Money Management

Trying to monetize your swimming pool? Read on to see how it might impact your insurance needs. 

Owning a home is expensive. In addition to paying a mortgage, you have to cover the cost of maintaining that property as well as pay for necessary repairs.

And then there’s homeowners insurance to think about. Your cost there will hinge on your home’s location as well as the size and condition of your property. But it’s another ongoing bill to contend with either way.

As such, you may be eager to drum up some extra cash to help cover your homeownership costs. And while you could go out and get a side hustle that has you waiting tables or driving for a ride-hailing service, an easier way to boost your income may be to monetize your home. You could do that by renting out a finished basement or garage, or by renting out your parking spot (either by the hour, day, week, or month).

But if your home has a pool, that’s another avenue you can explore. And it may be a lucrative one.

Many people don’t want to bear the expense of owning a pool, so they’re willing to pay a generous hourly rate to rent one instead. If your property has a pool, that’s a prime opportunity.

You may be wondering if renting out your swimming pool will force you to increase your homeowners insurance coverage. And the answer is, it depends.

Are you using a service or going solo?

You may be inclined to advertise that your pool is available to rent locally and see where that takes you. If you’re going this route, as opposed to using a service or app, then it’s definitely a good idea to contact your homeowners insurance company and see if you need additional coverage. But if you’re using an app or service to rent it out, you may not need added insurance.

Swimply, for example, offers U.S. and Canadian hosts liability protection of up to $2 million. If someone books your pool through Swimply and then gets hurt and sues you for $400,000, you have coverage in place. Swimply also says that hosts are eligible for up to $10,000 in property damage resulting from a booking.

Should you rent out your pool?

There are pros and cons to renting out your pool. The upside, of course, is the extra income. The downside is that you’ll have strangers on your property at different times, which may or may not interfere with your schedule.

Also, even if you use a service like Swimply, you’ll need to manage your bookings and ensure your pool is guest-ready as necessary. That could end up being a lot of work.

Now, if you’re interested in renting out your pool but are wondering whether it pays to go through a service or do it solo, that’s a different story. The upside of using a service is that it might be easier for guests to find you, and you’ll get the aforementioned financial protection (at least with Swimply).

On the other hand, you might lose a chunk of your profits to fees. Swimply takes 15% to 30% of what you charge per booking.

Whether you decide to rent out your pool through a service or not, it’s important to loop your homeowners insurance company in either way. It may not require you to increase your coverage, but it’s essential to have that conversation.

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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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Many first-time buyers make a low down payment. Keep reading to learn the potential consequences of doing so. 

Since 2018, the typical first-time home buyer has made a down payment of around 6% to 7% of the value of the house they are purchasing, according to the National Association of Realtors. This is below the 20% down payment that is usually recommended and that is required to avoid having to buy private mortgage insurance. Mortgage lenders require PMI on loans with less down because it protects them against losses in case they have to foreclose — but you have to pay for that protection.

So if you have only a little bit of money in your checking account to put down, does this mean you’re not ready to buy a house? Here’s what you need to know.

A small down payment could come with added costs

One of the biggest downsides of having a small down payment is that you’ll have added costs to pay.

As mentioned above, you’ll need to buy private mortgage insurance (PMI) if you put less than 20% down. Typically, PMI costs between 0.2% and 2% of the amount of your loan each year. So if you borrow $400,000, you’d be paying between $800 and $8,000 a year in PMI.

You will also be borrowing more with a smaller down payment, so your monthly payment (and interest costs) will be higher due to the fact you have a larger loan balance. This is on top of the added cost of PMI. You may also have to pay a higher interest rate since you could have fewer options for lenders. Not all lenders accept low down payments (and lenders who do often charge higher rates since they’re taking on added risks due to your small down payment).

Let’s say you’re buying a house valued at $450,000. Here’s how different the payment could look with a 20% down payment versus a 5% down payment:

As you can see, you’ll typically pay a lot more each month for your loan if you have a smaller down payment.

You risk ending up owing more than the house is worth

There’s another big downside to making a small down payment: You could end up without much equity in your house to start, so you could find yourself owing more than the house is worth. This is also called being underwater on your loan.

Generally, you don’t pay down much of your loan balance early on, since much of your mortgage payment goes towards interest. After a year of making payments on a $427,500 loan at 7.50% down, you would still owe $423,559.16. If property values declined even a little bit, you could end up owing more than the house is worth.

And since closing costs for sellers can equal around 6% to 10% of the home’s value, you’d almost assuredly owe more than you could sell the house for. This can make it impossible to move or refinance your loan if you need to.

You may be unprepared for emergencies

Finally, if you have a very small down payment, chances are you also won’t have a ton of money set aside for emergency expenses. Unfortunately, owning a home can come with a lot of added costs, such as maintenance and repairs. And if you lose your job or experience an income reduction, you’d still have the mortgage to pay.

If you have a small down payment and no emergency fund, you’re taking on a really huge risk and probably aren’t ready to make a home purchase.

Does this mean you shouldn’t move forward?

Now, there are clearly some huge downsides to having a small down payment and buying a house. But there’s an upside, too: You get into the house. You can start building equity and benefiting from property appreciation. If you had to wait months or years to save up more money, property values could go up in the meantime and you could still end up priced out.

Before you move forward, though, you do want to make sure that your monthly payments — including PMI — are affordable, that you don’t have plans to move or refinance for a while (in case you end up owing more than the home’s value for a period of time) and that you have money for emergencies. If all those things are true, then buying a house with a small down payment may be an OK choice.

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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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If you can put aside $50 a month, that’s a great place to start. Not sure what to do with your savings? Here are two savings options to consider. 

Many Americans hope to save more. But saving can feel impossible if you have minimal extra cash left in the bank after paying your bills. Even if you only have $50 a month to save, it can make a difference and improve your future. Don’t let your current financial situation keep you from saving at all. Here are two options to consider if you want to save $50 each month.

Start building an emergency fund

Costly life events can happen when you least expect them. Suddenly, out of the blue, you may need to pay for car repairs or an emergency vet bill. But the good news is you can prepare for unplanned expenses with an emergency fund. You may think it’s not worth it to start saving if you can only afford to set aside $50 monthly. But that’s not true.

Give yourself grace, and remember that we all start somewhere. It’s okay to start with $50. If you set aside $50 a month for one year, you’ll have $600 saved. That’s better than $0. As you continue to contribute more money, your account balance will grow.

By keeping your extra cash in a high-yield savings account, you can earn interest while your money sits in the bank. Many of the best high-yield savings accounts offer APYs of 4.5% or more. How much interest can you earn while your cash sits in the bank?

If you keep $600 in a high-yield savings account with a 4.5% APY for one year, you’ll earn around $27, depending on how frequently the interest is compounded. That’s much better than making $0 in interest by keeping it stashed in your checking account or under your mattress.

Begin investing for long-term growth

Investing is another way to put $50 a month to good use. It’s important to know there’s no guaranteed return when investing your money. Your returns can fluctuate significantly over the years, so you should feel comfortable taking risks.

Historical data shows that investing can be beneficial to your financial future. Over the last 30 years, the stock market has had an average annual return of around 10%, as measured by the S&P 500. If you already have an emergency fund established, you may want to consider starting to invest — especially if you’re looking for a long-term growth strategy.

If you want to invest, consider opening a traditional IRA account. With this type of account, your contributions may be tax deductible. Plus, your earnings aren’t taxed until you take a distribution. You can open a traditional IRA with a brokerage firm.

How much could your money grow? Let’s imagine you decide to invest $50 per month for the next 30 years. Here’s a look at the potential account growth after 10, 20, and 30 years with an 8.5% annual rate of return using the compound interest calculator from Investor.gov.

Don’t wait to begin saving

If you’ve been meaning to work on your savings goals, now is the perfect time to begin. It’s worthwhile to start, even if you can only afford to save $50 per month. Whether you choose to start building an emergency fund or focus on long-term growth by investing for your later years, your future self will be glad that you made your personal finances a priority.

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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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Having a Costco membership is more than just buying toilet paper and frozen pizzas in bulk. Find out what extra perks you can unlock in your membership. 

You don’t have to work hard to get something out of your Costco membership. Even the bare minimum can translate into more cash left over for your savings account. But Costco’s perks don’t stop at just the membership card that gets you through the door. From getting cheap car insurance to replacing your gutters or HVAC, your Costco membership could benefit your finances in ways you might not be using. So, if you’ve only been using Costco to stock up on toilet paper and frozen pizzas, here are three other ways to get more value from your membership.

1. Buy Costco tires

Costco Tire Center has always had great prices on new tires. But recently it jumped ahead of tire shops by eliminating its $80 installation fee when you buy a set of four. Combine this with a tire promotion (like $50 to $100 off) and you could be looking at the cheapest price for your car’s tires.

Not only are the prices low, but you’ll also get a five-year roadside hazard warranty for most tires (some truck tires don’t qualify) and lifetime maintenance. The roadside hazard warranty will replace your tires if they’re punctured or damaged beyond repair. Lifetime maintenance will cover tire rotations, balancing, air pressure checks, and valve stem replacements.

On the topic of cars, Costco will also give you a fat discount on car insurance through its provider CONNECT — a company that’s backed by American Family Insurance. You can also rent cars through Costco, buy cars, and get your car battery replaced.

2. Don’t skip the gift cards

Costco gift cards are one of the warehouse’s best deals. In fact, Costco regularly adds about 10% to 30% of value into its gift card packages. That means, if you’re buying $100 of gift cards, the sticker price could be as low as $70 — a savings of $30.

To be fair, you won’t always find gift cards you like (most noticeably missing are Amazon and Apple). And you’re also exchanging dollars, which can be used everywhere, for gift cards that can be used at one or a handful of stores. But if you’re already shopping at the stores whose gift cards Costco sells, you could save significantly by buying them in advance before you shop there.

3. Check out Costco’s home services

Finally, your Costco membership grants you access to a slew of home services, like bathroom remodeling and solar panel installation. Through Costco, you’ll connect with home professionals who will give you a free consultation. Plus, Costco will throw in a Shop Card if you go through with the purchase. Here’s how much you could earn based on some popular services:

Bath remodeling: 10% Costco Shop CardCabinet refacing: 10% Costco Shop CardCarpet & flooring: 15% Costco Shop CardCountertop installation: 15% Costco Shop CardGutter installation: 10% Costco Shop CardHome organization services: 10% Costco Shop CardHVAC installation: 15% Costco Shop CardSolar panel installation: 10% Costco Shop CardWater treatment: 10% Costco Shop Card

Ultimately, your Costco membership does more than just let you enter an airplane hangar of deals. In fact, these three perks only scratch the surface of what your membership can do. My tip: If you’re in the market for something, like a new HVAC system, always check Costco first. You might be surprised at what you find — and how much your membership can save 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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon, Apple, and Costco Wholesale. The Motley Fool has a disclosure policy.

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Retailers are increasingly getting ahead of the season all year round. Read on to see how I manage that in the context of holiday shopping. 

Retailers tend to have a single goal — to make money. And so they tend to employ different tactics to get consumers to reach into their wallets or swipe their credit cards.

One such tactic, for example, is to set up fun-looking displays at the end of different aisles. Another is to simply slap the word “sale” on a sign in the hopes of it triggering something in people’s brains to capitalize on a so-called great deal.

In recent years, though, retailers have adopted a strategy that I’m really not a fan of. I call it getting ahead of the seasons, and it goes as follows.

Rather than waiting until September to put out Halloween candy, many stores get it on the shelves in July. You’ll also start to see Christmas trees in August, Easter baskets in January, and so forth.

I don’t like this trend because rather than getting me excited for those future events, it gets me anxious and annoyed. I’ll worry, for example, that if I don’t scoop up my bulk bag of Halloween candy in July, there won’t be any left in mid-October, when I’d normally purchase it.

Similarly, in recent years, I’ve run into issues with not being able to find all of my holiday gifts in November and December. So when I see seasonal stuff hit the shelves in August, I’m often inclined to shell out the money.

The whole getting ahead of the season trend has the potential to throw a lot of people’s finances off-course. And that’s just one of several traps you might fall into. So here’s how I manage this new and, frankly, unwanted phenomenon.

I make a point to get organized

Last year, I did some of my holiday shopping well ahead of the season. And you know what happened? I did such a great job of hiding the gifts I purchased in my basement closet that by the time the holidays rolled around months later, I’d forgotten about them. In fact, I remember discovering a handful of gifts multiple weeks after the holidays ended and cursing my decision to purchase them.

This year, I’m being smarter about keeping tabs on my holiday purchases. Call it dorky, but I’m maintaining a spreadsheet that lists not only the holiday items I’ve purchased ahead of time, but exactly where in my house they’re located. That way, I won’t have a repeat where I forget about things I’ve already spent money on.

I save for the holidays all year round

Some people first start putting money into their savings accounts for the holidays during the fall. But given the whole getting-ahead-of-the-season trend, for me, that’s too late. I can’t first start setting money aside for the holidays in October if I need to begin my shopping in August or September.

That’s why I’ve started allocating money for holiday purchases as early as January. Now, if you missed that boat this year, you can’t go back in time. But given that the trend is probably here to stay, you may want to make a point to start saving for the 2024 holidays this coming January.

A trend that’s not going away

Because retailers are putting out holiday items earlier and earlier, consumers are following their lead. A good 46% of consumers started their holiday shopping before November last year, says the National Retail Federation, up from 39% in 2019.

While you may not like the idea of feeling pressured to do your shopping so far ahead of the season, it’s important to put yourself in a position where you can at least afford to do so. Just as importantly, create a system that prevents you from misplacing the gifts you’re buying ahead of time, whether it’s a spreadsheet, a series of sticky notes on your desk, or something else that works well 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.The Motley Fool has a disclosure policy.

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