Money Management

Damage from termites can cost thousands of dollars to treat. Read on to learn whether your homeowners insurance has your back — the answer may come as a surprise. 

Homeowners insurance provides coverage for many potential losses. The purpose of getting a policy is so that if things go wrong, the property owner doesn’t have to pay for the costs out of their own bank account.

But, what happens if there’s a termite problem at the home? Will homeowners insurance cover it?

Does homeowners insurance pay for termite damage?

The national average cost of repairing termite damage comes in at $1,800, according to Bob Vila. And in some cases, termites can cause much more extensive damage that can be even costlier to repair. Termites can impact a home’s structural integrity, potentially causing floors or ceilings to collapse. Furniture, flooring, and carpets can also be ruined by termites.

Unfortunately, home insurance is not going to provide any help to a homeowner who is faced with termite damage.

Pest control is considered to be the responsibility of a homeowner as part of their routine maintenance of a home. And preventing a termite infestation is possible — unlike, say, preventing a random fire that happens or a sudden water line break that damages a home. Home insurance is supposed to be there to protect against the kinds of losses homeowners can neither predict nor prevent, and any type of termite or insect infestation simply will not fall within this category.

Now, homeowners insurance could provide coverage if a wild animal suddenly damages a home since this would be considered to be the type of sudden, unexpected accident that can’t be prevented and that insurance protects against. But if the damage happens over time, as is the case with a termite infestation, this wouldn’t be a peril insurance would pay for.

Taking care of a home is the best bet

Homeowners should know that insurance is not going to be there for them if something goes wrong that could have been prevented if they had taken proper care of their house. This goes beyond just termites. If a homeowner doesn’t fix a leaky faucet and mold develops, home insurance also won’t pay for that type of situation either.

Home insurance is not, and can’t be, a substitute for making sure that maintenance tasks are done promptly and the home is repaired when fixes become necessary. It is the responsibility of every homeowner to protect their investment, which means doing things like watching for signs of termites and adding to a savings account they can use to pay for home repairs that arise over time.

Home insurers actually want to make sure that homeowners are taking care of their homes and not creating hazards. As a result, if an insurer identifies an issue that could lead to a claim — such as a roof that’s past its useful life that the homeowner isn’t replacing — the insurer could actually require the homeowner to make fixes or else be dropped from coverage.

Ultimately, it’s important to remember that home insurance has a very specific purpose: protecting against losses from big surprise disasters. Having the right coverage in place to do that is important, but planning (and saving) for the more minor problems that can come with owning a home is just as important as well.

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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 spend all that you earn, you’ll always find yourself living paycheck to paycheck. Read on for tips on how to avoid this fate. 

A shocking 61% of adults in the U.S. live paycheck to paycheck. This means that every dollar you earn is spent when it comes in, leaving you waiting for your next paycheck to come to cover the bills.

Unfortunately, if you are spending all that you earn, you’ll never be able to get ahead financially by saving for emergencies or putting money into a brokerage account to grow your wealth. Here’s why it can be such a big problem if every dollar you bring in goes out of your bank account right away — along with some tips on how to turn things around.

Here’s why spending everything you earn can be a huge problem

If you’re spending everything you earn instead of saving or investing some of your money, you’re never going to get ahead financially for a few simple reasons.

First, many or all of the things you’re buying likely won’t hold their value. Things that you consume (like groceries) will do nothing to grow your wealth. The same is true for vacations, money spent on utility bills, or cash spent on dining out and experiences. Even tangible assets, like your car or clothes you buy, go down in value immediately after you purchase them. None of these purchases are assets that can help you develop financial security in the long run.

Second, you won’t have money working for you if you spend all of it. If you invest your money and earn returns, your money earns money, so you can grow richer without having to work for every dollar you bring in. This is called compound growth. But you need to have money to invest in order for compound growth to work for you.

Third, if you’re spending all that you have, you face a really significant risk of getting into debt if any bumps in the road happen. One survey from Pew Charitable Trusts found 60% of households had experienced a financial shock over the prior 12 months.

Some surprise expense is going to creep up on you at some point. If you’ve spent all you’ve made and don’t have money saved for emergencies, you could find yourself reaching for the credit cards when that happens. And then you’d get stuck paying interest — which would make it even harder to get ahead.

RELATED: Emergency Fund Calculator

The bottom line is, spending everything you have is a recipe for disaster. You’re not going to succeed financially if you do it and you’re setting yourself up to fail.

Here’s how you can stop this practice and begin to get ahead

If you’re currently spending all you earn, how can you stop it? There are a few approaches.

One of the best options is to increase your earnings. This can make a more meaningful impact than cutting spending, because you can only cut spending so much but can increase earnings an unlimited amount. It’s also harder to sustain big spending cuts than it is to keep earning more. A side hustle like driving for Uber could help, or you could start tutoring or selling crafts on Etsy.

You could also work on developing your job skills, or do your research by checking sites like Glassdoor to see if you’re underpaid and negotiating for a raise.

Another option is to cut a big fixed expense, perhaps by switching to a cheaper used car, finding a roommate, downsizing your apartment, or canceling a monthly gym membership. Making one big change can be easier to sustain than a lot of small ones.

Finally, you can try tracking spending for 30 days by writing down everything you buy. This can help you identify areas where you’re overspending, so you can make cuts.

By taking these steps, you may be able to stop spending all you earn. You can send some money to an emergency fund in a high-yield savings account and some money to investment accounts that can aid you in building wealth. It’s worth making the sacrifices necessary to earn the financial security you deserve.

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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 Etsy and Uber Technologies. The Motley Fool has a disclosure policy.

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You may be inclined to buy a home in disarray to save on your purchase price. Read on to see why that decision might backfire on you. 

In August, existing-home sales were down more than 15% from a year prior, reports the National Association of Realtors. Despite that, home prices managed to climb. And as of August, the median existing home price was $407,100. A year prior, it was $391,700.

Because housing prices are as elevated as they are today, you may be inclined to do what you can to keep your mortgage to a minimum. And that could mean buying a home in need of some work.

Not everyone has the appetite for a fixer-upper. But if you’re someone who’s handy and has the patience, you may find that you can spend less on a home — and a mortgage loan — by purchasing a home that will require a number of projects from the start.

But while you might reap some savings by buying a fixer-upper, there’s one pitfall you might encounter if you do so in today’s market.

Your renovations might cost you more than you bargained for

Buying a home that needs work could mean spending less money on its purchase price, but you’ll have to account for costly repairs and renovations that will add to your tab. And you’ll also need to consider the fact that these days, financing renovations is more expensive than usual.

The reason? The Federal Reserve has been trying to cool inflation by raising interest rates. As such, it’s become more expensive to take out the loans that are commonly used to finance home improvement projects.

If you’re first buying a place of your own, you may not have enough equity to borrow against your home for immediate improvements and repairs. So in that case, a personal loan could be your next best bet.

But because consumer borrowing rates are up across the board right now, the cost of signing one may be higher than what you’d expect — even if your credit is great. And if you can’t afford to borrow to renovate your home, then you might end up stuck in a property that’s really not in livable condition for months on end.

Be careful with a fixer-upper today

A fixer-upper can be tempting at a time when home prices are through the roof. You might, for example, find a fixer-upper in your target neighborhood for $300,000 while the typical home there that’s move-in ready costs $450,000. If you bring in a contractor and determine that your renovation costs will be $125,000, then that fixer-upper might make financial sense. Plus, that way, you get to put your personal stamp on your new home.

But don’t forget to account for the cost of borrowing to finance your renovations, too. If you end up stuck with a very expensive borrowing rate, it might negate your savings. And then, at that point, you’ll also be dealing with the hassle of a fixer-upper.

Remember, too, that a fixer-upper might cost you in other ways. If you have to pay for temporary housing due to the nature of your repairs (some work might render your new home unlivable), that’s an added expense. Run all of the numbers before making an offer on a home that very clearly needs a lot of work.

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

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Using only a 401(k) for retirement could mean having limited access to investments. Find out what you need to know. 

If you have a 401(k) at work and your employer offers you a match, you should contribute enough to your account to earn the full match. HR or your plan administrator can explain how the match works, how much you must contribute to max it out, and how to sign up to have 401(k) contributions withdrawn from your checks.

Once you have maxed out your employer match, though, you may decide you want to put some of your money into other tax-advantaged retirement accounts. For example, you may decide you want to open a traditional IRA with a brokerage firm. Or you may opt for a Roth IRA.

Here are three big drawbacks to using only a 401(k) for retirement that could make investing some money in these other accounts attractive.

1. Your 401(k) may have limited investment choices

Your employer sets up your 401(k), and you have to deposit your funds with the plan administrator your company has chosen. Once your money is in your 401(k), you have to pick from the investment choices your plan makes available. Sadly, you probably are not going to have a big selection.

Typically, 401(k) options include target date funds that adjust where your money is invested based on how far you are from retirement, or other mutual funds that give you exposure to specific kinds of investments such as large or small companies. The Investment Company Institute found that in 2021, typical 401(k) plans offered an average of 13 different equity fund options for investors.

Being able to choose from only a small number of funds to invest in is a big downside of using only a 401(k) to save for retirement. If you were instead to open a traditional or Roth IRA with a brokerage firm or another financial institution, you could access virtually all the assets that institution allows you to trade. This could include thousands of ETFs, mutual funds, and bonds, not to mention shares of any publicly traded company.

If you want to develop an investment strategy that goes beyond the limited funds your 401(k) offers, you won’t want to stick with just 401(k) investing alone. Instead, you could research brokerage firms that have good screening tools to help you pick investments and then open up a traditional or Roth IRA with one of them.

2. Distributions could make Social Security taxable

When you put money into a 401(k), your withdrawals in retirement are going to be taxed at your ordinary income tax rate. Many people know that. What you may not know, though, is how the withdrawals could impact the taxation of your Social Security benefits.

Your Social Security benefits are not subject to tax as long as your countable income is below $25,000 for single tax filers or $32,000 for married joint filers. Once that threshold is reached, up to 85% of benefits can become taxable depending on how high your income actually is. Countable income isn’t all your income — it’s half your Social Security benefits, all taxable income, and some non-taxable income (like MUNI bond interest).

All of your 401(k) distributions count in determining if you hit the threshold when Social Security becomes taxable. But if you were to put some of your retirement money into a Roth IRA, withdrawals from that account aren’t part of your countable income. So this could help you stay below the threshold you need to in order to avoid owing taxes on Social Security.

3. You could have trouble with early retirement

The general rule is that you cannot take money out of a 401(k) until age 59½. While there are some limited exceptions, you’ll typically face a 10% penalty if you withdraw money from your account before then.

If you’re eager to retire really early — like in your 50s — you’re going to need to put some retirement money into a taxable brokerage account you can access when you want without taking that penalty hit.

For all of these reasons, you may want to think seriously about whether using only a 401(k) for retirement is the right choice or whether there are other accounts — like a Roth IRA or taxable brokerage account — you should also consider to help you save for your future. If you want more investment options, less chance of Social Security tax, and easier access to your money for early retirement, you may decide it makes sense to open a different kind of retirement account today.

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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 Target. The Motley Fool has a disclosure policy.

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I love Costco. But read on to see why I sometimes get aggravated when shopping there. 

As someone who shops at Costco on a regular basis, I can say that the $120 a year I pay for my Executive membership is more than worth the cost. Not only does that membership give me 2% cash back on my Costco purchases, but all told, I’m easily able to recoup that $120 outlay by reaping savings on groceries and household essentials.

But while I’ll usually be the first person to sing Costco’s praises, I have to admit that certain aspects of shopping there are annoying. Here are the things I find most irritating, as well as how I cope. If you’re a Costco member, you might want to try these tips, too.

1. Crowds

It’s easy to see why so many people like Costco. The prices are great, you get free samples, and the bakery is outstanding.

But because Costco is such a popular store, it tends to be very crowded in my neck of the woods. That’s a problem, because crowds and I don’t mix well. It also means my shopping trips tend to take longer.

Now that said, one thing I’ve taken to doing to avoid large crowds at Costco is shop at off hours. That means steering clear on weekends and trying to shop during the day — an option that’s available to me because I work from home.

Sometimes I’ll also try to visit Costco right before it closes. And while going at that time means missing out on free samples, since Costco is usually done with those by then, it tends to mean running into fewer people.

2. Long checkout lines

It’s not just that Costco tends to draw large crowds. I’ve found that my Costco doesn’t do a particularly good job of moving customers along during the checkout process.

Unlike other supermarkets, Costco doesn’t have an express line for people who are only buying a few items (mostly because, by nature, people tend to load up when they shop there). So even if I only have two cartons of milk in my cart, I still have to wait.

Shopping at off hours helps address this issue. But also, I’ve gotten comfortable using the self-checkout. It’s a big time-saver even when I have a loaded cart.

3. Inconsistent inventory

Costco tends to rotate its inventory on a seasonal basis, all the while maintaining a consistent inventory of groceries and household items. But while I can buy milk and cheese every week at Costco without fail, there are certain snack and pantry items that my local warehouse club doesn’t always have in stock. Rather, it’s hit or miss. And when you have picky eater children, that’s a problem.

That’s why I always plan to make a trip to my regular supermarket during the week on top of my Costco run. I know it’s generally not realistic to get everything I need from Costco.

Plus, there are certain items I don’t actually want in bulk. So I need my regular supermarket to avoid overspending on things I only require a small quantity of.

All told, I love Costco and am willing to brave the crowds and long lines to keep shopping there. I’m also willing to deal with inventory that’s not always 100% reliable. But if you feel similarly about these Costco pitfalls, aim to play around with different shopping times to see when the crowds are smallest. Also, embrace the self-checkout and work time into your schedule to go to the regular supermarket in case Costco doesn’t have everything you need, or you don’t want to buy everything on your list in bulk.

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

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