Money Management

It’s a problem for a lot of people, actually. 

There was a time in my life when I didn’t have an easy time spending money on myself. And even these days, I sometimes feel a twinge of guilt when I buy a sweatshirt I don’t really need because it has a cute picture of a dog on it, or when I treat myself to a takeout meal because I’m too busy to go to the supermarket for groceries or too darn tired to stand in my kitchen and cook.

It’s a good thing to be mindful of nonessential spending. But it’s another thing to feel downright guilty every time you spend money on something that’s supposed to make you happy or make your life easier.

A lot of people struggle with spending guilt. But if you make one key move like I did, those negative feelings might start to go away.

It’s easier to spend when you know you’re meeting your goals

You may have certain financial goals for the year. Maybe you want to add $5,000 to your savings account. Or maybe you want to add $6,000 to your IRA account.

Every time you spend money on something nonessential, it takes you one step further away from meeting those goals. So it’s easy to see why you might feel guilty about that type of spending. But if you automate your savings, those guilty feelings might start to disappear.

At this point, I’m pretty set with emergency savings (though sadly, many Americans are not), but I’m trying to fund my retirement savings and my kids’ college savings pretty aggressively. What I do, though, is set up an automatic transfer so that money leaves my checking account at the start of the month and lands in the accounts I have earmarked for those goals. That way, I know I’ve made my contributions, and the rest of my money, aside from what I need for essential bills, is technically mine to spend.

Now, this doesn’t mean that if I’m left with $800 a month after all of my essential bills are paid, that I’m going to spend that much on clothing, takeout, and other nonessential purchases. But I might feel less bad about spending $60 or $80 of that, knowing that I’ve already met my savings goal for the month.

Also, by automating the savings process, it gives me one less task to think about and keep track of. There’s a value in that, too.

Automation could work wonders for your guilt

When you work hard for your money, you deserve to spend some of it on things you simply enjoy, or things that buy you more free time, like a cleaning service for your home. But it’s easy to see why feelings of guilt might creep in when you’re spending money on things you don’t need rather than putting your money into savings or toward your key goals.

If you do what I did and automate your savings efforts, you can spend with a clearer head. And that might help you better enjoy the money you push so hard to earn.

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 

What should you do if your auto insurer fails? 

Auto insurance is a necessary expense for anyone who owns a car. But what happens if your auto insurance company fails? With Silicon Valley Bank, Silvergate, and Signature Bank all failing in a matter of days, many fear that the contagion may spread to other financial institutions, including auto insurance companies. If your auto insurer is having financial difficulties, you may be concerned that your coverage is in danger. Fortunately, your state will step in to ensure that claims are paid out. Here’s how it works.

Guaranty associations

In the past, if an auto insurer failed, claimants often faced lengthy delays and insufficient payouts when seeking compensation. To address these issues, each state created a guaranty association. The duties of the guaranty fund are to protect policyholders when a licensed insurance provider fails, by paying or making payments in accordance with the policy’s terms and conditions.

Just as the FDIC steps in for bank failures, these guaranty associations go to work when an auto insurer fails. It pays out any claims, helping to provide a reliable safety net for policyholders. The guaranty association will first try to rehabilitate the insurer or transfer its operations to another insurer, but if it fails, it moves to bankruptcy proceedings.

Company assets are then liquidated to help secure payment for any claims. Policyholders are generally given advance notice so that appropriate arrangements can be made for alternate coverage. The funds pay out up to a maximum amount per claim and can provide temporary coverage while members find new providers. Regardless of what happens, it is important to continue paying your premium to keep your coverage intact.

All 50 states have a guaranty mechanism in place to cover any claims should an auto insurer collapse. Each insurer pays an assessment to pay for the associations. Typically, all licensed insurers are members of the funds so it gives existing customers peace of mind they will be covered should their insurance carrier go under. Auto insurers are allowed to recoup the assessment they pay through premium increases, premium tax offsets, or policy surcharges.

Check the financial strength of your insurer

When selecting an insurer, it is important to check the financial strength of the company to ensure you are getting good value for your money. The financial strength of an insurer can be determined by taking a look at its investment portfolio and credit rating. A company with a high credit rating means it is more likely to pay out claims as promised. A company with a lower credit rating may signal higher premiums or potential problems meeting obligations if something unexpected were to occur.

There are five rating agencies and each have their own rating scale and standards:

AM Best rates companies on a scale of A++ to D-Fitch rates companies on a scale of AAA to DKroll Bond Rating Agency rates companies on a scale of AAA to DMoody’s rates companies on a scale of Aaa to CStandard & Poor’s rates companies on a scale from AAA to D

The credit rating agencies look at an insurer’s overall finances, how much debt it has, management stability, recent performance, history of the company, and other factors. You should check the ratings of each agency since their evaluations may differ. Check each insurer’s reviews, track record, and history before deciding which one to choose.

Dealing with an auto insurance company failure can be stressful and confusing, but each state’s guaranty association helps protect policyholders and pays out necessary claims. While state governments do not directly back a guaranty fund, they oversee it to help ensure you are fully protected should an auto insurer fail.

Our best car insurance companies for 2022

Ready to shop for car insurance? Whether you’re focused on price, claims handling, or customer service, we’ve researched insurers nationwide to provide our best-in-class picks for car insurance coverage. Read our free expert review today to get started.

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 

Hint: You’ll need to be very careful. 

Many consumers are downright tired of rampant inflation at this point. And that’s understandable. But unfortunately, the problem doesn’t seem to be fading away.

The Bureau of Labor Statistics just released its February Consumer Price Index (CPI). The CPI index measures changes in the cost of common goods and services.

On an annual basis, inflation fell from 6.4% in January to 6% in February. But on a month-over-month basis, inflation rose 0.4% in February. This could lead to more interest rate hikes on the part of the Federal Reserve.

Now, it’s a myth that the Fed is tasked with setting consumer borrowing rates, like auto loan and mortgage rates. Those rates are determined by lenders individually.

Rather, the Fed oversees the federal funds rate, which is what banks charge each other for short-term borrowing. But when the Fed raises its benchmark interest rate, consumer borrowing costs tend to rise as a result. And that’s why consumers looking to tap their home equity need to be very careful in the coming months.

It’s not the best time to borrow against your home

From an equity standpoint, many homeowners have the option to borrow against their properties because home values are still up on a national scale. But from a borrowing rate perspective, it’s a bad time to sign a home equity loan or line of credit (HELOC).

Since borrowing rates are up in general, you’re looking at paying more any time you borrow, whether it’s a car loan or a personal loan. And since we could see more rate hikes out of the Fed in the coming months, a home equity loan or HELOC might end up being more expensive than you bargained for.

What’s more, HELOCs are especially dangerous at a time when interest rates are on the rise because unlike home equity loans, HELOCs tend to come with variable interest rates. That means your payments under a HELOC have the potential to climb in general. And they might climb at a faster pace if the Fed is aggressive with rate hikes this year.

Hold off on borrowing if you can

If you have a pressing need for money, then you may not be able to put off your home equity loan or HELOC application. But if the situation can wait, then it could pay to hold off and see if borrowing rates come down next year.

Let’s say you’re borrowing against your home to renovate your kitchen, but right now, your kitchen is perfectly functional. You might want a newer one soon so your space is nicer to look at and there’s more storage room in your cabinets. But signing a loan now might mean paying a lot more money, so if you’re able to hold off, that could result in savings.

Plus, when you sign a loan at a higher interest rate, you risk struggling with your payments and falling behind on them. That could have huge financial consequences, like credit score damage, and your recovery from that could take many years.

Our picks for the best credit cards

Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

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 

Your state guaranty association can help. 

Investing in homeowners insurance is a must for all homeowners. Unfortunately, sometimes even the most reliable companies can fail. When this happens, your coverage is no longer valid and you may be left wondering what steps to take next. Fortunately, all states have a guaranty association that can step in when an insurance company fails. Let’s take a closer look at how this works.

How a guaranty association can help you

The state guaranty association was created to protect homeowners in the event their insurance company fails and becomes insolvent. It acts as a safety net to help policy holders. In the past, if an insurer failed, the policyholder or claimant had to file a claim in the liquidation proceeding. Any assets from the bankrupt insurer would be divided among thousands of creditors and claimants. These proceedings usually took years and rarely resulted in the payment of most claims.

To address these issues, each state created a guaranty association. The duties of the guaranty fund are to step in and pay claims in accordance with the policy’s terms and conditions when a licensed insurance provider fails. The guaranty association will review your policy and determine if you are eligible for compensation for any unpaid claims before the company failed. In most cases, the guaranty association will pay up to $500,000 per claim and $1 million total per policyholder — however, these limits vary from state to state.

How do you file a claim?

Just as the FDIC steps in for bank failures, these guaranty associations step in when a property and casualty insurer fails. The guaranty association will first try to rehabilitate the insurer and try to return the company to solvency. If this fails, the insurer is placed into liquidation, where its assets are sold off to pay claims. Each claimant receives a proof of claim form to substantiate their case, which is then thoroughly vetted for validity and paid by the guaranty association.

It’s important to note that not all claims will be eligible for compensation from the state guaranty association — only those that were made before the company failure date are eligible for reimbursement. Additionally, some types of policies (such as flood or earthquake policies) may not be covered by the guaranty association at all. To find out if your claim is eligible for reimbursement, contact your state’s department of insurance or visit its website for more information on filing a claim with the guaranty association.

All 50 states have a guaranty association in place to cover any claims should a property and casualty insurer fail. Each association assesses their members, typically all licensed insurers, to cover their expenses.

How to avoid financially unstable insurers

It is important to check the financial strength of the home insurance company before you decide on an insurer. The credit rating agencies look at an insurer’s overall finances, management stability, recent performance, and other factors. You should check the ratings of each agency since their evaluations may differ. There are five rating agencies and each have their own rating scale and standards:

AM Best rates companies on a scale of A++ to D-Fitch rates companies on a scale of AAA to DKroll Bond Rating Agency rates companies on a scale of AAA to DMoody’s rates companies on a scale of Aaa to CStandard & Poor’s rates companies on a scale from AAA to D

The bottom line is that having a reliable homeowners insurance provider is essential for protecting yourself against unexpected disasters and damage — but what do you do when that provider fails? By understanding how guaranty associations work, you can rest assured knowing that there are measures in place to protect yourself and your family should your insurer fail. It’s always best to research options before buying homeowners insurance, so you have greater peace of mind.

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.The Motley Fool has a disclosure policy.

 Read More 

Don’t assume the number you’re seeing is set in stone. 

Many people rely on their tax refunds to do things like pay bills or dig their way out of credit card debt. So if yours is looking to be a lot smaller this year than it was last year, that might come as a financial shock.

If you’re in line for a smaller tax refund this year than last, you’re not alone. In a recent interview, Mark Steber, Chief Tax Information Officer at Jackson Hewitt, explained that many refunds are going to be less substantial due to pandemic-era benefits running out.

For example, the Child Tax Credit got a sizable boost in 2021. But that boost didn’t carry through to 2022, which means that tax-filers won’t get the same benefit from that credit that they did a year prior.

Now, it may very well be the case that the smaller refund you’re seeing is the maximum refund you can expect to hit your bank account this year. But before you submit your tax return and lock that refund in, Steber says you may want to do these things.

1. Take a second look

At a time when inflation is surging, it’s important to squeeze out as large a refund as you can. So before you submit your tax return, give it a second look. Review different credits and deductions and make certain you’ve claimed every one you’re entitled to. And if you’re self-employed in any capacity, make sure you’re claiming those benefits, too.

Let’s say you work a side hustle as a math tutor. If you spend money on rideshares to get to your clients’ homes, those are expenses you should be eligible to deduct.

2. Consider any life changes that occurred last year

Maybe you had a baby in 2022, or got married or divorced. Changes like these could render you eligible for tax breaks you couldn’t claim before, so it’s worth reading up on what those might entail.

3. Get some help

The tax code is extremely complex, and it’s loaded with rules. Chances are, you don’t know what all of them entail. And that’s why it could pay to enlist the help of a tax professional if you’re hoping to give your tax refund a boost.

A tax professional isn’t going to bend the rules and suggest that you claim a credit or deduction you’re not actually eligible for. But what a tax professional might do is alert you to credits or deductions you didn’t know you could claim.

You may be thinking, “But what I gain in terms of a larger refund, I’ll spend on a tax professional’s fee.” That may or may not be true, depending on how the numbers work out.

But think of it this way. If a professional informs you of a tax break you’re allowed to take that you never would’ve discovered yourself, you may be able to claim it for many years going forward. So even if you don’t come out ahead financially on that fee this year, you might come out ahead in the long run.

A smaller tax refund can be a bummer, but you’re not necessarily stuck with one. Even though a lot of filers will inevitably get a smaller refund this year than last, it still pays to make these moves before submitting your tax return for good.

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 

It pays to follow her advice. 

Is a recession going to hit in 2023? It’s hard to know.

On the one hand, the job market is very strong, and the national unemployment rate is low. On the other hand, the Federal Reserve is not by any means done fighting inflation. In the coming months, it might raise interest rates aggressively in an attempt to bring living costs down.

If the Fed makes it too expensive to borrow, whether in the form of a credit card balance, home equity loan, or personal loan, consumers are apt to start cutting their spending. If that happens to an extreme-enough degree, we could end up with a recession on our hands.

No one is more aware of this than financial expert Suze Orman. In a recent blog post, Orman told readers to hope for the best and plan for the worst.

Now to be clear, Orman doesn’t have a crystal ball, so she, like the rest of us, can’t say with certainty what direction the U.S. economy is headed in. But, as she writes, “There is a lot going on right now that suggests 2023 could be financially shaky.”

That’s why she’s asking consumers to be both optimistic and prepared. And she specifically recommends making these key moves to gear up for an economic downturn.

1. Boost your emergency savings

Do you have enough money in the bank to cover a full three months of essential bills? If you don’t, then you may want to focus on building more savings immediately.

If a recession hits, it could lead to an uptick in unemployment rates. That doesn’t guarantee you’ll lose your job, but it’s a possibility. And if your paycheck goes away, you’ll need money to pay your bills until you’re hired elsewhere.

In fact, three months’ worth of living expenses is really the minimum amount of money you should keep on hand in your savings account. If you’re able to get closer to the six-month mark, you’ll buy yourself all that much more protection.

2. Do an outstanding job at work

Being great at what you do won’t guarantee that your job won’t land on the chopping block if your company is forced to reduce its staff. But think about it — who’s your company more likely to let go? The people who come in every day and do the bare minimum, or the people who work hard and get results?

It’s in your best interest to propel yourself into the latter category. So keep boosting your job skills and working your hardest while you’re on the clock so that if layoffs become necessary, you’ll have a greater chance of being spared.

3. Grow your network of professional contacts

When you need a job, who you know is often more important than what you know. Now, says Orman, is a good time to grow your professional network. You never know when you might need to call in a favor, so go out and establish those relationships before things get worse.

Ideally, 2023 will end up being a stable year, economically speaking. We could even see inflation cool off nicely. But at this point, we can’t really make any spot-on predictions about the coming year because there’s just so much uncertainty to grapple with. So your best bet is to hope that the economy remains solid, but to prepare in case the opposite happens.

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