Money Management

Your mid-day meal might really break the bank. 

Working from home wasn’t all that common before the COVID-19 pandemic, but since early 2020, a lot of people have been doing their jobs remotely. And what started as a temporary safety measure has evolved into more of a long-term perk for a lot of people.

Not only does working from home mean not having to spend money on commuting, but for many drivers, it means less expensive auto insurance. And there are other cost savings to be reaped via remote work, like not having to spend money on lunch.

Granted, when you work at an office, you’re not forced to go out and buy lunch every day. But when your colleagues are all doing it, it’s hard to say no.

Also, brown-bagging your lunch every day could mean never getting to escape for fresh air or taking a break. So if you’re starting to work out of an office, whether on a part-time or full-time basis, you may be racking up a bit of a credit card tab in the course of buying lunch.

But it’s not just that those returning to an office are having to bear the cost of a store-bought mid-day meal. It’s also that lunch, like just about everything else, has gotten more expensive due to inflation.

Is lunchflation busting your budget?

Financial expert Dave Ramsey talked about lunchflation in a late 2022 blog post. And he said that while the term might sound silly, “lunchflation is a real thing.”

As he explained, as of late October 2022, the cost of wraps was up 18% from a year prior, while the cost of sandwiches was up 14%. Meanwhile, salads were 11% more expensive and burgers were 8% more.

The problem with lunchflation, though, is that it deals consumers returning to the office a double blow. First, workers in that situation are bearing more expenses by virtue of having to get to work. But now, they’re paying more than they used to in the course of getting fed.

It may have been the case that prior to the pandemic, you worked out of an office five days a week and bought lunch twice weekly for $10 a pop. Well, if you’re now buying lunch twice a week but are spending $12 or $13 instead, the cost is apt to add up.

It pays to bring your own lunch

If the cost of lunch is wreaking havoc on your budget and leaving you with credit card bills you’re not happy about, then it may be time to consider packing your lunch daily and pocketing the savings involved. But that doesn’t have to mean that you’ll be destined to eat at your desk with no break every day.

Instead, encourage your colleagues to bring lunch from home and find a park with benches you can escape to. Or, eat at your desk but round up coworkers for a lunchtime walk so you can get some time away from your computer and much-needed fresh air.

The fact that store-bought lunch is more expensive than it used to be isn’t at all surprising. But that doesn’t mean you have to let those higher costs wreck your finances.

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A $500,000 home costs more than double than the national average to insure. 

Purchasing a home is an exciting milestone, but with it comes the responsibility of protecting your investment. Insuring your home is one way to do just that. Since COVID, the average sales price of a house sold in the U.S. has increased by 43%, going from $374,500 in Q2 2000 to $535,800 in Q4 2022. As the value of homes have gone up, so has the average cost of homeowners insurance, with the national average in 2023 at $1,787. Since more expensive homes have higher premiums, how much does it cost to insure a $500,000 property? Let’s take a look.

Factors that affect home insurance rates

When you’re trying to determine how much it will cost to insure your property, there are several factors that come into play. These include the age and condition of the home, the homeowner’s claims history, geographic location, type and amount of coverage, and even credit score. Older homes may cost more to insure because they may require more repairs than newer homes. A homeowner who has filed multiple claims could expect higher premiums than one who hasn’t made any claims.

Homes located in flood-prone or earthquake-prone areas also carry higher rates since damage from natural disasters can be costly to repair. What’s more, buying certain types of coverage, like earthquake or flood insurance, results in increased rates, while opting for higher coverage limits increases costs even further. Lastly, those with good credit scores get lower premiums as insurance companies see them as responsible individuals less likely to file a claim.

The cost of insuring a $500,000 home

The average cost of homeowners insurance for a $500,000 home is $3,878, more than double that of the average of all homes in the U.S. More expensive homes typically cost more to insure since it is more expensive to rebuild or repair the home. Higher-priced homes also tend to have unique features such as a guest home or swimming pool. In addition, certain items within the home may affect the rate too, such as special items like jewelry or valuable artwork.

The cost may be lower or higher depending on where you live and the factors mentioned above. When shopping around for policies, it’s important to compare quotes from different companies and read each quote carefully so you understand what is (and isn’t) covered by your policy before making a decision.

Insuring your home is essential if you want to protect your investment from potential damage or loss due to unforeseen circumstances, such as theft or natural disasters. Knowing what factors affect insurance premiums can help you get an idea of how much it will cost for your specific property so you can budget accordingly. Be sure to shop around for quotes from different providers to get the best coverage at the best price possible!

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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 have much to gain by going this route. 

Few things in life are more convenient than credit cards. They give you access to a line of credit that you can use to pay for your everyday purchases, and they’re accepted nearly everywhere these days. Plus, as you use your credit card and pay it off, you’re demonstrating to the card issuer that you can be trusted with credit. This builds your credit score, and having a good credit score can make it easier and cheaper to borrow money in more high-stakes situations, like getting a mortgage loan. With all these benefits in mind, here’s why it pays to use your credit card for as many of your expenses as possible.

The benefits of credit cards

It’s the features and perks of credit cards that make them ideal to pay for your groceries, gas, clothing purchases, utility bills, and beyond.

You can easily track your spending

You’re living on a budget, right? When it comes time to figure out how much you’re spending on different budget items every month, it’s very easy to log into your credit card account on your computer or in your mobile app and see all those costs. Some credit card mobile apps and websites will even helpfully categorize the spending for you — one of mine even creates a lovely pie chart showing where my money goes!

You can earn rewards

Some credit cards give you the chance to earn rewards on your spending in the form of cash back, points, or airline miles. Sometimes you’ll get a higher earnings rate on certain purchases, so if you’re comfortable juggling multiple credit cards, you can maximize your earnings by using the right card at the right time.

You can take advantage of security features

Credit cards are one of the most secure ways to pay. Your own money isn’t connected to them. With many credit cards, you’re not liable for fraudulent charges if your card is lost or stolen (and if you are, it’s generally for a small amount of money, like $50). The chip technology in a credit card keeps your data safe, and you can generally opt in for fraud alerts if your card issuer spots something fishy with your account.

A few exceptions

If you’re ready to start charging all your expenses on your credit card, take a quick breather and ask these questions first.

Will the fees involved supersede the rewards earned?

If you want to use your credit card to pay your electric bill, for example, check to see whether you’ll be assessed a processing fee for doing so. If your bill is $100, and the fee is $3, will you earn at least 3% back by using the credit card? You might also have a hard time paying your mortgage loan with a credit card, as you may need to use a third-party payment processor (and pay a fee). Any time it will cost you more to pay a bill with a credit card, it’s a good idea to use another payment method.

Will you be bumping against your credit limit?

You definitely don’t want to put yourself in a situation where you’re running up against your credit limit. Maxing out a credit card will do your credit score no favors. If you’re concerned about this, you might consider splitting your purchases and bills across multiple cards (provided you can keep up with multiple payments).

Will you have to carry a balance?

Finally, if you’re unable to pay off your balance in full every month, using a credit card for all your expenses will result in interest charges on the balance you carry forward. Credit card interest is not cheap — as of the fourth quarter of 2022, the average credit card had an APR of 19.07%. If you want credit cards to benefit you and your finances, you don’t want to owe an ever-growing balance on your cards month after month.

Credit cards can be a great way to make managing your everyday expenses easier and safer, and you get the chance to earn rewards on your spending to boot. Just be sure you’re paying off your cards in full every month and not spending more on your bills because of using a credit card.

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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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This could make a huge difference to your child’s future. 

Parents of all backgrounds want their children to be financially secure when they grow up so they don’t have to worry about where their next meal is coming from or how they’ll afford to pay for much-needed medical care. However, some families have an easier time setting their kids up for success than others.

But help could be on the horizon for low-income families if Congress passes the recently proposed American Opportunity Accounts Act. It promises up to $46,000 for American children to use to better their lives. Here’s what you need to know about it.

What is the American Opportunity Accounts Act?

This new piece of legislation was introduced by U.S. Senator Cory Booker (D-NJ) and U.S. Representative Ayanna Pressley (D-MA) as a way to help the next generation become homeowners, pay for higher education, and achieve other long-term goals. It also aims to help close the racial wealth gap.

If it’s passed, the new law would create a seed savings account, also known as a “baby bond,” with a $1,000 initial deposit for all American children. Each child’s account would be eligible for additional annual deposits, up to $2,000, depending on their household income. The money in these accounts would sit in a federally insured account managed by the Treasury Department, and it would earn roughly 3% in interest each year.

Families wouldn’t be able to touch the money in the account until the child turns 18, and even then, they’d only be able to use it for certain allowable expenses. This would include paying for higher education expenses or making a down payment on a home.

How much would baby bonds be worth?

The value of a baby bond would depend on its exact interest rate and what kinds of additional annual deposits the child qualified for. For families who are at or below the federal poverty line, each child would receive $2,000 per year, and their estimated final balance at 18 would be $46,215.

Annual deposits gradually decrease as income rises. Households with an annual income that’s 500% of the poverty line — about $125,571 for a family of four — wouldn’t receive any additional deposits after the initial $1,000. But they’d still have about $1,681 by the time they’re 18 to put toward any approved purpose.

Nothing’s set in stone

Baby bonds could be a huge boon for many Americans, but right now, this is all speculation. We have no way of knowing if Congress will pass it. Even if it does, that’s not a guarantee that the final law would look like the current proposal.

For the time being, parents hoping to help their children save for the future will have to rely upon more traditional means. Opening a high-yield savings account on your child’s behalf and depositing money as you’re able to is a good start. Some of these accounts are earning more than 3% per year right now, though rates can fluctuate over time.

You could also save for your child in a certificate of deposit (CD) if you don’t believe you’ll need the money anytime soon. CDs sometimes offer higher interest rates than high-yield savings accounts, especially if they have longer terms. But you can face penalties if you withdraw the funds before the term is up.

For teens seeking assistance with higher education costs, you can help them apply for financial aid and scholarships. You can also help them in finding age-appropriate employment to build up their savings. Even if you aren’t able to save consistently or put away a lot of money, every little bit counts.

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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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It’s a tough call for the Fed as it works to battle inflation. 

Silicon Valley Bank’s collapse earlier in March has left the banking industry reeling. It’s also left consumers wondering whether their savings are really as safe as they thought.

But it’s not just SVB that’s causing upheaval. First Republic Bank got a $30 billion bailout last week in an effort to avert a massive banking industry crisis. And it’s not the only bank whose finances are precarious right now.

Higher interest rates have been putting a strain on banks, many of which invest in bonds. When interest rates rise, bond values tend to drop. SVB was forced to sell bonds at a massive loss when trouble hit, leading to panic and a run on the bank. But if more banks are forced to follow suit, the industry as a whole could really take a tumble.

Meanwhile, the ball’s in the court of the Federal Reserve on the interest rate front, and up until a couple of weeks ago, there was reason to believe the Fed would keep pushing its interest rate hikes to slow the pace of inflation. But now, the central bank has a conundrum.

If the Fed keeps raising rates, it will put more pressure on banks. If it doesn’t, inflation might remain stagnant or increase.

It’s a tough call. And it’s one the Fed will have to address this week when it meets on March 21 and 22.

No easy answer

Inflation has been battering consumers for months, forcing many people to rack up credit card debt and raid their savings just to stay afloat. If the Fed doesn’t intervene by raising interest rates, the U.S. could end up with a major debt crisis on its hands. But if interest rates keep going up, a banking crisis could ensue. As such, the Fed now finds itself between a rock and a hard place.

A compromise could work

The Fed’s last interest rate hike was a 0.25% increase. That’s a fairly moderate one, and it’s a route the central bank might opt to take this week as well.

The Fed needs to slow inflation down. As of February, it was still up 6% on an annual basis, as measured by the Consumer Price Index.

A more aggressive rate hike could result in a world of backlash. But if the Fed doesn’t raise rates at all, it might really send the wrong message — and drive inflation in the wrong direction.

The Fed’s goal right now is to bring inflation down as close as possible to the 2% mark. As the Fed says itself, over the long run, 2% inflation is most consistent for maximum employment and price stability. “When households and businesses can reasonably expect inflation to remain low and stable, they are able to make sound decisions regarding saving, borrowing, and investment, which contributes to a well-functioning economy.”

That sounds perfectly reasonable. But since we’re a long way from 2% inflation, it’s fair to assume that the Fed is not going to back down on rate hikes this week. That’s something borrowers and consumers with money in the bank alike will want to pay attention to.

The good news is that consumers are protected in the event of a bank failure for up to $250,000 at FDIC-insured institutions. But even so, a complete banking industry collapse wouldn’t be good for anyone. So let’s hope the Fed doesn’t drive the industry closer to that point.

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

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