Money Management

Homeowners insurance pays for covered losses, but it’s important to get the right policy in place. Read on to learn why. 

When buying homeowners insurance, property owners must decide on their policy limits. In most cases, it makes sense to buy a policy that provides coverage for the full replacement value of the house. That’s what it would cost to rebuild.

Sometimes, homeowners don’t do that, though. They may choose a policy with a lower limit. The theory behind doing that is that most repairs won’t actually cost the full replacement cost of the house. And premiums are cheaper, so that’s less money coming out of a checking account each month.

But what happens when property owners do this? If something goes wrong and their home needs repair, will this cause any problems?

Homeowners need to know about the 80% rule

While skimping on insurance may seem like a great way to save on premiums, the reality is that home insurers are wise to this trick and they have a special rule that is designed to prevent exactly this type of behavior. It’s called the 80% rule.

Basically, this rule says that the home must be insured for at least 80% of the replacement cost of the property. So if the house would cost $400,000 to replace, homeowners need to make sure that their policy limits are set at $320,000.

If a property owner does not do this, then the insurance company will only pay a percentage of damages equal to the percentage of the home’s value that’s insured. Say for example that a property owner with a $400,000 house insured the property for $200,000 or 50% of the home’s value. The insurer would then pay just 50% of a covered loss — even if the loss was for an amount below the $200,000 limit.

So, let’s assume a property sustained $75,000 in damages in a fire. The insurer would pay 50% of that amount, or $37,500, even though the $75,000 is below the $200,000 limit.

Don’t skimp on insurance coverage

For property owners, it makes little sense to try to save money by skimping on insurance coverage. That’s because the risk that comes with not being properly insured is far too great.

The reality is, homeowners insurance provides vital protection for assets. Property owners need to make sure they have not only a sufficient amount of dwelling coverage (to pay to repair or rebuild the property), but also enough:

Liability coverage to protect their assets in case they are sued when someone gets hurt at their home.Personal property coverage, which pays for their personal items in the home that are damaged or destroyed by a covered loss.

Buying comprehensive homeowners insurance means that when a disaster strikes, the insurer will be there to save the day. Since a home is most people’s most valuable possession — and also the place where they keep just about everything they own — having it properly insured is a key part of avoiding a devastating money disaster.

Our picks for best homeowners insurance companies

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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Some Costco members are more enthusiastic than others. If you have a Costco superfan in your life, they’re sure to enjoy these gifts. 

I recently learned the term “Costco Superfan.” Apparently, there are people so enamored with Costco that they travel the country, visiting Costco stores. And then there are those who drop into their local Costco warehouse as often as possible. It’s impossible to know if it’s because they believe shopping at Costco helps preserve their checking account balance or if they simply enjoy the experience.

For those of you who have a superfan in your life, here are seven gifts they’re sure to appreciate.

1. Divorce sticker

Redbubble features a sticker that reads, “Ex-wife got the kids, but I got the Costco membership.” The ad shows the sticker on a stainless steel tumbler, but suggests using it to personalize laptops, windows, and more.

The sticker is currently on sale for $1.88. If you like the idea but don’t want to give someone a sticker, there’s also a magnet version on sale for $5.53.

2. Costco Monopoly

For the Costco superfan who also enjoys playing Monopoly, Costco sells the Costco version. The oversized game board features custom illustrations from Costco stores around the globe. Costco Monopoly sells for $45.

3. Costco Shop Card

As the name suggests, the Costco Shop Card is designed for Costco shoppers. It comes in denominations of $25, $50, $100, $250, and $500. Once you decide which amount fits into your household budget, you can order online.

Only members can purchase gift cards through the Costco website. If you’re not a member, your best bet is to ask a friend or family member who is a member to purchase the card for you.

4. Executive membership

Why not renew the gift recipient’s Costco membership? If they’re not already an executive member, now’s a great time to upgrade on their behalf. For $120, the recipient can earn up to $1,000 annually on qualified purchases, enjoy extra savings when ordering new checks, receive exclusive benefits on auto and homeowners insurance, get a free subscription to the monthly magazine Costco Connection, and more.

You’ll need the Costco member’s current card or membership number to make the upgrade, so you may want to ask for assistance from a roommate or household member.

5. Coffee mug

The online marketplace Etsy features a shocking number of Costco-related gifts. For example, there’s a coffee mug that reads, “I like long romantic walks down every aisle at Costco.” The mug is currently on sale for $11.79 with free shipping. It’s a fun gift that won’t drain your bank account.

6. Costco-related shirt

Etsy shops also sell Costco-related shirts in several styles, including t-shirts, sweatshirts, and hoodies. Here’s a sample of messages emblazoned on the shirts:

“Panic at the Costco”A photo of a Costco hotdog, with the words “You Know I Got the Dog In Me””I Need My Emotional Support Costco HotDog”A picture of an alligator with the words “Lacosta Wholesale” under it

Some Etsy sellers even allow you to personalize the shirts.

7. Putter weight kit

For the golfer in your life, this stainless steel weight kit allows the recipient to adjust the weight of their KS-1 putter and improve their game. According to the shop owner who crafts these weight kits, once the weight is attached, the club feels similar to a Scotty Cameron putter. The custom weight kit sells for $57.20.

It’s easy to imagine how much the faithful Costco members in your life will appreciate and enjoy any Costco-related product you give them. And what’s more fun than giving a gift that you know will be appreciated?

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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.Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Etsy. The Motley Fool has a disclosure policy.

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S&P 500 ETFs are a good long-term investment. But are they enough? Read on to find out. 

You’ll often hear that it’s important to diversify your holdings in your brokerage account. If you only invest in a single industry, you’ll risk major losses in a situation where that sector alone is negatively impacted.

Take someone who focused their investing strategy on travel stocks in early 2020. Travel stocks took a huge hit that year due to pandemic-related shutdowns, which means anyone with most of their portfolio in travel stocks would’ve been looking at serious losses.

Now, there are different ways you can go about diversifying your portfolio. You could simply buy stocks across a range of market sectors. Or, you could load up on S&P 500 ETFs.

ETFs, or exchange-traded funds, trade publicly and consist of numerous stocks. You can buy sector-specific ETFs — for example, travel ETFs. Or, you could buy S&P 500 ETFs.

The S&P 500 index consists of the 500 largest publicly traded companies today. The index is usually indicative of the stock market’s performance as a whole. So when you buy S&P 500 ETFs, you’re effectively putting your money into the broad market. You’re also getting instant diversification.

Investing in S&P 500 ETFs can be a great strategy, especially if you’re not so confident about choosing stocks individually. But should you only invest in S&P 500 ETFs?

The one time it’s okay to choose a single investment

You wouldn’t ever want to load up your portfolio with a single stock. But if you’re buying S&P 500 ETFs, this is the one scenario where you might get away with only owning a single investment. That’s because your investment gives you access to the broad stock market.

Meanwhile, if you only invest in S&P 500 ETFs, you won’t beat the broad market. Rather, you can expect your portfolio’s performance to be in line with that of the broad market. But that’s not necessarily a bad thing.

See, over the past 50 years, the S&P 500 has delivered an average annual 10% return. That average accounts for years of strong performance as well as downturns.

A 10% return is a pretty good one. For context, a $6,000 investment that enjoys a 10% annual return over 40 years will grow into almost $272,000. So if you’re happy with a portfolio that performs comparably to the stock market as a whole, then sticking to S&P 500 ETFs alone isn’t a bad idea.

However, if you assemble a portfolio of individual stocks that perform better, you might enjoy a 12% or 15% return over time — or more. A $6,000 investment that earns 15% a year over 40 years will grow into $1.6 million.

How much effort do you want to put in?

Putting your money into S&P 500 ETFs only might limit your returns to some degree. But in exchange, you’ll have a lot less work on your hands. You won’t have to research individual stocks for your portfolio and keep tabs on their performance quarter after quarter.

If you don’t want to put a lot of effort into managing your investments, then S&P 500 ETFs are a good solution. But if you’re willing to do the work, then you might do even better in the long run with a portfolio of hand-picked stocks (although, the odds are against you).

Another idea? Do both. Keep some of your portfolio in the S&P 500 but also add stocks you think offer exceptional value. With any luck, you’ll enjoy solid returns as a result of a modest amount of research, but not an overwhelming amount.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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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I bond interest rates are on the rise again. Are they a smart place to park your cash? Read on to find out. 

Series I savings bonds, better known as I bonds, are a special type of savings bond issued by the United States Treasury. They’re designed to provide risk-free income that is protected from the effects of inflation over time.

I bond interest rates have been rather high over the past couple of years — as high as 9.62% — as inflation has persisted, but has cooled off to a relatively low 4.3% from May through October of 2023. However, the Treasury Department just announced the new I bond interest rate, and the good news is that savers are getting a raise.

The new I bond interest rate

I won’t keep you waiting. The new I bond interest rate is 5.27%.

This is an increase from the previous rate of 4.30% and will apply to all I bonds purchased from November 2023 through April 2024. And to be clear, this rate will apply for six months, regardless of when exactly during this window an I bond is purchased.

An I bond’s interest rate has two components — a fixed portion and a variable portion. For new I bonds, the fixed rate is 1.30%, and this will stay the same for the life of the bond. This is mainly based on the current interest rate environment — for example, the fixed-rate component was 0% from May 2020 through October 2022, while we were in a low-rate environment.

The variable rate for new I bonds is 3.94%, and this is the component that changes with inflation over time. (Note: The overall rate is annualized, which is why 5.27% is a little higher than the two main rate components combined.)

The key point to know is that if you buy I bonds now to take advantage of the 5.27% yield, you’ll need to realize that the “headline” interest rates published in the future may differ somewhat from what your bond is paying. It’s important to know your fixed rate, so you can combine it with whatever inflation adjustment applies at the time. Fortunately, the Treasury Department maintains an excellent chart that shows the current yield of I bonds for various issue dates.

Benefits and drawbacks of buying I bonds

The benefits of buying I bonds are clear. You’ll get a guaranteed yield for the first six months, and your money will be protected from inflation over time. If inflation spikes to double digits (which has happened before), your future I bond yield will reflect that.

There are some drawbacks, however. For one thing, you can only buy $10,000 of I bonds each year through Treasury Direct. You can invest as much as $5,000 in addition to this by using your tax refund to buy I bonds, but at most, you’ll be able to put $15,000 into I bonds per year.

Additionally, your money is locked up for a while. You cannot cash out of I bonds at any time within the first year, no matter what. And if you cash out within the first five years, you’ll face a penalty that equals the last three months’ worth of interest.

Is it a good place to invest now?

To be sure, I bonds aren’t designed to be an all-in-one investment strategy. It’s still important to invest through your employer’s 401(k) or similar plan, or to open a brokerage account to invest in stocks, ETFs, mutual funds, and other instruments to build up a nest egg. However, I bonds can be a great tool to set aside some of your cash in a risk-free way, and to hedge against the impact of inflationary pressures on your spending power.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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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It can be hard to stay motivated as you work on your financial goals when you’re stuck living paycheck to paycheck. Find out how to reduce your monthly tab. 

Many Americans are feeling the impact of rising living costs. When bills continue to climb as your wage stays the same, it can be difficult to escape the paycheck-to-paycheck lifestyle. But even if you’re feeling discouraged, you can make progress in improving your current financial situation.

One way you can free up some of your income is by reducing your monthly expenses. Here are a few tips to help you cut your monthly bills so you can avoid going into debt.

1. Cancel unused subscriptions

If you want to reduce your monthly bills, first review your recent spending habits. Take a look at your bank statements and credit card bills and tally up your monthly bills. You’re likely paying for subscriptions or memberships that you’re no longer using. By canceling these services, you can reduce your spending so you have more money to put toward your financial goals.

2. Give budgeting a try

The thought of budgeting turns many people off. But budgeting can result in you being more in the know about your everyday spending habits. If you’re struggling with spending, you may want to give budgeting a try to see if you can reduce unnecessary spending. If you’re new to budgeting and are ready to make changes, check out our list of the best budgeting apps.

3. Alter your grocery shopping habits

Life gets busy, and sometimes there’s little extra time to plan your next trip to the grocery store. But if you’re willing to change some of your shopping habits, you could lower your grocery spending. Here are a few tips that could help you leave the checkout line with a less costly bill:

Review sales fliers and compare the best deals from nearby storesMake a shopping list so you can stay on budget and avoid impulse purchasesConsider sticking to store-brand essentials to avoid higher price tagsUse cash back apps to earn rewards as you shopPay for your purchases with cash back credit cards to earn cash back

4. Shop around for the best insurance rates

If you’ve seen your insurance premiums rise in recent years, you’re not alone. I live in a state that is less at risk of severe natural disasters, yet my homeowners insurance premium climbed several hundred dollars in the past year. Even if increased insurance costs are the norm, it’s a good idea to get quotes from multiple insurers to see if you can reduce your insurance costs.

Now is an excellent time to get quotes for home insurance and auto insurance policies to see if you can get a better rate. You could reduce your monthly insurance bills by switching insurance providers. Just make sure you’re researching the prices for comparable policies.

5. Negotiate the cost of recurring bills

Believe it or not, you may be able to negotiate the cost of some of your monthly bills. Review the prices you’re paying for recurring bills like home internet and mobile phone service, and then research current rates. Some companies may be willing to offer a discount or apply a new customer promotion to your account. It’s worthwhile to call and ask. If you’re not successful, you may want to compare other plan options to see if you can save money by switching.

6. Remove saved credit cards from online shopping apps

Online shopping is convenient, but it can be too easy to spend beyond your means. If you’ve been spending more money than you’ve planned shopping with your favorite online retailers, you may want to consider removing your saved credit cards from online shopping apps and websites. By doing this, you’ll have to jump through more steps to complete an online purchase — which could result in you engaging in retail therapy less frequently.

Don’t let your financial struggles get you down

If you’re struggling financially right now, please know you’re not alone. Your current situation may be challenging, but it doesn’t mean you can’t make progress toward improving your personal finances. Small changes can make a big difference. Reducing your monthly expenses could help you ease your stress and allow you to keep more money in your bank account.

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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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