Money Management

Gather ’round for a story from the trenches of renting. 

Over the course of my life, the vast majority of my living situations have been rentals — I’ve rented homes and apartments in multiple cities and states, and I’ve had a variety of experiences.

When I first arrived in my current state of residence (where I intend to become a homeowner again) several years ago, I moved into an apartment sight unseen. I was moving for a job, and lacked the time and money to make a separate trip to view rentals, so I did the best I could to find something decent via the internet. The apartment turned out to be a lemon, with irresponsible and largely unresponsive management.

A bad situation

My now-former spouse and I arrived after two days of driving (we moved from 1,400 miles away) to find a filthy apartment with a broken front door lock, windows painted shut, non-working air conditioning, and no smoke detectors. That first night, the situation was so bad, we ended up putting a hotel room on my credit card so we would have a safe and clean place to sleep, and we could re-evaluate the apartment in the morning. Unfortunately, it didn’t get better once we had rested. But we had to unload our trailer so we could return it to the rental place.

Other problems soon appeared, including catastrophic water leaks from the upstairs bathroom that resulted in huge water-filled bubbles in the paint on the ground floor ceiling. The humidity in the apartment was so high that my laptop bag and cloth lunchbox grew mold (and had to be thrown away) and paper turned to mush. The apartment complex’s maintenance was overworked and without resources to fix the problems, and management wouldn’t return our calls.

We coped as best we could while I was getting used to a brand-new job; the apartment situation added a considerable amount of stress. This went on for 10 weeks. Finally, we moved out, into a rental home in another part of town. Here’s what I learned from navigating this experience.

1. Always get a copy of your lease as soon as you’ve signed it

When we arrived, at 9 p.m., exhausted from two days of driving and little sleep, we had to sign the lease immediately to be issued keys. This is not so unusual, but at the time, we were told that we would be given a copy of the lease the following week when the management office was open. That day never came, and when the problems with the apartment mounted, I emailed repeatedly to get my copy of the lease (by then, I wanted to know how to break it).

Finally, I got a response from the rental office. The administrative assistant admitted in her email back to me that we had “signed a lease for a different property,” and could come by anytime to sign the lease for the actual place we rented. A lightbulb went on above my head. I had, in writing, that my lease was invalid. This meant we could move out without incurring a lease-break penalty, right? Time to ask a lawyer.

2. If you think you need a lawyer’s help, you do

By this point, I was juggling all of my apartment concerns alongside trying to get used to my new job. Thankfully, I had a lot of local contacts through work, including a board member who worked for the neighborhood association where I was renting. He suggested I attend a free “ask a lawyer” night at the community center. I had no money to pay a lawyer, so this was my chance to ask one about the situation and get advice. This was important, as I was flying blind for what my rights were under these circumstances.

The lawyer was extremely helpful, and recommended that we draft a letter to management. The letter outlined problems with the apartment, management’s lack of response and resolution, and the fact that we didn’t have a valid lease, so we were moving out. I sent this letter via email, fax, and certified mail, so there would be no way for management to deny having received it.

3. It’s better to lose money than sacrifice your health and safety

Having sent the letter (and we never got a response, by the way), we found a house to rent and moved out a few weeks later. We forfeited our security deposit, which was definitely a blow to my bank account (moving around so often is expensive). Ultimately, we were relieved to be out of the worst rental I’ve ever lived in. It’s always better to lose some money rather than stay in a dangerous situation, like an apartment full of mold and leaks, and without safety equipment like smoke detectors.

Renting a new place comes with the possibility of having an experience like mine, but thankfully, this has been the worst I’ve personally been through. It’s made me a lot more vigilant about thoroughly vetting new rentals and ensuring I get my questions answered and a copy of the lease as soon as I sign it. Oh, and it also serves as motivation to buy a house soon, so I never have to go through this again.

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There’s one scenario where it might come in handy. 

The purpose of having an emergency fund is to ensure you’ll have a way to pay your bills in the event that you’ve lost your job. Your emergency fund could also bail you out if you’re hit with an unplanned expense, like a home or car repair. Without an emergency fund, you might be forced into instant credit card debt in these scenarios.

As a general rule, it’s important to have enough money in your savings account to cover three months of essential expenses, like your rent, auto loan, groceries, and utilities. But in the wake of the pandemic, some financial experts say that a 12-month emergency fund wouldn’t be going overboard.

Suze Orman, for example, says it’s a smart idea to have enough cash to cover a year’s worth of expenses. That way, if an extreme situation arises again like it did in 2020, you’ll have financial protection.

Now, a one-year emergency fund might seem like a lot of money. And for many people, it’s beyond what they feel compelled to save.

If you’re someone who tends to be financially cautious, though, then you may be wondering if you should be saving more than a year’s worth of bills. For the most part, you should know that you’re in really great shape if you manage to sock away 12 months’ worth of bills, and there’s probably no need to go beyond that. But there is one exception.

The rules change when you’re starting a business

Many people dream of starting a business of their own. And if you have a great idea or a passion you’ve always wanted to pursue, then you may decide to leave the safety of a salaried job and start your own venture instead.

In this situation, it’s extremely important that you have a solid emergency fund. And you may even want to save beyond a year’s worth of bills before venturing out on your own.

Most small businesses take at least two to three years to be profitable, according to FreshBooks. And if your business is going to become your sole source of income, then you may need a lot of money in savings to tide yourself over and cover your bills if it takes a long time for your business to actually start making you money.

If you’re starting a business but are also married and have a spouse who earns money, then you may be okay with a one-year emergency fund. But if you’re single and are taking this leap on your own, then it certainly wouldn’t hurt to go in with enough money in the bank to cover two years of bills, if that’s doable for you.

Strike the right balance

The problem with keeping too much money in your emergency fund is that you might lose out on the higher returns you’d get by investing it in a brokerage account. And that’s really why most people don’t need to save beyond a 12-month emergency fund. Many can even get away with less.

But if you’re starting a business, you may want to go beyond the 12-month mark in case it takes longer than expected for your venture to turn a profit. Doing so might help you dive in with fewer financial concerns. And that way, you can focus your energy on getting your business off the ground instead of wasting time worrying about how you’ll pay your bills.

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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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Everyone’s money is safe, but take this time to review where you’re keeping your money. 

Earlier this month, Silicon Valley Bank’s collapse became the second-largest bank failure in U.S. history. It’s also the largest bank failure since 2008. For many, it has brought back the fear and uncertainty they felt during the financial crisis.

Are banks a safe place to put your money? And what about the investments in your retirement account? Money expert Tori Dunlap, founder of Her First $100K, covered this in an episode of her podcast. She gave listeners a great explanation of why you shouldn’t panic.

Is your money safe in the bank?

With any bank worth using, the money in your account is insured for up to $250,000. Almost all banks are members of the Federal Deposit Insurance Corporation (FDIC), which means they have FDIC insurance. This insurance covers up to $250,000 per depositor, per ownership category, in the event of a bank failure.

That means if your bank fails, the FDIC will take over and cover the losses. As Dunlap explained, if the bank is FDIC-insured, “it is 100% guaranteed” up to the $250,000 coverage limit. It isn’t a long, drawn-out process, either. The FDIC’s goal is to make funds available within two business days of the bank failure.

If you want to check that your bank is FDIC-insured, contact the bank and ask. Or, visit the bank’s website, as this information will be readily available there. Note that if you have your money in a credit union, it will be a member of the National Credit Union Administration (NCUA), not the FDIC. The NCUA provides the same insurance coverage of up to $250,000.

But what if you have more than $250,000 in your bank account? That was the problem for clients of Silicon Valley Bank. Many of its clients were businesses that kept far more than $250,000 in their accounts.

In the case of Silicon Valley Bank, the FDIC is protecting depositors in full. It has already given depositors access to all their money. While this is good news for clients of Silicon Valley Bank, and the people working for companies that banked there, it doesn’t mean the FDIC will always do this. That’s why if you have more than $250,000 in your bank account, you should make some changes.

How to protect your money

To make sure all your money is covered by the FDIC, don’t keep more than $250,000 at a single bank. Open accounts at multiple banks and split your money between them.

This isn’t hard and doesn’t need to cost you any money, because there are plenty of bank accounts with no fees available. To get the best return on your money, look for accounts with high APYs. Here are a few options to consider:

High-yield savings accountsCertificates of deposit (CDs)Money market accounts

What about investments?

One more thing you may be worried about is your retirement. During the 2008 financial crisis, most people’s investments took a huge hit. With the turmoil in the banking industry, and the possibility of a recession, it’s natural to wonder if the same thing will happen this year.

Although Dunlap believes a recession is coming, she says that shouldn’t change your investing strategy, and she’s right. Continue to invest, and make sure you’re investing for the long term. There’s always the possibility of market volatility that affects your portfolio. If you ride this out and don’t panic, the stock market will bounce back, just like it did after the financial crisis.

If you’re within about five to 10 years of retirement, this is a good time to review your asset allocation. Consider putting more of your money in fixed-income investments, such as bonds. Since these are a low-risk investment, they help balance out stocks, which are more volatile.

The Silicon Valley Bank closure was worrisome news, but bank failures are something you can prepare for. Make sure your account has FDIC (or NCUA) insurance, and if you have more than $250,000, split it among multiple insured accounts.

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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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