Money Management

Homeowners insurance won’t pick up the tab every single time something goes wrong in your home. Read on to learn more. 

The whole purpose of homeowners insurance is to protect you financially as a property owner. With insurance in place, you can sleep soundly knowing that if a weather event transpires and causes damage to your home, or if someone tries to break into your home and breaks things in the process, you’d likely have the cost covered by your homeowners policy.

But just because you have homeowners insurance doesn’t mean you should file a claim against your policy every time something goes wrong. Here are a few situations where you’re better off dealing with the bill yourself.

1. When it’s wear and tear damage

Homeowners insurance is meant to cover property damage. It’s not meant to cover expected, normal wear and tear that occurs in the course of owning a home.

So, let’s say your air conditioning system dies after 12 years. These systems are expected to break down after a period of time, so this is the sort of thing a homeowners insurance policy generally won’t cover. And if your system is newer and it breaks down, chances are, the repairs would be covered by a warranty on your system, not your homeowners insurance policy.

2. When your cost is the same as your deductible or less

As is the case with auto insurance, homeowners insurance policies come with a deductible you generally need to meet on a per-claim basis. So if the cost of the damage to your home is the equivalent of your deductible or less, then it makes no sense to file a homeowners insurance claim.

Let’s say your policy has a $750 deductible and you’re looking at a repair bill of $625 for recent damage. There’s zero sense in filing a claim for that work because there won’t be anything for your insurer to pay. Even if you’re looking at a $750 bill, filing a claim does nothing for you.

3. When your premiums have recently risen because you’ve filed other claims

The more claims you file against your homeowners insurance policy, the more you can expect your premium costs to rise. So if you’re looking at filing a claim that’s going to result in a minimal payout, then you may just want to cover the entire cost yourself.

As an example, let’s say you incur $800 in property damage in the course of a covered event and have a $750 deductible. Sure, you could file a claim against your homeowners policy and receive a $50 check. But is that worth doing if it might raise your premium costs by more than $50 the coming year?

It’s a good thing to have homeowners insurance so you’re protected when your home sustains damage. But it’s also a good thing to file claims against that policy judiciously, since you don’t want to drive your costs up. Progressive says the average cost of homeowners insurance is $999 to $1,655 a year, and that’s a difficult enough expense for the typical homeowner to absorb. So it’s best to do what you can to avoid raising your homeowners insurance costs even more.

Our picks for best homeowners insurance companies

There are many homeowners insurance companies to choose from. We’ve researched dozens of options and short-listed our favorites here. Looking for a green build discount or easy bundle policies? Want an easy-to-use interface? Read our free expert review and get a quote today.

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 recommends Progressive. The Motley Fool has a disclosure policy.

 Read More 

It’s a good idea to open several different kinds of brokerage accounts to meet different needs. Read on for a rundown of which ones to open. 

Opening a brokerage account is very important. You need a brokerage account so you can invest your money and earn reasonable returns that help your wealth grow.

While money you need in the short-term (around two to five years) should be in a savings account, funds you are setting aside for long-term goals should be invested with a broker so you can benefit from compound growth.

In fact, most people shouldn’t just have one brokerage account. They should have several. Here are three different kinds you should seriously consider opening.

1. A tax-advantaged retirement account

In many situations, it makes sense to open either a traditional or a Roth IRA with a broker in order to save for retirement. This is true whether you have a 401(k) at work or not.

A 401(k) is a simple retirement plan to use because your employer opens and administers the account and you can just sign up to have contributions withdrawn from your pay. Your employer may also match some of your contributions. But, you have very few investment options with most 401(k) plans.

After you have invested enough to earn your full employer match (if you have one), then you should open a traditional or Roth IRA with a broker. Both offer you many more investment choices, and both come with tax breaks. A traditional IRA gives you upfront tax savings when you contribute, while a Roth provides the tax savings when you make withdrawals but you contribute with after-tax dollars.

Using a tax-advantaged retirement account just makes sense as the government subsidizes your savings through generous tax breaks. If you contribute $1,000 to a traditional IRA and you’re in the 22% tax bracket, you could save $220 on your annual taxes. The government is essentially giving you that money now to help you invest for your future (although you will eventually be taxed on withdrawals later).

Most brokers allow traditional or Roth IRAs, so consider opening one ASAP. If you think you are paying higher taxes now than you will as a retiree, a traditional account is the right way to go. Otherwise, opt for a Roth.

2. A taxable brokerage account

Taxable brokerage accounts don’t come with the tax advantages that retirement plans do. But, it’s still a good idea to have one. That’s because you won’t have restrictions on withdrawals like you do with tax-advantaged accounts.

With IRA accounts, for example, you usually can’t take the money out until age 59 1/2 without paying a penalty (although there are some exceptions). If you think you might want to retire early, you would want a taxable brokerage account to draw from until retirement age.

A taxable brokerage account can also help you save for other long-term goals beyond retirement, and is just generally a good way to grow a big pot of money you can use to amass a larger net worth.

3. A 529 account

If you have kids and you want to help them go to school, a 529 account could be the ideal option. You can contribute to a 529 plan and the child who the account benefits can use the money to cover any qualifying educational costs. You don’t get a federal tax deduction, but some states make contributions deductible. And your child can make tax-free withdrawals for qualifying costs.

You can open a 529 directly with your state, but you can also open one at a brokerage firm as well. Using an account through a brokerage firm can give you more investment options than your state’s plan so you have the flexibility you need to make the best investments for your child’s future.

If you can open all three of these kinds of brokerage accounts and start putting some money into them, you will be well on your way to building wealth and setting yourself up for financial security.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

 Read More 

A lot of people believe you must earn a lot of money to become wealthy. Keep reading for Dave Ramsey’s take on this misconception. 

There are many pervasive money myths in U.S. culture that can affect how you manage money. Finance expert Dave Ramsey has called out one of the most damaging of those myths.

“There’s a myth in our culture that says you have to earn a large income to build wealth,” Ramsey said. “That myth is about as real as a three-dollar bill.” Ramsey explained that while earning a larger salary can help you, “it won’t lead to a high net worth if you’re not doing the right things with your money.”

But, is Ramsey really right that you don’t need a generous salary to become wealthy? Is this really a myth?

Can you actually build wealth without a high income?

The good news is, Ramsey is absolutely right that you do not need to earn a fortune to end up with a fortune. If you can save money consistently over your lifetime — especially if you start young — you can end up with a high net worth and the money you need in your savings account to be comfortable.

Say, for example, your goal is to become a millionaire by the time you reach the age of 65 — a common age to retire. If you start saving at age 35, which is actually pretty late in the game and at a time when most people are “proper adults” with jobs and the ability to invest — you would only need to save about $308 a month to reach millionaire status assuming a 10% average annual return (which is very doable with an S&P 500 index fund, even if you aren’t an investing guru).

Since the annual mean wage was $61,900 as of May 2022, it’s easily doable for most people to save $308 a month as that’s only about 5% of monthly income. In fact, most people should be able to save well above that, as the recommendation is about 15% of monthly income.

If you start at a younger age, you can get by with saving even less per month to become a millionaire. So, Ramsey is absolutely right you don’t need to earn hundreds of thousands per year to grow your net worth. In fact, someone who makes $150,000 but who doesn’t save diligently and who spends all they earn could easily end up with a far lower net worth than someone who makes $30,000 but who also makes the right money moves.

How can you build wealth, regardless of what you earn

So, what if you want to end up with a huge net worth and you don’t make six figures? Here are a few steps you can take to help make that happen:

Keep your fixed costs to below 50% of income. This includes trying to keep housing costs to 25% or less, and then filling in the rest of your 50% with other essentials.Avoid high-interest debt. Carrying a credit card balance is a recipe for disaster if you’re trying to build wealth, with the St. Louis Federal Reserve indicating the average APR on cards was 20.09% as of April 2023.Set up automated transfers to savings. Aim to save about 20% of your income and set up automatic transfers to your savings accounts and brokerage accounts so you never miss a transfer.

If you follow these steps, you can help dispel the common myth that you need to earn a lot to be rich — and, of course, can end up with the financial security you need to live a comfortable life.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Costco price tags can give you a clue as to whether an item is a good deal or not. Read on for some tips to decipher those prices. 

Costco can be a great place to shop, but you want to be smart about what you buy there to keep your credit card bills down and avoid wasting money. Surprisingly, you can actually get an idea of whether a purchase is a good deal or not by looking at some key details on the price tag (beyond just the price alone, obviously).

If you understand the ins and outs of Costco pricing, you can keep as much money in your bank account as possible. Here are some important details about what the tags can reveal — and how you can use them to be a smarter shopper.

1. An asterisk means you need to act quickly

When you see a Costco price tag with an asterisk in the upper right corner, this means the item isn’t going to be restocked. Your chance to buy it is limited as a result. So, if it is an item you use regularly or something you definitely will want at some point, you shouldn’t hesitate to purchase it as you may not have another chance if you delay.

An asterisk doesn’t necessarily mean the item is deeply discounted, though. It could be on its way out simply because the manufacturer has discontinued it or Costco decided not to carry it any more for various reasons. So, don’t assume the asterisk means you’re getting a rock-bottom price — it just signifies you soon won’t be able to buy the item at Costco.

2. A .99 at the end could mean the item is full price

If you see an item with a .99 at the end of the price tag — like something that is $9.99 or $21.99, this .99 is an indicator the item is a full-priced item set at the standard price.

You won’t get a special discount on purchasing this item, but will pay whatever Costco’s normal going rates are.

3. These numbers could mean a sale

Certain other numbers at the end of a Costco price tag are good news for shoppers, because they mean that you’re likely getting a discount.

When a price tag ends in .49 or .79, this is usually an indicator that the product manufacturer is offering special promotional pricing. When a price ends with .97, on the other hand, this is a sign that Costco has put the item on clearance or is offering a manager’s discount, so you’re likely getting a great deal for the item.

4. Items with these numbers need some extra scrutiny

Finally, if the number on the price tag ends in either .00 or .88, this typically means there aren’t many of the items in stock and the goal is to sell off the remaining items.

In some cases, these tags can indicate the item was actually returned, which means it will be really important to give the item a careful once-over to make sure all the parts are there and there’s no problem with it.

By paying attention to the ending numbers on a Costco price tag, you can decide whether to buy now or whether you can wait a while on a full-price item to see if it drops in the future. It only takes a second to check out these numbers and make an informed choice about whether to buy.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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 Costco Wholesale. The Motley Fool has a disclosure policy.

 Read More 

It’s important to have emergency savings. Read on to see what goal to aim for when you’ve just graduated from college. 

It’s pretty unsettling to hear that a good 67% of Americans don’t have enough money in their savings account to cover a $400 emergency expense. That’s what a recent SecureSave survey found, and it also revealed that most Americans are living paycheck to paycheck with no financial cushion.

If you’ve just graduated from college and are starting your first job, you should make a point to not spend your entire paycheck. You’ll need to free up some cash so you can build yourself an emergency fund.

In fact, you should really aim to have enough money in your emergency fund to cover a full three months of essential bills, like your rent, auto loan payments, food, and utilities. But if you’ve only first just started to work and your paycheck isn’t so generous, you may be wondering how much of it you can reasonably be expected to save.

The answer is, it depends on your income and bills. But you should also know that it might take time for you to build up a three-month emergency fund. And as long as you’re saving something every month, you’re doing pretty well.

You can only do your best

When you’re in your late 20s and have five years of working experience or more under your belt, you gain more negotiating power when it comes to salary. And at that point, your paycheck might go up.

When you’re a recent college graduate, you may have to come to terms with an entry-level salary. And if you’re not earning very much and have a lot of bills, there may only be so much money you can save on a monthly basis.

So, let’s say you bring home $2,500 every month after taxes, but your essential bills come to $2,000. That gives you $500 left over each month to spend on things like leisure, meals outside the home, streaming services, and travel.

Should you spend all of that $500 on those fun but non-essential expenses? No. But also, you shouldn’t necessarily be expected to save that $500 in its entirety. That’s just not realistic. So in this example, saving $150 to $200 a month is pretty reasonable, and pretty respectable.

You can try to boost your income

If the salary your job pays you doesn’t allow for much opportunity to build savings, then you may want to consider boosting your income with a side hustle. Chances are, you won’t be the only person in your social circle going that route. And getting a second job might make it easier to build up your emergency fund more quickly.

But even so, it might take you well over a year to complete your emergency fund, and that’s really okay. As long as you’re setting aside some amount of money each month, you’re doing a good thing for your finances.

In our example, if you’re able to bank $200 a month, you’re looking at $2,400 in savings after a year. That’s roughly one month of essential living costs. It’s not the complete financial protection you need, but it’s a start.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More