So, for example, if your company matches 50% of contributions up to 3% of your salary and you make $45,000 a year, you would want to ensure you were putting at least $2,700 into your 401(k) to earn $1,350 in free money from your company. You would not want to invest in a brokerage account first and leave these funds on the table.

If you’ve accomplished these milestones, it may be time to find the best brokerage for you, open an account, and start putting money into it so you can make your money start working for you.

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Trader Joe’s Mandarin Orange Chicken is a repeated winner of the customer choice awards. Here’s why it’s so popular — and why you might want to try it. 

Trader Joe’s makes many products that will inspire you to get out your credit cards as fast as you can to make them yours. But there’s one product that consistently wins customer awards year after year. It’s, quite frankly, a truly delicious product too, so its repeated victories aren’t a surprise.

So, what is this amazing treat, and is it the most beloved of all time?

This Trader Joe’s product is undeniably a fan favorite

When it comes to Trader Joe’s delights, the company’s Mandarin Orange Chicken is one that undoubtedly stands above the rest.

The frozen Chinese entree won the title of Favorite Overall Product in the 2022 Customer Choice Awards and also took the prize for Favorite Entree that year. This was not the first time that it was an award winner, either.

The Mandarin Orange Chicken has been a winner in at least some categories for 13 years in a row. Each year since Trader Joe’s began doing Customer Choice awards, the chicken either won for favorite entree, favorite overall, or favorite in whatever other category it fit into. With so many victories, the entree also holds the title of having won the most awards of any products the store sells.

Its long string of wins prompted one presenter to comment on the Inside Trader Joe’s podcast that perhaps it should be given a “lifetime achievement award” in order to “open up space for something else.”

Does it deserve a place on your shopping list?

If you’ve never tasted the Mandarin Orange Chicken, you might not understand how such a simple dish could run away with so many awards every year. But, the reality is, this chicken really is that good.

It costs just $4.99, so it is very easy on the checking account, it takes only a few minutes to make in the microwave or on the oven and stove top, and the taste is absolutely unbeatable. The chicken is soft, tender, and easy to cut. It comes with plenty of sauce (which is the perfect combination of sweet and savory), and the finished product is as good as, or better than, similar dishes I have had in Chinese restaurants.

Because of its low cost, easy prep, and awesome taste, the dish is one Trader Joe’s shoppers should try if they tend to like Chinese food. And the best part is, because this is so good, you will be less tempted to order out Chinese (and end up spending a lot more money in the process). In our house, we eat the Mandarin Orange Chicken along with a side of Trader Joe’s fried rice, which we prepare in a wok with some fried eggs added. The combination of the two means it’s like going out for a meal, but without the cost of takeout or dine-in service.

If you’re looking to cut your food costs, buying the Mandarin Orange Chicken, as well as some other Trader Joe’s fan favorites like the Chicken Tikka Masala, could help to encourage you to cook at home instead of paying higher restaurant prices. Keep a few bags of these items in your freezer so they are ready on nights when you don’t feel like making a meal from scratch. You’ll be able to whip up something effortless and delicious right in your own kitchen for far less than takeout would cost you.

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CDs have some of the highest rates that banks offer. Find out why one personal finance writer sticks to savings accounts and never uses CDs. 

If you want to earn as much as possible on your savings, certificates of deposit (CDs) are usually the way to go. Some of the best CDs currently have rates of up to 5.55%, at the time of this writing. With high-yield savings accounts, rates generally max out at about 5.00% to 5.30%.

So, you can potentially earn about 0.25 to 0.50 percentage points more with a CD than you would with a savings account. CDs also have fixed rates. If you get a 1-year CD with a rate of 5.55%, you’re guaranteed that rate for the entire year. If you get a savings account with a rate of 5.30%, it could drop at any time.

Despite the perks of CDs, I never use them. I’ve always used savings accounts, and I’m fine with giving up the extra interest I could be earning. If you’re trying to figure out the right banking product for your savings, here’s why you may want to do the same.

Savings accounts have everything I want for my savings

When deciding where to put my savings, there are three features I look for. They are, in order of importance:

Security: I don’t want any risk of losing money.Access at any time: I want to be able to withdraw money when I need it.Solid return: I want an account with a competitive APY.

High-yield savings accounts check all the boxes. They’re safe — I always make sure to use accounts with FDIC insurance. That covers up to $250,000 per eligible account if the bank fails. (To be fair, many CDs are FDIC-insured, too.)

They let me access my money at any time. This is one of the biggest drawbacks of CDs. You need to keep your money deposited for the entire term. If you take it out before your CD’s maturity date (the end of the term), you’ll be charged an early withdrawal penalty, normally a few months of interest.

High-yield savings accounts also have competitive APYs. They’re generally not quite as good as on CD rates. But I’m not worried about getting the highest-possible return on my savings. I have a brokerage account for that, so I can invest a portion of my income.

My savings is my money for an emergency fund and short-term savings goals. It’s great to earn some interest, but it’s more important to me that I have access to my savings and don’t need to worry about early withdrawal penalties.

CD rates aren’t high enough to change my mind

If there was a larger difference between CD rates and savings account rates, I’d be more inclined to open a CD. A 2 to 3 percentage point difference would be tempting. But an extra 0.25 to 0.50 percentage points doesn’t move the needle that much.

To put these percentages into perspective, let’s say you have $10,000 in savings. If you put that in a 1-year CD with a 5.55% APY, it’ll earn $555. If you put it in a savings account with a 5.30% APY for one year, it’ll earn $530. For agreeing to lock up $10,000 for an entire year, you make an extra $25.

Deciding between a CD and a savings account

That’s my personal philosophy on managing my savings. Some people prefer to keep their money in CDs, and that can also work well.

With CDs, you potentially get a higher rate, and you have the peace of mind that the rate isn’t going to drop during the term. The tradeoff is that CDs require more planning. You need to figure out how long you can lock up your money.

One popular strategy is CD laddering, which involves opening CDs of various term lengths. This way, your CDs mature at different times. Instead of having all your savings in a 5-year CD, you could divide it up into a 1-year CD, a 2-year CD, a 3-year CD, and so on.

A savings account doesn’t provide the same rates, and savings rates can fluctuate. The advantage is that they’re uncomplicated, and there’s no planning required. Just deposit your money and take it out when you need it. I like that kind of simplicity, which is why I stick to savings accounts.

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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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Credit card debt can be financially damaging, but millions of Americans carry a balance. Find out how many people owe and what to do if you’re one of them. 

Credit card debt can be expensive, but unfortunately it’s pretty common for people to carry a balance.

It’s definitely understandable that many Americans owe money on their cards, as sometimes keeping up with everyday expenses can be difficult without that extra buying power that credit cards provide.

But just how many Americans owe, and what should you do if you’re one of the many who is carrying a balance?

Here’s how many Americans are in credit card debt

Credit card debt is the most common type of debt, according to the Federal Reserve. In fact, more than 45% of families indicated they had an outstanding balance due on their cards after making their most recent payment. Among those who owe, the median family had a balance of $2,700 in 2022.

In order to avoid paying interest charges, it would be necessary to fully repay the entire balance owed on a card by the end of the grace period in each billing cycle. However, almost half of all Americans are not paying off their cards in full, as this data shows. They are letting at least some of the money they owe carry over to the next billing cycle.

Since credit card minimum payments tend to be very small — often somewhere around 2% of the balance due — it’s not surprising that many people don’t pay 100% of what they owe each month. The problem is, for all those families in credit card debt, when their next bill comes, it will be even harder to pay it off in full since they’d have to pay the debt that was carried over, interest charges, and any new debts they have incurred over the most recent cycle.

It can become really easy for a card balance to get out of control quickly, and it’s easy to see how people get stuck in debt for years as their balance keeps growing each month when they don’t pay it back entirely and they charge new purchases on top of old obligations.

What should you do if you owe money on your cards?

If you’re one of the 45% of people carrying a credit card balance, dealing with this debt should be a major financial priority. With the average credit card interest rate at 21.47% as of November 2023 per the St. Louis Fed, carrying a balance can make all your purchases a lot more expensive and the payments can make it difficult to do other things with your money.

To get rid of your debt for good, you’ll want to make a plan. Some options include:

Refinancing using a personal loan: Personal loans have fixed payment schedules and the interest rate is usually lower than on cards (it averages 12.35%). If you can reduce your financing costs and get on a set repayment schedule where you’re debt free in a few months or a few years, it may be worth doing.Paying extra on your credit cards: Paying more than the minimum can bring your balance down. Try to budget as much as you can for card payoff so you can stop the financing charges ASAP.Living on a budget: You’ll want to stop charging more on your credit cards than you can afford to pay back so you don’t keep adding to your balance each month. Living on a strict budget can help you keep your spending down to a level you can afford to fund in cash.

The sooner you start working on your credit card payoff plan, the better off you’ll be — so if you’re in that 45%, look into these options today to figure out which works best for you to become free of credit card debt.

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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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