Money Management

Bundling insurance policies may seem to make sense on the surface. But read on to learn the reasons you should avoid it. 

Most people need multiple insurance policies, such as auto insurance and home insurance. Insurance companies know this and they typically encourage people to bundle coverage. Bundling means buying several policies from the same carrier.

Bundling insurance policies can seem attractive because doing so often comes with a discount. And it may just feel like it’s easier to have only one insurer to deal with instead of several. But, the reality is, bundling is not necessarily always the right choice.

In fact, here are three reasons why consumers may want to steer clear of bundled coverage.

1. Bundled policies still may not be the cheapest options

Many people choose to bundle their policies together because they feel like doing so will be the cheapest way to get covered. And this can sometimes be the case, since discounts for buying multiple policies are typically between 5% and 25% depending on the carrier and the types of coverage being purchased.

But, just because bundling can be cheaper doesn’t mean it always is. Sometimes, a consumer may be able to get really low-priced car insurance from one carrier and really low-priced home insurance from another — and the combined cost of those two separate policies may be less than the total cost of buying a bundled policy. That’s because insurers price risk differently and the company that offers a consumer the cheapest car insurance isn’t necessarily the same one that will offer that person the cheapest home coverage.

Consumers who bundle coverage may also not shop around as much with different carriers when it comes time to renew their policy. It can seem like a real hassle to get quotes from different companies for different policies. But, not shopping around and sticking with the status quo can lead to higher rates because those consumers will miss new options that become available and because insurers often charge elevated premiums to people who they don’t think will do price comparisons.

Ultimately, it is important to get quotes for both bundled and separate policies each year to make sure the best deal is truly being offered.

2. All of the desired coverage may not be available

Another downside to bundling coverage is that a single insurer may not offer all of the different kinds of protections that a consumer might want.

For example, some insurers have better protection for new car owners than others, offering new car replacement for longer periods. And others may offer better coverage for home insurers, such as offering building code upgrade insurance that provides extra money to bring a building up to code if repairs must be made.

Bundling policies with one insurer could mean giving up the chance to get the best, most comprehensive insurance for each different asset. This could leave consumers facing more out-of-pocket costs in the event of a disaster.

3. There’s a risk of poor customer service

Finally, there’s a risk that consumers could experience worse service from their insurer if they bundle coverage. That’s because one company may be really great at handling auto insurance claims, but not the best at handling home insurance claims, or vice versa.

It’s important to check customer satisfaction ratings and complaints for each specific type of insurance policy and ensure that an insurer chosen to cover a particular asset has a good reputation for those particular kinds of policies.

For all of these reasons, consumers should think twice about bundling and should really do their research to make certain it makes sense in their 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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For some people, a basic Costco membership will more than suffice. Read on to see if you fall into that category. 

I had a basic Costco membership for several years before making the decision to upgrade to an executive one. What prompted me to pay for the upgrade was that the executive membership gives you 2% back on all Costco purchases, including online purchases and travel.

Now the executive membership costs $120 a year, whereas a basic membership at Costco only costs $60. In exchange, you get 2% cash back on all Costco purchases with an executive membership.

If you’re going to spring for the upgraded membership, it’s important to be able to put it to good use. Here are a few signs that a basic membership may actually be your better bet.

1. You don’t have many people in your household

My family consists of two adults and three school-aged children. So for us, it’s easy to justify the cost of an executive membership. Since we do a lot of food shopping and cooking, we’re able to use our Costco membership often.

But let’s say you have a household of just one or two. Chances are, you won’t be buying the same amount of food and supplies as a larger family. So in that case, a basic membership might meet your needs.

2. You don’t have a lot of storage space at home

In my house, I have a regular fridge/freezer in my kitchen, and a chest freezer and second fridge/freezer combination in my basement. I also have a basement with multiple storage closets, as well as a garage with lots of shelving. Because of this, I’m able to store bulk food purchases and household products without running out of space or having to stash boxes of chips in my bedroom.

But if your home does not offer much in the way of storage, then you may be limited in what you can buy at Costco. And if that’s the case, then an executive membership may not pay off for you.

You should especially be careful with perishable Costco purchases if you don’t have a lot of fridge or freezer space. This isn’t to say that you need a spare one like me to buy food in bulk. But be mindful of the room you do have so you don’t end up throwing your money away.

3. You don’t have a Costco warehouse club store nearby

I happen to have not one, but two Costco warehouse club stores within 15 minutes of my house. But if you don’t live anywhere near a Costco, then you may not get over there all that often. If that’s the case, then you may find that a basic membership is your better bet.

For many people, an upgraded Costco membership makes financial sense. Basically, if you spend $3,000 a year at Costco, your executive membership pays for itself, because at 2% back, you’ll recoup the extra $60 you’re spending. And for every dollar you spend beyond that, you come out ahead financially with the executive membership.

But if the above signs apply to you, you may not hit the $3,000 spending mark at Costco in a year. And in that case, you might as well save your extra $60 and stick with a basic 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.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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Wondering what happens if you’ve reached the ultimate 850 credit score and need to apply for new credit? Read on to find out. 

You’ve worked hard and toiled for years of your adult life to achieve the “perfect” credit score of 850, and finally you’ve done it. Great job! You should be proud — after all, only 1.31% of Americans have achieved a perfect credit score, according to research from The Ascent.

But the time has come when there’s a shiny new credit card with a super tempting welcome bonus that’s caught your eye, and you want to apply. What happens now? Will you get approved? If so, will your credit score fall? And by how much?

Read on to learn the good and the not so good of applying for new credit once your score has reached 850.

First things first

There’s no need to mince words here, as you will almost certainly get approved for that new card when you apply! An 850 credit score shows lenders that you have maintained a mix of different types of credit accounts, paid off balances in a timely manner, and responsibly used your available credit for an extended period of time. You’re exactly the sort of consumer they want to lend to.

Perhaps one exception to instantaneous approval would be if you’ve decided to apply for a Chase credit card. Chase has a very strict rule in effect, called the 5/24 rule. It means that applicants who apply for a new card (no matter how high their credit score) and have opened five or more credit cards in the last 24-month period, will be denied. As long as this doesn’t apply to you, you should be golden.

New credit could ultimately benefit you

I know you’re looking at your beautiful, perfect score and bemoaning the idea of it being wiped away by a new credit application, but look at the bright side. As long as you continue to maintain the same responsible credit habits that got you to 850 in the first place, you’re likely to get there again. And a new credit account on your credit file could actually help with that.

New credit will give you a higher total credit limit, which will also help lower your credit utilization ratio. Let’s say you had $20,000 in available credit when you reached your 850. If you had an outstanding balance of $2,000 on a credit card, you’d be using 10% of your total credit. However, if you apply for new credit and increase your total available credit to $30,000, you’re now utilizing only 6.67% of your available credit with that same $2,000 balance. The lower your credit utilization, the better off you are in the eyes of the credit bureaus!

Now for the not so good

Let’s be frank. If you apply for new credit when you have an 850 credit score, your score will drop, there’s no way around it. How much it drops will depend on other factors relating to your own credit history, such as your length of credit history, credit mix, average age of accounts, and credit utilization. However, the drop should be relatively minor, and will definitely be one you can recover from.

The reason your credit score will drop is because by applying for new credit, you are altering the factors that go into calculating your credit score. New credit inquiries on your account will generally cause a minor drop on their own, as new credit accounts for 10% of your FICO® Score. But with a new account open, you’re also lowering the average age of your accounts, which accounts for 15% of your FICO® Score.

My personal experience

I am in my mid 30s and achieved an 850 credit score for the first time in late February of this year after pining after it for years, since my early 20s. The satisfaction that came with seeing those numbers at the top of my credit overview page was profound. So much so, in fact, that I found myself navigating back to that page several times over the coming weeks just to look at it and make sure it was still there. (It was).

But it wasn’t long before a new credit card came out with an excellent sign-up bonus, and I just knew I needed to have it. So I pushed my pride (and my perfect credit score) aside and I applied for that credit card in mid-March, and then another in mid-May. I was approved for both cards, and have earned two very hefty welcome bonuses as a result. Today, my credit score sits at 819. That’s a drop of 31 points in about four months’ time.

Is new credit worth losing your perfect score?

Is it a bummer to see my score fall that far after finally achieving perfection? A little bit. But I’m not worried about it. See, my credit score is still in the “Exceptional” credit range of 800-850, and as long as that’s the case, I know that I’ll be eligible for the best borrowing rates with all the other top-tier borrowers.

So, is it worth giving up your perfect credit score to attain a new line of credit? You’ll have to weigh the benefits for yourself. But if you’re able to earn a nice chunk of cash back or rewards, or use your new line of credit to improve your life in some other way, then yes, it is likely worth it. And, the good news is, you can immediately start working towards bringing your score back up. Personally, I love a good challenge, and I’m very much looking forward to the day where I can put those new credit applications behind me and once again see an 850 credit score attached to my name.

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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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Debt consolidation can make it easier to pay off debt. Find out three big reasons why, including that you can reduce the number of payments you must make. 

If you are working on paying off your debt, you may want to look into debt consolidation.

Debt consolidation works by getting a new loan, such as a personal loan. You’d use the proceeds from the personal loan to pay off multiple existing debts. You could also consolidate debt using a balance transfer credit card by moving the debt from multiple cards onto one new one offering a low promotional rate on transferred balances.

Whatever approach you take, debt consolidation can often make debt payoff easier for three key reasons.

1. Reducing the number of monthly payments you make

Consolidating debt can make life easier for you if you have multiple loans by combining all of them into one. Instead of having to remember to write checks to two, three, four, or more different creditors every single month, you can just make one convenient monthly payment.

By combining all your debt, you also eliminate the question of which loans to focus on paying off first. You don’t have to try to prioritize debt with high interest rates or debts with low balances so you can score a quick win. You can focus all your attention and send all your extra cash to your single debt consolidation loan.

2. Providing a fixed payoff time

If you get a personal loan to consolidate debt, your loan is going to have a repayment term that you’re aware of from the moment you borrow. For example, you might take out a personal loan with a three-year payoff term or a five-year payoff term.

Once you have that loan with a set payoff deadline, you will know exactly when you’re going to be debt-free. Of course, you could choose to try to pay off your loan faster. But even if you don’t, there will be a clear endpoint.

This is very different from when you have credit cards where you could get stuck paying minimum payments for years. It’s also different from a situation where you’re trying to pay off multiple different creditors and there’s different end dates for each debt.

It can be quite comforting to know when you’ll reach your goal of becoming debt-free, and you’re more likely to stay motivated when there’s a date you know you’ll be done.

3. Lowering your interest rate

Finally, consolidating debt can make paying it off easier if you get a new loan with a lower interest rate.

Reducing your rate can make total payoff costs lower by allowing more of your money to go to the principal each month. As long as you don’t make your repayment timeline a lot longer, you’ll save money over time and lower each monthly payment, so you get a double win.

Say, for example, you have two loans currently — a $5,000 loan at 17% that you’re paying $100 per month on and a $10,000 loan at 10% that you’re paying $250 per month on. Now say you consolidate to a new personal loan with a 60-month repayment term and an 11.51% APR. You would end up making a payment of $329.93 per month, so you’d save about $20 per month. You’d also reduce your repayment time by 2.3 years and save a total of $1,178.20 in interest.

RELATED: Personal Loan Calculator

It’s well worth the money saved, especially when combined with the other benefits. So if you’re currently paying off debt, consider whether you can qualify for a consolidation loan at a lower rate. If you can, taking advantage of that opportunity may be a smart financial move that will make it a lot easier to become debt-free.

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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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As you look at homes for sale, try not to let your emotions cloud your thinking. Find out how doing so could cost you money when buying a home. 

The home-buying process can be exciting. As you tour potential homes, you’ll imagine what life would look like if you lived in each space. But be careful not to get too attached when considering properties. If you’re not cautious, your emotions may cloud your decision making. Buying the wrong home could be an expensive mistake. Here are a few reasons to keep your emotions in check as you look for an ideal home to call yours.

1. Your offer may get declined

You’ll need to put in an offer once you find a home you want to buy. There will likely be other home buyers who dream of owning the same house. That means there is potential for multiple offers to come in, and someone else’s offer may be more attractive to the owners and therefore get accepted. If your offer is declined, it could be especially crushing if you’ve become too emotionally invested in the home. You can prepare yourself for potential rejection by reminding yourself that there are plenty of other homes to consider if your offer is rejected.

2. You might ignore your ‘must-haves’

Since many of us spend a lot of our free time at home, choosing a home that will meet your needs is essential. Before you start looking, it’s best to determine your must-haves. You should also determine which home and neighborhood elements you want to avoid so you know when to walk away from a potential home if it’s not the right fit.

Throughout the home-buying process, it can be easy to let your emotions get in the way. If you’re not cautious, you may settle for a home that doesn’t fully meet your needs out of fear that you won’t find the right one. The last thing you want to happen is you spend a lot of money only to realize it wasn’t the right home for you.

3. You might overlook costly issues

No home is perfect, but some properties have significant problems. If there are concerns with a property you like, it’s essential to consider whether it makes sense to take on the responsibilities that come with the property. Some home issues are expensive, and having to take care of repairs soon after becoming a homeowner could negatively impact your personal finances.

It’s also worth noting that some problems might not arise until you have a thorough home inspection. As you tour properties, consider how any issues will impact your life, including your finances. You don’t want to drain your checking account taking care of expensive repairs.

4. You could end up house poor

As you look for a home, keep your budget in mind. If you visit a home that you quickly become attached to, you may feel pressure to bid above your spending limit in hopes of beating out competing buyers. If you bid more than you can afford, you could end up house poor. This means your house is eating up more of your income than is comfortable for your finances.

Keep in mind you’ll only be able to take out a mortgage for the appraised value of the home. If you overbid beyond what the home is worth, you’ll need to cover the difference in cash. If you only have enough money in your savings account to cover closing costs and a down payment, you’ll find yourself in a stressful financial situation.

It’s also worth noting that mortgage lenders may approve you for a loan that you can afford based on your income. However, the loan amount may be more than you’re truly able to afford if you’re putting a large portion of your income toward other financial goals, like saving for retirement. That’s why it’s important to review your finances and be realistic about your budget.

You can avoid ending up house poor by being clear about your budget from the beginning. If you’re unsure, this guide can help you determine how much house you can afford. No matter how far you are in your home search, don’t feel pressure to overspend.

Think through this life-changing choice

Buying a home is a big deal, and it’s a decision that will impact many areas of your life. Make sure you think through your choices during the home-buying process. You can avoid disappointment and regret by keeping your emotions in check. If you’re ready to apply for a home loan, check out our list of the best mortgage lenders to learn more.

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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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You don’t need to make big lifestyle changes to succeed financially. Making these three moves will have a big impact without requiring any drastic action. 

Improving your financial situation can sometimes seem like an impossible task. But, the reality is, you don’t need to give up everything you love or make drastic lifestyle changes to end up with more money in your checking account.

In fact, just three small changes could make a huge positive difference in your net worth — and your attitude toward money over time. Here’s what they are.

1. Automate your savings

One of the simplest ways you can profoundly change your financial life is to set up automatic transfers of money into a savings account and a brokerage account. Once you do this, if you leave your transfers alone and allow them to continue without your intervention, you will build wealth effortlessly.

It doesn’t take a ton of money to make a big impact, either. If you can transfer just $300 a month for 30 years and you earn a 10% average annual return, you’d end up with close to $600,000. That’s only about $10 a day — less than the price of a lunch out at work.

The best way to automate your savings is to figure out how much you need to save to hit a certain goal, like amassing a particular retirement nest egg or putting aside a certain amount each month for a home down payment. Then, have this amount taken directly out of your bank account right after your paycheck hits before the cash gets spent on anything else.

If you do this, you should both simplify your money management process and end up a whole lot wealthier.

2. Track your spending

It’s easy to mindlessly put purchases on your credit cards without really stopping to think about where the money is going. That’s why keeping track of your spending can lead to powerful change.

If you simply take the time to write down what you’re spending money on (or to record it in an app), this will do two things for you. First, you’ll be more conscious of where your money is going so you’re less likely to waste it. And second, you’ll be able to identify problem areas where you’re overspending and make a change.

Tracking your spending will help you ensure your money is best aligned with your values. This way, you’ll easily be able to compare what you’re actually doing with your dollars versus what you want to do with them, based on your goals and financial priorities.

3. Pay attention to your investment fees

Investment fees can have a huge impact on how much money you end up with, and if you aren’t paying attention to what you’re being charged (check your brokerage account), you should start. Making a point of looking at expense ratios of your investments, as well as commissions and other costs, can help you to avoid unnecessarily reducing your returns.

Changing to less expensive investments could be one of the most important choices you make because of the profound impact the change will have over time. Say, for example, you have $30,000 invested and earn a 10% average annual return. If you paid a 2.5% fee, at the end of 20 years, you’d have $127,436. But if you paid a 1% fee instead, you’d have $168,134. That’s a huge difference.

These changes don’t require a lot of effort, but they can alter the course of your financial life for the better. Give them a try.

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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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