Money Management

Flames aren’t the only damaging part of a wildfire. Here’s what homeowners need to know about homeowners insurance and wildfire smoke damage. 

Though we’re only halfway through the year, the U.S. has already experienced 21,305 wildfires that have burned nearly 645,000 acres. These fires can be devastating to natural environments, but they can be even more problematic when they move into populated areas. Wildfires can destroy entire towns, and even homes that avoid the flames often wind up dealing with costly smoke damage.

This leaves many homeowners wondering if they’re adequately protected against wildfire smoke damage. Here’s what you need to know.

It depends on where you live

There’s no such thing as a wildfire insurance policy. A typical homeowners insurance policy, known as an HO-3 policy, provides coverage against a variety of natural disasters, including wildfires. This includes damage from the flames itself as well as smoke damage.

But as wildfires have become more prevalent and more costly, some insurers are taking steps to protect their financial solvency and their bottom lines. State Farm recently decided that it would no longer sell new homeowners insurance policies in California due to the high risk of wildfires there. And other insurers are also wary of selling policies in areas where there’s an increased risk of wildfire claims.

Each company handles this in their own way. Some may require homeowners to pay a separate and higher deductible when filing a wildfire claim than they would for other types of homeowners insurance claims. Others may sell homeowners insurance policies with exclusions for wildfire damage. Or they may refuse to sell policies in that area altogether, like State Farm.

What homeowners can do

It’s important for homeowners in wildfire-prone areas to understand what their policies do and do not cover so they aren’t caught off guard when they need to file a claim. Homeowners can learn about what type of wildfire coverage they have and what kind of deductible they’ll pay by reviewing their policy terms or reaching out to their home insurance provider for additional information.

It’s also a good idea to conduct an annual review of policy limits. Building costs are higher now than they’ve been in the past. What may have been an adequate amount of coverage when the homeowner purchased the policy may no longer be enough to pay for a full rebuild should this be necessary. An insurance agent or a local builder in the area can help homeowners estimate how much coverage they need in order to be fully protected.

Shopping around is key to scoring great rates on homeowners insurance at any time, but this is especially true for those who live in areas at high risk of wildfires. All insurance companies evaluate risk a little differently, and some may take the threat of fire more seriously than others and charge more accordingly. The only way to know which offers the best rate is to get quotes from several companies and compare them.

Most people should be able to find some sort of wildfire coverage with traditional insurers, but there are areas where no insurance company will take on the risk. In this case, homeowners may have to turn to their state’s Fair Access to Insurance Requirements (FAIR) plan.

This is a special homeowners insurance policy that provides basic fire coverage in areas traditional insurers won’t work in. These policies are often more expensive than a typical homeowners insurance policy, though, so they should be a measure of last resort.

Take these steps to keep your home safe

Homeowners should also do what they can to reduce the risk of wildfire and smoke damage to their home so they can hopefully avoid filing claims. Some important steps to take include:

Establishing at least 30 feet of defensible space around the home: Keep the grass and landscaping trimmed and remove as much combustible material from the area as possible.Install wire mesh screens over attic vents: This can reduce the risk that wind-blown embers find their way inside the home.Keep the roof and gutters clean: Debris here could catch fire if embers land upon it.Consider fire-resistant building materials: Homeowners who are building or remodeling should look into fire-resistant siding and roofing materials to help reduce the risk of severe wildfire damage.

Some insurance companies even offer discounts to homeowners who take crucial wildfire mitigation steps.

While we can hope that we see fewer wildfires in the future, for now they remain a pretty common — and costly — occurrence. So it’s important for homeowners to take all possible steps to ensure they’re fully protected. Even if a town hasn’t been hit by a wildfire before, that doesn’t mean it’ll never happen. It’s best to take the steps above now rather than waiting until a wildfire is on the way.

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There are two ways to pay off one credit card with another. Find out what they are and what to expect with each option. 

If you’re having trouble paying your credit card bill, you may wonder if you can pay it off with another card. You can, although it’s not the standard or most readily available option. Credit card companies will only let you use a bank account as a payment method, so you can’t just plug in a card number to use for a payment.

But there are two ways you can use one credit card to pay off another. You could do so through a balance transfer, which is when you transfer a balance from one card to another. Or, you could get a cash advance from another credit card, and then use that cash to make your payment. Before you decide to try one of these, you should know what to expect from each option.

Here’s what happens if you pay off a credit card with a balance transfer

A balance transfer is the best way to pay off one credit card with another. With this method, you transfer your balance to a card with a lower interest rate, saving money on your credit card debt.

If you choose the right card, you can save a lot of money this way. The best balance transfer cards offer a 0% intro APR on balance transfers. That means during the intro period, you aren’t charged interest on the balance you transferred over. Some of these cards have intro periods lasting 15 months or longer.

To pay off a credit card like this, you first need a balance transfer card. You’ll set up the balance transfer using that card. The process varies a bit depending on the card issuer, but normally, you just go to your balance transfer card’s account and enter the info of the card you want to pay off. Here’s what happens after that:

The balance is transferred off the original credit card.The card issuer adds any applicable balance transfer fee. The standard fee amount is 3% to 5%.The full balance, and the balance transfer fee, are added to your balance transfer card.

To demonstrate how valuable a balance transfer can be, let’s say you have $5,000 in credit card debt. You pay $300 per month and your card has a 20% interest rate. It will take you 20 months to pay off, and in that time, you’ll pay $906 in interest.

Now, let’s say you transfer that balance. Your new card has a 0% intro APR for 18 months on balance transfers and a 3% balance transfer fee. You still pay the same $300 per month. The balance transfer fee costs you $150, but you’re able to pay off the full balance in 18 months with no more interest charges. You save $756 and pay off your debt two months sooner with a balance transfer.

Here’s what happens if you pay off a credit card with a cash advance

A cash advance is almost never a good move financially. This is when you get cash using a credit card. You can do so by setting up a cash advance PIN with your card issuer, and then using your card at an ATM. Some card issuers also offer cash advance checks you can use. These are paper checks tied to your credit card account.

Credit cards usually have cash advance limits that are much lower than the credit limit for regular purchases. The cash advance limit is normally between about 20% to 50% of the regular credit limit. For example, if your card has a $10,000 credit limit, the cash advance limit will likely be anywhere from $2,000 to $5,000.

Here’s what happens if you pay off a credit card with a cash advance from another card:

You’re charged a cash advance fee. The standard fee amount is 3% to 5%.Your card issuer starts charging interest immediately. Unlike with purchases, there’s no grace period before you get hit with interest charges on a cash advance.The interest rate will likely be higher than what you’d pay on purchases. Most credit cards have a cash advance APR that’s higher than the purchase APR.

A balance transfer can save you money. That’s not the case with a cash advance. After the fee and the immediate interest charges (at a potentially higher rate), cash advances get expensive very quickly. If you’re hoping to pay off one credit card with another, the only option to consider is a balance transfer.

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When it comes to resale value, one vehicle color stands above the rest. Keep reading to learn how the color of your car could impact its value. 

A vehicle’s paint color can impact its resale value by up to $5,000, according to new research by iSeeCars.com. After combing through pricing data for more than 1.3 million three-year-old used cars, here’s how the study found color impacts retail value.

One color stands out

The average three-year-old car loses 22.5% of its value. Let’s say a car was originally worth $30,000. That means its resale value three years later can be expected to be around $23,250.

That’s the “average” vehicle. A yellow car, on the other hand, only loses 13.5% of its original value. So, a three-year-old yellow car originally worth $30,000 can be expected to resell for approximately $25,950. The seller is left with $2,700 more to save or invest than they would have if they were selling a less in-demand vehicle color.

According to iSeeCars Executive Analyst Karl Brauer, it’s not that many people want a yellow car. However, fewer yellow cars are manufactured, leading to more people who want one than what is available. The scarcity of yellow cars helps explain why they do so well when it’s time to resell.

Above-average value retention

These vehicle colors were found to be somewhere in the middle. They don’t retain their value as well as yellow cars, but do better than other shades of paint.

Relatively few orange and green vehicles are manufactured, suggesting that scarcity in the secondary market also contributes to them holding their value.

The study found that gray cars lose, on average, 22.5% of their value, putting them smack dab in the middle.

The biggest losers

Vehicle colors likely to put the least amount of money back into your checking account are:

With a three-year-old car depreciation rate of 22.5%, purple vehicles remain within a hair of average, likely due to the few purple cars on the road.

Another iSeeCars study found that white, black, gray, and silver are the most popular car colors in the U.S. So why are gray and silver among the vehicle colors that depreciate most? It’s likely due to the same issue that helps yellow cars retain value: Demand and supply. Simply put, enough black and gray cars are in circulation to fill the demand for used vehicles. A buyer doesn’t have to offer a premium price to drive away in a black or gray vehicle.

Where the picture shifts

The statistics above are an average of all used three-year-old cars. The picture changes a bit when the type of three-year-old vehicle in question is factored in. For example:

SUVs: Yellow is again at the top of the heap when it comes to SUVs, but yellow doesn’t fare as well among some other vehicle types.Off-road trucks: By a fairly impressive margin, beige off-road trucks depreciate less than trucks of other colors.Sedans: Brown was at the bottom of the heap when all vehicle types were averaged together. When buying a used sedan, though, shoppers are more attracted to this color. A brown sedan only depreciates by 16.8% in three years.Convertibles: Yellow is once again king of the hill. Some convertible buyers may be looking for something other than a subtle car.Coupes: According to the Society of Automotive Engineers, a coupe is a car with less than 33 cubic feet of interior space. Typically, coupes are sporty cars, which may help explain why yellow is once again the color that depreciates the least.Minivans: Green and brown are popular colors with minivan buyers, with green depreciating by 19.8% and brown by 20.8%.

We haven’t touched on how a vehicle’s condition impacts resale value. Naturally, if faced with two choices, a buyer is more likely to buy a well-maintained, low-mileage car than an abused vehicle. After all, no one wants to take out an auto loan on a vehicle that may immediately need repairs.

There are ways to save besides choosing the right vehicle color when you first purchase a car. For example, you can search for the cheapest auto insurance available or download an app like GasBuddy or Gas Guru to locate the least expensive gasoline prices in your area.

Ideally, the vehicle you purchase will be painted a color you like. Worrying about whether it will resell for more down the road may rob you of the chance to drive a car that makes your heart flutter.

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You don’t have to worry about losing your retirement savings when your company goes bankrupt. Read on to learn more. 

Bankruptcy is something both individuals and companies can file for to gain certain protections as they sort out their financial affairs. In many cases (though not all), when a company files for bankruptcy, it shutters operations completely, and its assets are liquidated to try to pay creditors what they’re owed to the greatest extent possible.

It’s usually the case that if your company goes bankrupt, you’ll be out of a job at some point. That may not happen the moment your company files for bankruptcy, as it might take months for your employer’s bankruptcy proceedings to be finalized. If you’re an essential employee, you may be asked to stay on board until operations truly wind down.

Now you may be worried that your company’s bankruptcy filing will impact the money you have in your 401(k) plan. But rest assured that your money is nice and protected.

Creditors can’t come for your 401(k)

As part of the bankruptcy process, it’s common for companies to release a schedule of liabilities that list their various outstanding debts. It’s also common for creditors to file claims against bankrupt companies for the money they think they’re owed.

As part of the bankruptcy process, outstanding debts are settled via a legal proceeding in the hopes of making things as equitable as possible for creditors. There’s also a hierarchy that’s followed to determine which creditors get paid before others. But either way, if you have your retirement savings in a 401(k) plan, your company’s bankruptcy filing will not put your money at risk.

The Employee Retirement Income Security Act (ERISA) ensures that employee contributions to 401(k) plans are not commingled with employer assets. This means that in the event of a bankruptcy, creditors cannot go after employee 401(k) funds.

You’ll need to find a new home for your money

While you don’t have to worry about a creditor coming after your 401(k) if the company sponsoring that plan has gone bankrupt, you will need to find a new home for your retirement savings. When companies shutter, whether as part of a bankruptcy proceeding or not, it’s common for their retirement plans to be terminated in short order. So once that happens, you’ll need to move your money — and you may want to move your funds before your employer’s 401(k) is terminated.

Now if you’re able to line up a new job that offers a 401(k), you could always roll your old 401(k) into that new workplace plan. Otherwise, you can roll your 401(k) into an IRA you open and manage yourself.

It can be unsettling when the company you work for files for bankruptcy — especially if that bankruptcy is of the liquidation variety, which means your company is closing down and you’ll probably be out of work at some point. But while you may have to deal with the stress of finding a new job, you can at least take comfort in the fact that no one will get their hands on your 401(k).

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You should pay attention to mortgage rates, but it shouldn’t be the major determining factor in deciding whether to buy a house. Find out why. 

When you are buying a house, you need to do all that you can to get the most affordable mortgage interest rate possible. The interest rate that you pay is the cost of borrowing. If you must pay a higher interest rate on your mortgage loan, you will end up with higher monthly payments and higher total borrowing costs over time.

But, while you should care about your interest rate quite a bit, that doesn’t necessarily mean what you think it does.

Here’s why you need to care about your interest rate

To understand why interest rates matter a whole lot when you get a home loan, consider how much the monthly payment would be for each $100,000 you borrow if you opted for a 30-year fixed-rate mortgage loan.

Here’s what the payment would look like, depending on the interest rate you qualify for when you get your home loan:

As you can see, a higher interest rate makes your monthly payments less and less affordable. And remember, this is just for principal and interest on your home loan. Your lender may require you to pay a set sum each month that goes towards covering your annual property taxes and homeowners insurance.

Since you could add hundreds of dollars in extra monthly payments to your mortgage loan if you borrow at a higher rate rather than a lower one, paying attention to the interest that you’re charged is the only logical thing to do.

What does this mean for you?

Since you need to care about mortgage rates, it’s important to figure out exactly what that means.

First and foremost, you may assume you shouldn’t buy a house when rates are high. That’s not necessarily the case. Yes, it’s ideal to buy when rates are lower. But you don’t have any control over the broader economic trends that will determine when rates rise and fall. And you can’t necessarily predict when rates will tumble or climb higher.

It doesn’t usually make sense to put off a home purchase when you’re ready to make one, just because rates are higher than they were in the recent past. By putting off purchasing, you’d be losing the chance to start building equity and you could end up paying more later if property values rise. There’s also no way of telling how long you’d have to wait since you can’t determine exactly when or if interest rates will fall.

You do also have the option to refinance your loan later, which means if rates end up falling in the future, you can always take advantage of them by refinancing. The reverse isn’t true — you can’t go back in time and get a loan at today’s rates if tomorrow’s rates are higher. So, it’s often better to get your loan even during a time of high rates and just plan to refinance later if you can.

So how do you cope with high mortgage rates?

Since you shouldn’t let high rates affect your borrowing decision, what does caring about mortgage rates mean? Basically, it’s best to do everything in your power to get the lowest rate possible, given prevailing market conditions. You shouldn’t just accept the first offer on the table, but should shop around among multiple different mortgage lenders to try to get the best rate on offer at the time.

Taking steps to improve your credit and to become a more qualified borrower — such as saving up a bigger down payment and reducing debt — can also help you get better rates, and these steps are definitely worth taking given the big impact a high rate has on your costs.

So, you should care about mortgage rates to the extent that you change what you can to get the best rate — but you shouldn’t care so much that you put off a home purchase and end up regretting it in the end.

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If you have little to no credit, now is an excellent time to take steps to improve it. Keep reading to learn four ways to establish credit. 

Your credit history and credit score impact your finances in the United States. For this reason, it’s essential to care about your credit. Those with minimal credit history could find it difficult to take out an affordable mortgage loan to buy their first home, or to buy a new car using an auto loan. If you’re new to credit, you can take steps to establish credit for the first time. It’s not too late to start building credit. We’ve outlined a few can’t-miss steps to start building your credit so you can take positive strides that help your financial future.

1. Apply for a credit card

When used responsibly, credit cards can help build credit. If you have no credit history, applying for a secured credit card is likely the best choice. Unsecured credit cards can be more challenging to get approved for if you have zero credit history.

Secured credit cards require a cash deposit, usually equal to your credit limit. After making a deposit, you can use your card to make purchases. Making responsible spending and payment decisions when using your credit card can help you establish credit. To avoid expensive credit card interest charges, only use your credit card to make purchases you can afford to pay off in full.

Some secured credit cards allow cardholders to graduate to an unsecured credit card once they show they can manage their credit well. It’s worth mentioning that some secured credit cards charge an annual fee. However, applying for a secured credit card with a $0 annual fee is possible. Check out our list of the best secured credit cards to learn more about card options.

2. Become an authorized user of a credit card

Another way to build credit is by becoming an authorized user. If a family member or partner is willing to add you as an authorized user on their credit card account, their account spending and payment history will appear on your credit report. As an authorized user, you’ll receive a credit card and can make purchases with the card. However, the credit card account holder, not you, is responsible for making payments to the account.

Before asking a loved one to add you as an authorized user, consider whether they have good credit. If they make irresponsible decisions, such as paying their credit card bills late, their actions could harm your credit.

You’ll also want to set clear expectations. You can work together to determine ground rules for how much you’ll be allowed to spend and how you’ll pay your share of the bill. Your loved one may decide to add you as an authorized user without giving you access to the card.

3. Get a credit-builder loan

For those without credit histories, credit-builder loans offer another way to establish credit. These loans can boost your credit score but function differently than traditional ones. With this kind of loan, you won’t receive the money being lent to you until you pay the loan off.

It’s worth noting that your monthly loan payments will include interest charges. For this reason, this solution can be an expensive way to establish credit. However, it may be worth exploring if you’re looking to rebuild your credit or establish credit for the first time.

4. Take out a personal loan with a cosigner

Another option for those looking to build credit is to take out a personal loan with a cosigner. A cosigner is someone who agrees to take responsibility for the personal loan payments if you fail to pay them. It’s not uncommon for individuals with little or no credit to need a cosigner to get approved for a personal loan.

If you have a trusted loved one who will agree to be a cosigner for you, this could be a strategy to consider to build credit. Before asking someone you trust to be a cosigner, be ready to show that you’ll have the ability to afford the monthly loan payments. You should also review the interest rate and fees before considering a personal loan to know what extra costs to expect.

Stay on top of your payments

Whether you get a credit card or loan to build credit fast, staying on top of your payments is necessary to impact your credit positively. Making regular, on-time payments is the best strategy to build credit and improve your credit score.

Late or missed payments can not only make for a costly mistake due to late fees and other penalties, but delayed or missed payments can also negatively impact your credit score. Check out our free personal finances resources for additional tips to improve your financial situation.

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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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