Money Management

Homeowners insurance may cover water damage, depending on the cause. Keep reading to learn how your home insurer decides what to cover. 

Homeowners insurance does more than just protect a property; it protects the homeowner’s checking account balance, too. That’s because when something goes wrong at home, the insurer should pay to repair the issue or pay to replace the property if it is destroyed. The property owner does not have to cover all the costs themselves and deplete their assets.

Home insurers don’t necessarily cover every single disaster though. One big question homeowners need to know the answer to is whether home insurance will cover water leaks. Water damage repair can cost anywhere from $3.75 per square foot to $7 per square foot on average (according to Angi), so it could be a real financial mess if a home is affected by a leak and insurance won’t cover it.

Here’s what property owners need to know about when home insurance will pay out for water leaks.

When are water leaks covered by homeowners insurance?

Homeowners insurance may provide coverage for water leaks — but not in all circumstances. In order for a homeowners insurance policy to cover damage resulting from a leak, the incident typically must have been a sudden and accidental one. For example, if the water line to the refrigerator breaks or if a pipe suddenly bursts in the home, this would be the type of situation where insurance would typically provide coverage.

Homeowners insurance policies would not pay for damage caused by deferred maintenance or negligence though. If a property owner noticed a leaky faucet, toilet, or shower and just chose not to fix the issue over a long period of time, any resulting damage would be their responsibility to pay for.

Likewise, if a leaky roof caused damage over time because the property owner never repaired the shingles, this would be damage an insurance policy would not protect against.

Home insurance policies also do not cover damage resulting from floods. Those who want to be protected against flooding would need to get a separate flood insurance policy through FEMA or a private insurer.

Having the right home insurance coverage — and understanding your coverage — is critical

It is important for property owners to know the limits of what their insurance is going to do for them. In general, most policies either name specific causes of damage they will provide protection against (these are named peril policies) or cover all causes not specifically excluded (these are open peril policies). But neither named peril nor open peril policies will pay for damage due to negligence or due to flooding caused by acts of nature (like a hurricane).

Homeowners don’t want to be caught off guard by not understanding the details of their insurance policy or what it will pay for. It’s always best to ask an insurance agent or the insurance company directly what types of perils are — and aren’t — covered so there are no unpleasant surprises.

How can you avoid an expensive disaster at home?

Property owners should not only take responsibility for putting the right insurance in place, but also make sure they are maintaining their property and responding appropriately to potential causes of damage. A water leak is a big risk to a home, so if you notice something amiss with your plumbing, you should take action quickly and be prepared to pay for the repairs.

Consider saving money for home maintenance in a separate savings account so you’re ready. This way, a minor disaster doesn’t have to become a major one that an insurer won’t pay up to fix.

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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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My Walmart mattress is just about as comfortable as the Tempur-Pedic, and it’s a lot less heavy. Here’s how the two mattresses stack up against each other. 

Recently, we bought a mattress that we plan to use temporarily for a few months as most of our furniture is in storage while we complete a remodeling project. We didn’t want to spend a lot of money since this mattress will be relegated to a guest room, if it is used at all, once we get our furniture back in place.

We opted to buy a memory foam mattress from Walmart and paid $278.99 for a king size. This was a fraction of the cost of our regular mattress, which is a Tempur-Pedic that cost several thousand dollars.

After sleeping on the cheap mattress for a while, here’s how they compare.

Both are equally comfortable

First and most importantly, my husband and I have found that both of the mattresses are equally comfortable to sleep on. Both provide a similar level of firmness and support. And, we don’t feel the other person moving around in either bed. In fact, if forced to pick which of the two we like better, we would not be able to based on the comfort factor alone.

Both have the same warranty

Our Tempur-Pedic mattress came with a 10-year warranty. We didn’t expect our new bed to offer this same guarantee since it cost so much less. But, we were wrong. The new, inexpensive mattress also has a 10-year warranty and a 30-day refund policy to make sure we’re comfortable with it.

Both have multiple layers

Our Tempur-Pedic came with multiple different layers of material including a comfort layer on the top, a support layer in the middle, and a base layer. Each of these layers is supposed to serve a purpose, like distributing body weight evenly along the mattress or dispersing heat.

Our inexpensive mattress actually comes with more layers, referred to as the “five floors of comfort.” There’s a top breathable fabric, a second layer to avoid heat, two separate support layers, and a non-slip layer at the bottom.

I’m not exactly sure if all of these layers are serving their exact purpose, but I have noticed that neither bed sleeps warm and both feel like they provide adequate support. The non-slip layer on the cheaper mattress also seems to help it stay in place on my box springs.

The Tempur-Pedic feels heavier and more substantial

The Tempur-Pedic stands out by feeling more substantial. The cheaper mattress came vacuum packed in a tiny little package and it took a while to fluff up. And it just doesn’t have the same heft as the Tempur-Pedic mattress.

However, while this is a point in the Tempur-Pedic’s favor because the substance has me feeling like it may last longer, it also means the Tempur-Pedic is more of a pain to move around.

Ultimately, I feel like the cheaper mattress was a better buy. It left more money in my bank account than the Tempur-Pedic, and it provides a similar level of comfort as well as the same warranty.

The experience has shown that buying a more expensive bed isn’t always the best option, so before breaking out your credit cards, be sure to explore and fully compare different mattresses to find one that feels the best at a fair price. Visit some stores and try them out. Don’t immediately dismiss one just due to a lower price point, as you might miss out on a comfortable mattress at a great discount. And don’t forget to consider the return policy and warranty so you end up happy with your purchase in the long run.

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

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For many people, buying a home outright could be a bad move. Keep reading to learn why one writer wouldn’t consider it. 

Let’s be honest: While I intend to buy a house next year, and have just met my savings goal to make it happen, I’m not capable of paying cash for the entire purchase. Instead, I’ll be shopping around with the best mortgage lenders and financing my home purchase (except for my down payment).

But in some alternate universe where I have more money to throw at a home purchase, I still wouldn’t buy a house outright in cash. Here’s why — as well as you might want to think twice, too.

1. A home is not a liquid asset

You may have heard of assets (the things you own, like cash, stock shares, or property) being referred to as “liquid.” What does that mean, though? Liquid assets can easily be converted to cash, such as money you have in a checking or savings account, as well as stocks, bonds, and other marketable securities. While you may lose money in the process of converting stock shares to cash (if you have to sell at a time when values are down, for example), it’s a fairly straightforward process to turn these into money if you need it.

A home, on the other hand, is not a liquid asset. Your ability to sell a house to convert that asset to cash is not guaranteed, nor is it guaranteed to happen as quickly as you might hope if you’re really in need of money. Using the current market as an example, a lot of potential home buyers have been priced out, and mortgages are expensive enough that current homeowners might be reluctant to give up their current low mortgage rate to buy your home with a rate double what they have now.

Sinking all your cash into a home purchase, rather than buying with a mortgage, could put you in a real bind if you need money quickly and have no other sizable assets beyond your home.

2. I could likely earn a higher return by investing

This point is much less effective given that mortgage rates are at their highest level in over 20 years, but it still bears discussing. The stock market has returned an average of 10% annually over the last 50 years (as measured by the performance of the S&P 500 index). The longer you can leave money in the market, the more likely you are to earn a nice return on your investments. Meanwhile, as of this writing, the average rate on a 30-year fixed-rate mortgage loan is about 8%, according to Freddie Mac.

There was a much more dramatic difference between interest rates on mortgage loans and the average stock market return a few years ago when the start of COVID-19 brought mortgage rates plummeting to 3%. But you can still likely earn more by investing than you’d save by buying a home outright with cash. And since you’re more likely to earn that 10% return the longer you can leave the money invested, it’s worthwhile to pay off a mortgage over 15 or 30 years, while your extra money is growing in an IRA account for your future over that period.

3. I might not have money left over

The final reason I wouldn’t pay cash for a home purchase is that I wouldn’t want to tie all my money up. Owning a home is expensive, and the cost of the home itself is really the bare minimum you’ll pay. Even after you pay for the house, you’ll still owe homeowners insurance premiums, property taxes, and potentially homeowners association fees if you buy in an HOA-managed neighborhood.

Plus, there’s the cost of maintenance and repairs. You can’t expect a home to never need any intervention from you — appliances and home systems break, and when you’re the owner, it’s on you to maintain them. My colleague Maurie Backman wrote about a friend of hers who ended up in a bad spot after paying cash for a home — she was left without adequate savings and risks ending up in debt as a result.

Do you really have to commit to 30 years of payments?

No, not at all! You have options for the type of mortgage you want to take on, in addition to the lender you use. Some people opt for a 15-year mortgage rather than a 30-year one; this is a great way to save on interest costs if you can manage the higher monthly payments. The rates for 15-year loans are often lower than for 30-year loans, and you’ll be paying interest for fewer years.

Another option, if you have the cash to buy a home outright, would be to make a larger down payment — why not put 50% down, get a mortgage for the rest, and consider opening a brokerage account to invest your extra cash? While you’re at it, put a good chunk into a high-yield savings account for an emergency fund — something is bound to break at home sooner or later.

Sinking all your spare cash into a home purchase could have you scrambling for cash for emergencies and missing out on the chance to invest and earn a higher return. Consider all your options for buying a home, and make the decision that’s right for you and your finances.

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Want to end up wealthy? Read on to learn about some key tools to take advantage of. 

Have you ever looked at someone you know with a lot of money and wondered how they got there? Maybe they got lucky — say, they ran with a unique business idea and it wound up being successful. Or maybe they inherited some of their wealth through family.

But you should know that many people who end up with a lot of money get there by making savvy choices. And that includes using the right wealth-building tools. Here are three you may want to take advantage of.

1. Traditional IRAs

When you contribute to a traditional IRA, you’re committing to saving and investing for retirement. But the tax savings you enjoy in the course of doing so make it easier to grow wealth.

Traditional IRA contributions are tax-free, so by funding one of these accounts, you’re shielding some income from taxes. That’s money you can invest for added wealth.

So for example, if you put $5,000 into a traditional IRA, you won’t be taxed on $5,000 of earnings. If you fall into the 22% tax bracket, that’s $1,100 in savings. If you take that $1,100 and invest it rather than spend it, you can grow even more wealth. It’s that simple.

2. Roth IRAs

The money you contribute to a Roth IRA won’t give you an immediate tax break. But you should know that investment gains in a Roth IRA are tax-free, and that alone opens the door to a lot of wealth-building opportunity.

Let’s say you contribute $250 a month to a Roth IRA over 45 years. The stock market’s average return over the past five decades is 10%, as measured by the S&P 500. If you score that same return in your Roth IRA, you’ll end up with a balance of about $2.15 million — but you’ll have only put in $135,000 of your own money. So all told, you’re looking at a $2 million gain that the IRS can’t touch.

3. HSAs

HSAs, or health savings accounts, combine the benefits of traditional and Roth IRAs. Contributions go in tax-free, and investment gains are tax-free along with withdrawals taken for qualified medical expenses.

And yes, HSAs are specific to healthcare costs. Withdrawing from an HSA for another reason could result in a costly penalty. But there are two caveats there: First, healthcare is a perpetual expense, so think of an HSA as the same thing as having a prepaid supermarket debit card. You know you need to eat, so that prepaid card is akin to having cash. HSAs are similar in the context of healthcare spending.

Also, while you’ll generally be penalized for tapping an HSA for non-medical withdrawals, once you turn 65, that penalty goes away. At that point, your HSA will work like a traditional IRA in that you can take distributions, but you’ll pay taxes on them.

People who are rich don’t always simply get lucky. Many work hard and use the right tools to gain wealth over time. If you want to build up your personal finances and join the ranks of the wealthy, make sure to save for retirement and healthcare in a tax-advantaged account like the ones discussed above. That way, you can enjoy a world of tax breaks in the course of your investing career.

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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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Some companies are willing to work with their customers to make their bills more affordable. Discover the steps to take to lower your regular bills. 

Life continues to get more expensive. Many of your bills have likely increased in price over the last few years. When this happens, your bank account balance is impacted. If you want to reduce your spending, it can be worthwhile to negotiate some of your recurring bills.

Your service providers may agree to lower the cost of your bills. If successful, you could free up more cash, which you could use to pay off credit card debt, build an emergency fund, or invest for your future. Here’s how to negotiate your recurring bills.

Decide what bills are worth negotiating

Before you get started, assessing your current financial situation can be beneficial. Review your credit card bills and bank statements to see your expenses and determine which bills might be worth negotiating. Here are a few bills that you may be able to negotiate:

InternetCableMobile phone serviceGym membershipHome security subscriptions

Research plans and prices

You want to come to the conversation well-prepared. Once you’ve decided which bills you’ll attempt to negotiate, make note of the current plan and the price you pay. Then, research the available options. Your rate may not be the current advertised price.

Some companies have special promotions available to new customers. Even if you’re an established customer, it’s worthwhile to research deals like this. The company may be willing to extend a new customer offer to you to keep your business. Knowing current rates and offers can help you during the negotiation process, because it shows you’re informed.

Be patient and kind

Now you’re ready to contact your service provider to ask if your current rate can be adjusted. You can do this by phone, or if the company has an online support feature, you can chat this way. Remain patient and kind throughout the entire discussion — even if the conversation doesn’t go as you hope. The customer service representative is only doing their job. They’ll be more likely to work with you to find a solution if you remain calm and friendly during the chat.

Try again another time

If a biller won’t budge, don’t give up. Your success could vary depending on who happens to be on the other line. If you’re told that your rate can’t be reduced, try again at another time. You could have better luck speaking with another customer service representative.

Here’s what to do if you can’t get a rate adjustment

Unfortunately, not all companies are willing to negotiate their rates. If you don’t get a rate adjustment, you’ll need to decide what to do going forward. One option is to remain a customer and continue paying the same rate. But if you need to reduce your spending, that may not be the best solution. Here are some other options to explore:

Stay with your current provider, but switch to a less costly planSwitch providers to get a more affordable rateCancel your account and have another adult in your household sign up as a new customer to get a discounted, new subscriber rate

Try your luck at lowering your bills

If you’re looking for a way to save money, you may want to see if your service providers will give you a discount on your bill. It’s always worthwhile to ask — the worst thing that can happen is you’re told no. Taking a few extra minutes out of your day to make the call could result in significant savings. For additional ways to save money, check out our personal finance resources.

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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 six-figure income gives you options when it comes to retirement savings. Read on to see what sort of balance you can accumulate with an income that large. 

Saving for retirement is important. If you don’t enter your senior years with a solid nest egg, you might have a hard time paying your expenses. That’s why it’s essential to fund an IRA consistently for as long as you can.

If you earn $100,000 a year, you’re likely in a stronger position to make large contributions than someone earning, say, $40,000 a year. But what contributions are reasonable? And what sort of balance is realistic at the end of your savings window?

You could end up a retirement millionaire

Some financial experts will tell you to aim to save 15% to 20% of your income for retirement. That’s a tall order, though. Even if you earn a nice salary, it’s hard to part with that much money.

Maxing out your IRA, however, may be doable if you earn $100,000. Right now, IRAs max out at $6,500 a year if you’re under 50.

Let’s say you’re 32 years old with a $100,000 salary but you haven’t started funding your IRA yet. Maybe you were focused on first building an emergency fund and saving up a home down payment.

Let’s also assume you invest your IRA heavily in stocks. The stock market’s average over the past 50 years has been 10% a year, as measured by the S&P 500 index. So if you set aside $6,500 a year in your IRA over 35 years, you could end up with a balance of about $1.76 million if you score that same 10% return. That could make for a very comfortable retirement.

You may not be able to save so much

It’s often the case (though not always) that people who earn a high income do so by living in an expensive area so they have access to jobs with generous salaries. RentHop reports that the average monthly rent for a studio apartment in New York City is $3,450. If you’re spending over $41,000 a year on rent alone, you may not be able to save $6,500 a year.

So let’s be more realistic and say you’re able to save $250 a month, or $3,000 a year. That’s only 3% of your income, but in a high-cost city, that may be all you can swing.

In that case, if we assume the same average annual 10% return and 35-year savings window as above, you’re looking at an IRA balance of about $813,000. That’s not a multimillion-dollar nest egg, but it’s also a nice sum of money for retirement.

Just because you earn $100,000 a year doesn’t mean you can afford to max out your IRA. If that’s not the case, don’t beat yourself up. Just do the best you can to save as much as you can. If you start at a fairly young age, with the right investments, you can grow your balance quite nicely.

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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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