Money Management

CDs can be a useful savings tool. Read on for an easy CD strategy that could serve you well. 

Some people don’t like the idea of putting money into a certificate of deposit, or CD. I’ve heard people say that it’s too much of a commitment, and it’s not worth the upside of what’s often just a slightly higher interest rate than what a savings account will offer.

But it’s not just that CDs commonly pay more interest than savings accounts. It’s also that they guarantee you the interest rate you sign up with for a preset period of time.

My savings account is currently paying me 4.3% on my money. But a few months from now, my savings’ interest rate could drop to 4.1% or 3.8%, and there’s nothing I can do about it (other than perhaps shop around for a bank that’s paying more generously).

However, if I lock in a 12-month CD right now at 4.7%, I’m guaranteed that rate for a full year, regardless of market conditions. And that’s a nice thing.

But while I’m a fan of CDs, I’ll only take one approach to opening them — using a ladder. This way, I’m less likely to end up in a jam.

When your money frees up at regular intervals

The downside of opening a CD is that you’re committing to keeping your money in the bank for its duration. And if you cash out a CD before it matures, you could face costly penalties.

These vary by bank, and they commonly hinge on the term of your CD. But the penalty for cashing out a 12-month CD early could easily be three months’ worth of interest.

And it doesn’t matter how early you redeem your CD before it matures. You’ll face the same penalty whether you cash out your CD six months early or six weeks early.

That’s why I make a point to ladder my CDs rather than put all of my spare cash into a single CD. That way, my money is freed up at regular intervals, so I’m less likely to face a scenario where I risk being penalized for cashing out a CD early.

How to set up a CD ladder

Setting up a CD ladder is pretty easy. You simply take the amount of money you’re willing to put into CDs, divide it into a few batches, and then open a new CD every few months.

There’s no exact science. The key is just to make sure you have a CD coming due every so often so you have access to some of your money when you want it.

So, let’s say you have $10,000 you’re interested in putting into a CD at the start of the year. Rather than open a single 12-month CD, what you’d potentially do is open a $2,500 CD with a 12-month term in January, another 12-month/$2,500 CD in April, a third in July, and a fourth in October. That way, you have $2,500 freeing up every three months.

Of course, this is just one example. You could set up a CD ladder that has money becoming available every month if you want. The point is simply to avoid a situation where you need access to your money but can’t get it because it’s in a CD, or risk a penalty for an early cash-out.

And speaking of avoiding penalties, another rule I follow with CDs is to never put my emergency fund into one. Since that’s money I might need at any time, I wouldn’t want to tie it up for any preset period — even if I’m using a laddering strategy.

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In the market for an Audi? Read on to see why you may want to buy one through Costco. 

Many people think of Costco as the retailer you visit when you want to buy potato chips or paper towels in bulk. But the reality is that Costco’s services extend far beyond groceries and household goods.

For one thing, Costco’s travel services offer members the opportunity to save money on a host of destinations and vacation packages. And Costco’s pharmacy services often allow for big savings on prescriptions.

Costco also offers an auto program that helps members purchase vehicles — a tough thing to do today given that so many cars are in short supply. Car prices are also up across the board due to shortages, so if you’re in the market for a new vehicle, it’s important to look for ways to trim your costs. And if you have your heart set on an Audi, buying it through Costco between now and October 2 might result in some major savings.

Members can save big time

Now through early October, Costco is offering member-only incentives on select Audi models. Most notably, you might qualify for a $5,000 member-only incentive on the Audi A8, S8, e-tron® GT, or RS e-tron® GT.

To take advantage of this offer, you’ll need to register through Costco for a certificate with a unique promo code. You can then take that certificate — either a printed version or a digital copy — to any Audi dealership to receive either $1,000, $1,500, or $5,000 off of the price of your vehicle, depending on the model you’re looking to buy.

Can you afford an Audi?

The name Audi is synonymous with luxury. So if you’re an average earner looking for a new car so you can get to and from work, then an Audi probably is not in the cards for you. But if you’re a higher earner and it’s important to you to have a nicer car, then you may find that an Audi is worth paying for.

That said, you’ll need to crunch the numbers to see what you can swing. The Audi A8, for example, has a starting MSRP of $89,995. The exact price you’ll pay for your Audi will depend on the model you choose, the features you opt for, and the dealer you work with. But all told, Audis are generally considered to be expensive cars, so you’ll need to keep that in mind.

Also, buying an Audi could cause your auto insurance costs to skyrocket. Auto insurers set premium rates based on different factors, including the cost of your vehicle. So if you buy an almost-$90,000 car and you’re currently driving a $45,000 car, you can expect your premium rates to rise quite a lot.

Plus, in some cases, pricier cars can also be more expensive to maintain. It’s a good idea to do plenty of research before committing to an Audi.

Finally, do keep in mind that auto loan rates are up these days on the heels of the Federal Reserve’s recent string of interest rate hikes. So if you’re looking to finance your Audi, you may be in for a series of really high monthly car payments — even if you’re able to shave a few thousand dollars off your purchase price by buying your vehicle through Costco.

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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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Just because you’ve been denied a mortgage doesn’t mean you can’t buy a home. Read on to learn what your next steps should be. 

Many people who want to buy a home can’t afford one outright, so they turn to mortgage lenders for help. But just because you’ve applied for a mortgage doesn’t guarantee that you’ll get approved. And if you’re denied a mortgage, you may have to put your home-buying plans on hold.

That said, being denied a mortgage doesn’t automatically mean that homeownership is off the table for you. There are other options you may be able to explore if your initial mortgage application is rejected.

Why might you be denied a mortgage?

There are a number of reasons why you could be denied a mortgage. For one thing, it generally takes a minimum credit score of 620 to qualify for a conventional mortgage. If your score is lower than that, you’re likely to be denied. And even if you have a 620 credit score, some lenders might say no regardless of you meeting that minimum requirement because their own standards are higher.

Another reason you could be denied a mortgage might have to do with your income. It may be that you’re asking to borrow more than what your salary can comfortably allow you to repay. Lenders don’t want to risk not getting repaid, so they put income requirements in place that differ based on the sum you’re borrowing. But if those numbers don’t match up, then you may not get the home loan you’re after.

Finally, it may be that you already have a lot of debt relative to your income. If so, that alone could serve as a red flag and cause a lender to say no to your mortgage request.

What to do when you’re denied a mortgage

If you’re denied a mortgage repeatedly, you may need to delay your home-buying plans until your financial situation changes. But if you’re denied a mortgage after one application, it could pay to look into other options.

For one thing, it may be that one lender isn’t comfortable writing you a loan, but another one is. So shopping around could give you the “yes” you’re after.

Also, if your credit score isn’t high enough to qualify for a conventional loan, you can try applying for an FHA loan instead. FHA loans have lower credit score requirements than conventional mortgages do.

You can also try to address some of the issues that may have prevented you from getting approved for a mortgage. Say the issue was your income. If you’re able to switch gears and buy a less expensive home that results in a smaller mortgage, you might get approved, even if you’re not able to boost your earnings. And if you were denied a mortgage due to having too much existing debt, you could see if it’s possible to pay some of that debt off and then apply again.

Finally, if your credit score is the reason you’ve been denied a mortgage, you should know that consistently paying bills on time could lead to a higher credit score in time. Another smart thing to do is to check your credit report for errors, because a mistake that reflects poorly on you could be dragging your credit score down needlessly.

Being denied a mortgage can constitute a blow. But don’t assume that buying a home is off the table. There may be another lender out there that’s willing to give you a chance, or there may be steps you can take to turn a “no” into a “yes.”

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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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Sure, a AAA membership can get you out of a roadside jam with your car. But keep reading to learn what other benefits come with your membership. 

If you’ve ever had a mishap with your car that left you stranded, you can likely understand the typical reason people join AAA: roadside assistance. However, AAA doesn’t have the market cornered on this service; you can also generally get it by paying a few extra dollars a month to your auto insurer.

In fact, if you’re trying to decide whether to sign up for AAA, you should really consider all the benefits you’d get by doing so. Here are a few you may not already know about that I found through the AAA’s Northeast branch (your own regional AAA branch will also have perks aplenty).

1. AAA can make you a better driver

In addition to offering help with your dead battery or flat tire, AAA provides driver education courses that can improve your driving skills. Being a better driver could help you avoid accidents and therefore save you money on your auto insurance premiums.

The program has been around for more than 85 years, and you can take advantage of programs in both a classroom setting as well as behind the wheel whether you’re a teen or adult driver.

2. AAA can save you money on ticketed events

In the wake of the COVID-19 pandemic, it feels like everything is so much more expensive, and this includes tickets to concerts, sporting events, and more. Luckily, a AAA membership can unlock cheaper prices for entertainment opportunities.

For example, you can save up to 15% on tickets to see Aerosmith in concert if you buy through AAA. Sporting events more your speed? You can save up to 5% on tickets to see the New York Rangers play. Any money saved on entertainment is more money you can use to pad your savings account.

3. AAA offers promo codes for savings on retail purchases

Hunting down coupon codes is a great way to save money when you shop, and AAA maintains a database of them, saving you time in addition to money. No matter your shopping habits, you can likely find coupon codes you’ll use.

For example, if you have pets, AAA has deals for Chewy, BarkBox, and PetFlow. There are coupons for electronics retailers, florists, at-home recipe boxes, and so much more.

4. AAA can help you with your passport

If you’re hoping to travel the world, you’ll need a passport. Being a AAA member means you get access to cheaper passport photo services at your local AAA office. While you’re there, you can pick up a passport application.

If you need your passport in a hurry, AAA has a RushMyPassport service that’ll save you some money on those expedited passport costs.

5. AAA offers home and renters insurance

Need a new homeowners insurance or renters insurance policy? Why not consider looking at your options through AAA, if you’re a member? You can get an online quote or call the toll-free number to speak directly with an insurance agent.

AAA boasts savings on policies, too — for example, if you live in New York, you can save 5% through the insurance company AAA works with there.

How much does a AAA membership cost?

The price for AAA depends on a few factors, such as your location, how many cars you want covered, and whether any promotional deals are available. As of this writing, here were the prices I found for my area.

When I checked prices, AAA was offering to waive the one-time $15 enrollment fee, too. The different membership tiers include different levels of roadside assistance as well as other perks, but all memberships come with the discounts discussed above.

Is a AAA membership worth it?

That’s not a question I can answer for you! But consider the list of perks (along with other benefits of AAA) alongside the cost, and decide whether the money you’ll save is enough justification to spring for a AAA membership.

RELATED: Personal Finance Guides

Consider starting with the basic membership, as it’s the most affordable. You could also try it for a year and see if you use enough of the benefits to make renewing worthwhile — especially if you can get a deal on your first year of membership.

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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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