Money Management

Dave Ramsey recommends considering how a new car purchase will alter auto insurance costs. Here’s why that’s an important consideration. 

When buying a new or used vehicle, most people focus on how their car loan payments will impact their bank account. And while it’s crucial to make sure monthly loan payments are easily within budget, there’s also another expense to consider as well — and it’s one that finance expert Dave Ramsey warns car buyers not to forget.

Here’s what it is, and why it’s so important to take the expense into account.

Don’t forget to consider the cost of auto insurance

Ramsey warned car buyers not to forget about how much their new vehicle will cost to insure.

See, car insurance is required in most states and even when it’s not mandatory, it provides essential protection. Without insurance, drivers would be on the hook to buy a new car if theirs was totaled or to cover all losses they caused others in a collision. Plus, the cost of car insurance can vary by vehicle, so Ramsey wants drivers to make sure they’re prepared.

“When you change cars, don’t forget about how it might impact your car insurance bill,” Ramsey said. “If you’re turning in your hooptie for a much newer model, your insurance premiums will probably go up. That’s why it’s important to figure out exactly how much of a bump you’re in for.”

How to estimate your future auto insurance expenses

The good news is, it is really easy to get a clear idea of how much a new vehicle is going to cost to insure — and anyone who is shopping for a new vehicle should heed Ramsey’s advice and do the necessary research to estimate future premiums.

To do this, car-shoppers should make a list of the make, model, and year of vehicles that they are interested in looking at — and then go online and get car insurance quotes for all of those vehicles. The vast majority of insurers will allow anyone to get an online quote for any vehicle within just a few minutes by providing some basic details.

Drivers can do this for all potential cars they may want to buy so they can see how much insurance premiums are going to be, both compared to what they are currently paying and from one car to another.

By taking this step, drivers can make sure that upgrading to a new vehicle isn’t going to push their auto insurance rates so high they become unaffordable. Drivers can also make sure they pick a car that has reasonable insurance costs. If one vehicle a motorist is considering costs a lot less than another — perhaps because there’s less risk of theft or because the car has better safety features — it may make sense to buy the one with the lower auto insurance premiums.

Ramsey advises working with an independent insurance agent to estimate the premium costs of future vehicles, but there’s no real need to do this. Anyone with an internet connection and a few minutes of time to spare can jump online and make sure their auto insurance rate isn’t going to put a dent in their finances after their new vehicle purchase.

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Are you all set for retirement with $1 million in savings? Read on to find out if you’re done or need to save more. 

Fidelity reports that the average IRA balance as of the fourth quarter of 2022 was $104,000. So if you have $1 million in your IRA, it means you’ve managed to sock away roughly 10 times what the typical saver has. And that’s something to be incredibly proud of.

You might assume that once your IRA reaches the $1 million mark, there’s really no need to save any more. After all, how much money will you need in retirement?

But the answer to that question will largely depend on your specific goals more so than anything else. And so believe it or not, you may want to push yourself to save beyond $1 million, depending on what you want your retirement to look like.

What does your dream retirement entail?

For some people, retirement means staying local, living frugally, and enjoying the company of neighbors, friends, and family. For others, it means frequenting the theater, dining at nice restaurants four nights a week, and traveling to different countries. If the latter description sounds more like what you want your retirement to look like, then you may end up disappointed in a $1 million nest egg.

Now, it may seem ridiculous that a $1 million savings balance would leave you short on funds for retirement. But remember, your retirement might span several decades if your health remains solid. And you’ll want your savings to last the entire time.

That’s why you’ll need to withdraw from your savings carefully. You could use the 4% rule to land on the right withdrawal strategy. That would mean withdrawing 4% of your savings balance your first year of retirement and then adjusting future withdrawals for inflation. If you go with this withdrawal rate, you’ll end up with $40,000 of annual income.

It’s worth noting that these days, 4% is considered an aggressive withdrawal rate for retirement savings. It may be appropriate if you’re retiring on the late side and don’t need your savings to last too many years. But if you’re retiring early or on time, it’s risky.

In fact, the typical retiree today is probably best off sticking to a 2% or 3% withdrawal rate. That means getting $20,000 to $30,000 in annual income from a $1 million nest egg.

You’ll also need to consider Social Security as part of your retirement income. Though benefits could be cut in the future, that’s not set in stone.

Right now, the average Social Security recipient gets $1,827 a month, or about $22,000 a year. Whether that (plus $20,000, $30,000, or $40,000 a year from savings) is enough for you depends on, well, you.

You may want to save even more

A $1 million IRA balance is certainly nothing to scoff at. But if you want to give yourself even more options to spend money in retirement, then you may want to save beyond that point.

A relatively painless way to keep funding your IRA is to arrange for your contributions to transfer out of your checking account and into your IRA automatically each month. If you put the process on autopilot, you’ll be more likely to stay on track.

And to be clear, you may be able to start contributing less to your IRA than you’ve been doing all along. If you’ve been putting $500 a month into your IRA but already have a $1 million balance, you may be okay to contribute $250 a month going forward. That could make it so you’re able to grow your balance nicely, but also get more of your money to spend in the near term.

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Need the perfect gift for an amazing woman in your life? You can find something she’ll love at Target. Check out some presents that are affordable and fun. 

Whether you’re searching for a gift for Mother’s Day, your favorite lady’s birthday, or want to surprise a remarkable woman in your life just because, you can find a gift she will love while staying on budget. Target has fantastic presents you can buy without draining your checking account. To help you shop, we’ve outlined some of Target’s best women’s gifts.

1. Takeya Deluxe Cold Brew Coffee Maker

If you’re looking for a gift for someone who can’t go without caffeine, Target sells the Takeya 2-Quart Patented Deluxe Cold Brew Coffee Maker for $37.99. Cold brew is the perfect drink to enjoy during the summer, but it can be pricey to buy at a coffee shop. Your loved one will appreciate that you bought a thoughtful gift that can help them save money.

2. Gardening essentials

If you want to show your favorite green thumb that you care, why not shower her with some new garden essentials? Target has various affordable gifts that any gardener will love. Here are some great finds you can purchase for $25 or less:

Smith & Hawken 3-Piece Aluminum Pruner, Cultivator, and Trowel Gardening Set: $25Digz Women’s Full Finger Latex Work Gloves: $8.99Smith & Hawken large Steel Iron Watering Can: $25

3. Fujifilm Instax Mini 12 Camera

If you have a bigger budget but want to spend under $100, you may want to consider buying the Fujifilm Instax Mini 12 Camera. This instant camera is an ideal gift for the lady in your life who loves snapping photos and capturing memories. It’s available in several colors and has a built-in selfie mirror. Target sells this popular camera for $79.99. If you want, you can also include a film pack and you’ll still be under your $100 spending limit.

4. Eva NYC Therapy Session Hair Mask

You can’t go wrong with a deep-conditioning hair mask if she loves beauty products. You can score the Eva NYC Therapy Session Hair Mask for under $20. This deep conditioning mask adds moisture, smooths hair, and helps reduce breakage. It’s one of those beauty products she may want to try but doesn’t want to spend the money on herself.

5. Books

If you know an amazing lady who is a bookworm, she’ll appreciate a new book to add to her bookshelf. With summer here soon, a new book is the perfect item to bring to the beach or a weekend getaway. Target has plenty of well-rated options, no matter her preferred genre. The following paperback books are available for less than $15 each:

The Seven Husbands of Evelyn Hugo by Taylor Jenkins Reid: $9.42Book Lovers by Emily Henry: $9.99Things We Never Got Over by Lucy Score: $10.49Tiny Beautiful Things: $11.52

6. heyday Ring Light with Tripod

Whether she’s a remote worker wanting to step up her virtual meeting game or is looking for a way to capture the perfect selfies, a ring light with an attached tripod will make a fantastic gift. The heyday Ring Light with Tripod is available at Target for only $29.99.

Don’t ignore your finances while you shop for gifts

When shopping for gifts, keeping your personal finance goals in mind is essential. You don’t have to spend a fortune to show your friends and family you care. It’s never a good idea to go into credit card debt to purchase an extravagant present, so only spend what you can afford.

By shopping at Target, you can get a great gift without going broke. Don’t forget to use the Target Circle Rewards program to earn cash back and get extra discounts by clipping money-saving offers. It’s free to join and is a valuable program for Target loyalists.

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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.Natasha Gabrielle 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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Financial experts frequently recommend paying off debt before doing anything else. Read on to learn why that myth may be costing you money. 

There’s an oft-repeated myth that any spare money earned should go toward paying off existing debt. And to be sure, paying off debt is worthwhile. Ridding yourself of high-interest debt frees you up to do other, more important, things with your money. It may also help you sleep easier at night. However, the idea that digging your way out of debt is more important than any other financial goal is pure malarkey. Here, we lay out why.

Impacts your ability to deal with emergency situations

On average, the current personal savings rate in the U.S. is 4.5%. That means if you bring home $75,000 a year, you’re saving, on average, $3,375, or $281 per month. With the common refrain of, “You need to get out of debt!” running through your mind, you may be tempted to send the entire $281 to your credit card company or other creditor. That may or may not be the prudent thing to do, however.

If you have an emergency savings account in place with enough money in it to cover three to six months’ worth of expenses, fire away at your debt. Do what you need to do. That means if you lose your job, get sick and can’t work, or run into another emergency situation, you have the funds to take care of yourself without borrowing money to do so.

However, if your emergency fund is not large enough to carry you through, focusing solely on paying down debt could lead to bigger problems than you currently face. Without an emergency savings account to fall back on, you can find yourself deeper in debt.

The worst time to try to borrow money is when you desperately need it. After all, it’s easier to accept lousy loan terms when you don’t feel as though you have any other options.

Gives you less time to plan for retirement

Paying off debt is a worthy goal, but it’s not an all-or-nothing proposition. Every year spent focusing solely on debt cuts down on the time you have to plan for a healthy retirement and work on growing your wealth. The following table shows how much it can cost to delay investing for retirement.

This scenario involves a 36-year-old, contributing $500 a month to a retirement plan earning an average return of 7%. They plan to retire at age 68. Even if they never increase their monthly contribution, here’s how much they will have by the time they retire:

As you can see, compound interest can have astounding effects when it comes to dollars invested that are left to grow in your retirement accounts. Focusing only on debt paydown and delaying those retirement contributions by only a few years can cost you hundreds of thousands in possible retirement dollars. Looking at our example above, by starting contributions just four years later at age 40, you would lose out on $177,123 in retirement funds by the time you reach age 68.

So, before forgoing retirement contributions completely and throwing everything you have at existing debt, why not consider a compromise? Go ahead and make extra payments against that debt, but also harness the power of compound interest by investing in retirement as early as possible.

Let’s say you carry $10,000 in credit card debt, at an interest rate of 16%. You’re already paying $200 per month, but want to add more. Here’s how much extra payments can help, even if those extra payments are small:

Take a look at how much money you have left at the end of the month, and split it in a way that allows you to address both debt and retirement.

It’s all about balance

There’s a great rule in personal budgeting called the 50-20-30 rule. According to the 50-20-30 rule, a household budget should be broken down into three spending categories:

NeedsDebt reduction and savingsWants

The first 50% of your net income should go toward living expenses and necessities. Then, 20% should be dedicated to reducing debt and saving money. The final 30% should go toward the things you want, like a new pair of shoes or dinner out with friends.

Investing in the future comes out of that second category, debt reduction and savings. How you choose to divide the 20% is up to you. A good way to make the decision is to figure out which will benefit you the most in the long run — debt reduction or investing. That’s where you’ll want to focus the largest portion of the 20%.

The ideal situation is to rid yourself of debt while also protecting your interests with an emergency savings account and growing investment portfolio.

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Costco offers plenty of excellent buys, but some products are best purchased elsewhere. Here are five products you may want to steer clear of. 

Where else can you shop for bananas and televisions in the same store? The sheer variety of products is one of the many features that keep loyal customers coming back for more. However, it may be a little too convenient to pick up everything you need while browsing the warehouse store. That’s because some products are not worth the price you pay for them. Here are five examples.

1. Beauty products

You may be surprised by how short the shelf life is on some of the beauty products you use every day. According to Glamour UK, products used around the eyes have the shortest shelf life. For example, unless you plan to use it all in three months or less, buying a multi-pack of mascara or eyeliner may mean throwing at least some of it away.

On average, liquid foundation and concealer should last around a year. Lipstick, lip pencils, bronzers, and blush can last between three and five years — if properly looked after. That means wiping lipstick with a tissue after each use to stop the build-up of bacteria and regularly cleaning makeup brushes to prevent bacteria transfer from powder to the face, or vice versa.

While we’re on the subject of beauty products, all those skincare products Costco sells at a great price may also be a waste of money. Skincare products almost always have a shelf life of six or 12 months once they’ve been opened. That’s easy enough to keep track of.

Where you may run into trouble is with any additional jars or bottles of products that were included in your purchase. Those will survive for around 30 months before going bad. It’s incredibly easy to leave one container out and store the others away for the future. But by the time the “future” arrives, you’ll likely have forgotten when the product was purchased and can’t be sure it’s safe for use.

2. Sunscreen

If there’s anything we’ve had drilled into us over the past decade, it’s the importance of using sunscreen. Because of that, many of us have numerous tubes and cans of sunscreen scattered around our homes, cars, offices, and handbags.

The Food and Drug Administration requires all sunscreens to last at their original strength for a minimum of three years, according to the Mayo Clinic. After that time, you may feel good about applying sun protection, but it’s likely to have little benefit.

If buying a multi-pack of sunscreen makes it difficult to remember when the product was purchased, you may be better off picking up a single tube elsewhere. Sometimes, it’s better to spend a little more upfront than lose money in the end.

3. Ground spices

The average meal would be pretty bland without spices to keep things interesting. However, if you’re going to purchase a ground spice, you may want to check out a local supermarket instead of Costco. Unless you’re cooking for a small army, it’s unlikely you’ll use up a massive Costco container while it’s still fresh. Ground spices typically don’t last past the six-month mark.

4. Flour

Again, if you’re cooking for an army, this may not apply to you. For the rest of us, buying flour at Costco is a waste of money that we could have saved or spent on something else. A 25-pound bag of all-purpose flour currently runs around $13 at Costco, which sounds like a good price at first blush.

The problem is what happens to flour if you don’t use it right away. No matter which type of flour you buy, it attracts water by soaking up moisture in the air. The longer it sits in your cupboard or pantry, the more time it has to soak up that moisture. Once it hits the tipping point, the flour turns rancid.

Whole grain and nut flour will last you a couple of months, while old-fashioned all-purpose flour keeps for around one year. Still, before making the purchase, ask yourself if you’re likely to use 25 pounds of flour in one year. For many of us, the answer is no, and leaving the money in our bank account is a better move.

5. Assortment packs

Costco is great about mixing things up. One month an assortment of snack-size chips will go on sale, and the next month it will be granola bars or some other delicious treat. There’s only one problem with having a huge assortment at home: Everyone has their favorites, and some flavors typically go to waste. Let’s say you buy an assortment of yogurt featuring five different flavors. However, one of those flavors is peach, and no one in your house enjoys peach yogurt. That means you just paid more per unit for the snacks that your family will eat.

In short, if you don’t think your household will consume all of something before it expires or goes bad, you may just want to leave it on the shelf. In the meantime, pull out your Visa Card and take advantage of all the great Costco deals available.

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

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Dave Ramsey is famously anti-credit cards. But read on to learn how to avoid interest and still benefit from being a cardholder. 

Credit cards charge high interest rates. That’s a fact. And, you don’t want to end up paying interest on your cards as this can cause you several financial issues. You’ll make all your purchases costlier if you pay interest, and will drain your checking account with monthly payments.

To make sure you never pay interest, finance expert Dave Ramsey suggests simply not having a credit card. But, that’s actually a really bad move. Here’s why.

Ramsey’s recommendation for avoiding credit card interest

When it comes to avoiding credit card interest, Dave Ramsey is clear on his preferred approach.

“The best way to avoid paying credit card interest is to pay off your credit card and then cut it up! Better yet — don’t have a credit card to begin with,” he suggests. Rather than using a credit card, Ramsey believes you should pay cash for all purchases by using your debit card linked to your bank account.

Here’s what you should do instead of listening to Ramsey

It’s true that if you don’t have a credit card, you aren’t going to get hit with interest charges on it. Obviously, a creditor can’t make you pay interest if you aren’t using its cards at all.

But, giving up on credit cards entirely just to avoid interest charges is often the wrong move to make. You’d be passing up all of the benefits of credit cards just because you don’t trust yourself to avoid the one major downside — even though the downside is easily avoidable in other ways.

See, you will not pay $1 in credit card interest if you pay off your card balance in full when it’s due. You only are charged interest if you carry a balance beyond your statement period. If you can limit the spending on your card to ensure you can pay it off in full when the bill comes, creditors aren’t going to get any interest payments from you at all — you’ll only be paying off the amount you spent.

Credit cards can actually pay you

This means there’s no cost to using credit cards if you use them wisely, and there’s a lot of upside to them. Credit cards can allow you to earn rewards, which you could cash in on things like free trips or even literal cash (in the case of a cash back card). When you make payments, they are also reported to the credit reporting agencies so you can earn a good credit score, which in turn will make a mortgage, car loan payment, or auto insurance payment cheaper.

The best way to avoid credit card interest is to get a card and pay it off in full. If you can be responsible enough to limit your spending on your card, try to use it for as many purchases as possible to maximize your rewards and make sure your full payment is sent in before the statement due date.

If you don’t trust yourself to do that, you can still get a card to use for fixed monthly expenses (like your internet bill) and then set up autopay for that amount while leaving the card at home and not using it for other things (so you can still earn some rewards and build credit).

Taking this approach is a far better option than following Ramsey’s advice to steer clear of cards for good.

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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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