Money Management

You really don’t want to go without it. 

If you own a home, you need homeowners insurance. Not only is it usually a prerequisite to getting a mortgage loan, but it’s something you need to have in case your home sustains damage, whether due to a flood, fire, or weather-related event.

Homeowners insurance can also protect you in case someone gets injured on your property. Let’s say you don’t clear the ice from your driveway and a delivery person slips and sustains an injury. Your homeowners policy might cover their medical bills so you aren’t required to pay out of pocket.

But putting a homeowners insurance policy in place isn’t enough. You should also make sure to buy the right homeowners insurance. And if you ask financial guru Suze Orman, there’s one key feature you should really be on the lookout for.

Protect yourself in the face of inflation

Consumers have seen firsthand how inflation can make the cost of just about everything more expensive. Over the past year and change, inflation has soared at an unusually rapid clip. But even during periods when inflation is more moderate, in general, expenses naturally tend to rise over time. And that extends to the cost of building and/or replacing your home.

That’s why Suze Orman insists that it’s important to buy homeowners insurance with extended replacement cost coverage. Doing so could help ensure that you’re able to have your home fully rebuilt if it’s damaged or destroyed, despite the higher cost of doing so.

It’s common for homeowners insurance to offer regular replacement cost coverage. But in that scenario, warns Orman, your payout is limited to 100% of the original value of your home and the items contained inside it, like your furniture and electronics.

What extended replacement cost coverage does is protect you from rising costs related to your home and its contents. With this sort of coverage, you might get a payout up to 125% of the original value of your home and belongings. And that’s important because over time, the cost of replacing your home and belongings could rise. But with extended replacement cost coverage, you’re covered in that regard.

Read the details carefully

Owning a home is a huge expense. So it’s natural that you’d want to save money on homeowners insurance to free up money for other costs, like property taxes, maintenance, and repairs.

But rather than opt for the cheapest homeowners insurance policy possible, it could be worth it to pay a little extra for extended replacement cost coverage. That way, if the cost of replacing your home increases over time, you’ll still be protected. Not every policy includes this feature, so pay attention to the fine print when you’re shopping for homeowners insurance.

And if you already have homeowners insurance, you may want to ask about upgrading your policy so it includes extended replacement cost coverage. Homeowners insurance is supposed to give you peace of mind. It’s worth paying a little extra to really get the protection you need.

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Indulge that wanderlust with these key tips. 

If you’re hoping to do your fair share of travel in 2023, you’re not alone. A December survey by MMGY Travel Intelligence found that 58% of Americans had plans to take a vacation within six months — despite the higher costs involved.

Of course, traveling can do a lot of great things for you. It can give you a chance to learn new things, enjoy mind-opening experiences, and get a much-needed escape from the daily grind. And so if you’re eager to take more trips in 2023, here are some steps you can take to pull that off.

1. Work a side hustle

Not only has travel gotten expensive these days, but just about everything has, due to inflation. That means it may be harder to free up cash in your budget for travel purposes.

That’s where a side hustle could come in. If you’re willing to work a second job, you may find that you have more money to spend on different trips without running the risk of landing in debt. In fact, you might even be able to combine your love of travel with your desire to boost your income by getting paid to write about different destinations on a freelance basis.

2. Bank your credit card cash back

If you use a credit card for everyday purchases like gas and groceries that puts cash back in your pocket, don’t take the money and spend it every month. Instead, bank it, and reserve it for the next big trip you want to take.

At the same time, swipe your credit cards strategically. You may have one card that offers bonus cash back at the pump, and another that rewards you more generously for grocery store purchases. Pay attention to each card’s rewards program so you can maximize those offers.

3. Use a travel rewards card to lower your costs

One of the reasons so many people struggle to afford travel is that the smaller expenses involved, like checked baggage fees, can add up. But if you use a travel rewards credit card to book your trips, you might save yourself a nice amount of money along the way. Many travel rewards cards let you check bags for free, and also offer discounts on in-flight purchases (which are sometimes unavoidable, such as if you didn’t have time to stop for a meal before boarding).

Now, one thing you should know about travel rewards cards is that they commonly charge an annual fee. But in many cases, that fee can more than pay for itself, so crunch the numbers to see what makes sense. If you have to pay $100 for one of these cards, but you save $35 each time you’re given a free checked bag, that card will pay for itself if you’re boarding a plane three times a year or more.

Many people would love to get out and travel more this year. Higher costs across the board could make that challenging, but if you follow these tips, you may be surprised at how doable it is to get away on multiple occasions.

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It’s probably not the one you think. 

These days, a lot of people are carrying balances on their credit cards. We can thank inflation for that. When your bills go up across the board, it can be difficult to manage them with your regular paycheck alone — especially if you don’t have money in your savings account to fall back on.

New York Life’s latest Wealth Watch survey reveals that the average credit card balance among all U.S. consumers is $6,320.98. But members of one generation owe a lot more than that.

Gen Xers owe the most

You might assume that it’s Gen Zers or millennials who have the highest credit card balances. They’re the ones who are likely to be earning less due to having less career experience.

But actually, the aforementioned survey found that Gen Xers have the highest credit card balances, averaging $7,004.07. And surprisingly, baby boomers are second to Gen Xers in terms of outstanding debt. They owe an average of $6,784.64 on their credit cards.

Why do older Americans have more debt? It may actually be because they earn more, and therefore feel comfortable taking on higher expenses.

Also, a lot of Gen Xers may be grappling with not just inflation, but also, having to pay college tuition for their growing children or having to support their adult children during these trying times. And many baby boomers may be retired and on a fixed income that can’t keep up with inflation. So over the past year, boomers may have added to their credit card balances simply to keep up with their costs.

Eliminating credit card debt is key

No matter which generation you identify with and how much credit card debt you have, it’s important to do what you can to pay it off quickly. The sooner you do, the less interest you’ll rack up, and the less money you’ll wind up throwing away.

Of course, to pay off your credit card debt, you’ll need money. And if your main paycheck is eaten up by your regular bills, then you may need to look to the gig economy to give your income a boost.

The good news is that you can make a nice amount of money from a side hustle no matter your age, and the right approach may be to see if it’s possible to monetize one of your hobbies so that side gig doesn’t feel as much like work. If you’re someone who plays an instrument well, offer up your services as a music teacher for students who want to learn. If you love hanging out with dogs, become a dog-walker or sitter. And if you’re great in the kitchen, moonlight as a personal chef.

There are lots of different options you can look at, but the key is to whittle down your credit card balance as quickly as possible. If you allow that debt to drag on, you may find that no matter what your balance looks like today, it’ll be a whole heck of a lot higher a year from now.

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It all boils down to the amount you’re borrowing. 

One huge benefit of owning a home is getting to tap the equity you build in it. Home equity is defined as the value of your home minus what you owe on your mortgage. If your home could sell for $400,000 and you owe $200,000 on your mortgage, you’re left with $200,000 in equity. And that equity is something you can borrow against in different ways.

Meanwhile, homeowners today are sitting on lots of equity thanks to the explosive housing market we’ve seen over the past few years. According to CoreLogic’s most recent home equity analysis, U.S. homeowners with mortgages saw their collective equity increase by more than $2.2 trillion between the third quarter of 2021 and the third quarter of 2022. That’s an annual gain of 15.8%.

When it comes to tapping your home equity, you could do so via a cash-out refinance or a home equity loan. But the latter may be a better choice today for one big reason.

When borrowing rates are up, it pays to borrow less

These days, borrowing rates are up across the board. It’s more expensive than it was a year ago to refinance a mortgage, finance a car, take out a personal loan, or put a home equity loan into place.

But the reason a home equity loan is generally a better bet than a cash-out refinance today is that with the former, you’re borrowing less money. And when interest rates are elevated, it pays to keep the sum you borrow to a minimum.

Let’s say you need $50,000 to do a major home remodel and you owe $200,000 on your mortgage, but also have $200,000 in equity. You could most likely qualify for a $250,000 cash-out refinance pretty easily, assuming there aren’t major issues with your credit score. But in that case, you’re taking out a $250,000 loan that you’ll probably get stuck with a not-so-competitive interest rate on.

On the other hand, if you take out a $50,000 home equity loan to fund your renovation, you’re only borrowing $50,000. You’re not borrowing that money plus the entire balance of your mortgage.

Plus, if you currently have a fairly low interest rate on your mortgage, the last thing you’d want to do is increase it substantially by refinancing. So if that’s the case, you’re better off taking cash out of your home by going the home equity loan route.

It pays to shop around

Borrowing rates may be up across the board right now, but that doesn’t mean you should resign yourself to getting stuck paying a lot of interest. Before you sign a home equity loan, shop around with different lenders to see which one has the best offer.

At the same time, because rates are up, it pays to try to keep your borrowing to a minimum. If you only need $50,000 for your upcoming renovation, don’t borrow $60,000.

When rates are lower, it can make sense to tack extra money onto an existing loan so you have a little more borrowing leeway. But since that’s far from the case today, you’re probably better off only borrowing what you need.

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These tricks actually work really well. 

It’s fair to say that a lot of people’s finances took a hit in 2022. Last year, a lot of people had to raid their savings accounts or even resort to racking up credit card debt to cope with inflation.

And speaking of inflation, we’re not done with it. You may find that the cost of everything this month, from groceries to apparel to utilities, is more expensive than it used to be. That could make growing your savings a challenge. But here are a few less obvious ways to give your cash reserves a boost this month.

1. Do your food shopping at Aldi

Groceries are an essential expense. And as of January, grocery prices were up 11.3% from a year prior, according to that month’s Consumer Price Index. You can cut your food costs, however, by shopping at discount grocers like Aldi.

Now, if you’re going to insist on loading up on specific brands as you do your food shopping, then Aldi probably won’t work for you. The whole reason Aldi is able to offer such competitive prices on groceries is that it commonly stocks off-brands that don’t spend tons of money on marketing, meaning they don’t pass that expense onto consumers.

But if you don’t care who makes your pasta, rice, or cereal, then shopping at Aldi could result in a much lower credit card tab than your normal supermarket. And who knows? You may even find that you prefer an Aldi brand you’ve never heard of to the one you’ve been buying for years.

2. Stay off Amazon when you’re bored

When you’re not quite ready to hit the sack at night but you’re not in the mood for TV or a book, it can be tempting to scroll through retail sites like Amazon to stay entertained. Don’t do that. What’ll often happen is that you’ll tell yourself you’re simply window shopping, so to speak, only to wind up buying random items that seem like a good idea at the time.

In fact, as a general rule, you shouldn’t shop out of boredom, whether it’s browsing Amazon at night or hitting the mall on a weekend when you don’t have other plans. To put it another way, only visit a store or retail site when there’s a specific item you’re looking to acquire.

3. Take over one home maintenance item you’d normally outsource

Annual home maintenance costs Americans $3,018 on average, according to Angi. That’s roughly $250 a month. But if you’re able to take over some of your maintenance instead of outsourcing it, you might cut that expense quite a bit.

Think about the different services you pay for. Chances are, there are some that don’t require specific tools or skills — perhaps you just don’t want to spend the time tackling them. But if, for example, you’re currently paying a housekeeper $100 a week to do your cleaning for you, that’s a job you’re most likely equipped to do yourself, provided you don’t have a condition that limits your ability to do physical work.

Cutting back on spending substantially is a great way to boost your savings. But that’s also a really tough thing to do — and something that might make you miserable. So rather than go that route, look to these less obvious ways to give your savings a nice lift.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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Don’t be shocked if your premiums are costlier than expected.  

Owning a car can be an expensive prospect. But it’s easy to argue that for many people, a car isn’t an indulgence — it’s a necessity.

Now, the total cost of vehicle ownership for you will depend on factors like how much of an auto loan you’re on the hook for and the amount of driving you do. Your auto insurance rates will also play a role. And those, unfortunately, might end up being more expensive than you bargained for.

There are different factors that auto insurance companies consider when determining premium rates. But financial guru Dave Ramsey says these are some of the reasons you might end up having to spend more on car insurance.

1. You have a lower deductible

Your deductible is the sum of money you’re required to shell out each time you file a claim against your auto insurance policy. And it’s easy to see why you may want a lower one. But you should also know that in general, the lower your deductible is, the higher your premium costs might be. So if you’re willing to raise your deductible, you might pay less for auto insurance on a monthly or yearly basis.

2. You drive an expensive vehicle

Car prices are up these days, so if you have to buy a new one, you may end up spending considerably more than you would have a few years ago. But the more expensive it is to replace your car, the more you’re likely to pay for auto insurance. So if you want to save money, don’t opt for the highest-end model and skip some of the features you can manage without. That might not only save you money on car insurance, but also make your ongoing auto loan payments more manageable.

3. You don’t have the best driving history

Auto insurers look at drivers’ records when determining rates. If yours is loaded with moving violations, expect to pay more for car insurance. But also, ask if there are things you can to make up for that record, like taking a defensive driving course.

4. You’ve filed too many claims recently

The whole purpose of having auto insurance is being able to file a claim when you get into an accident or your vehicle sustains damage. But filing too many claims in short order could result in higher premiums — even if it’s not your fault you’ve run into a string of bad luck.

5. You have a long commute

A longer commute opens the door to more potential accidents. Your auto insurance rates might be higher if you drive a long way to work, or if you drive on highways with a higher incidence of crashes.

6. Your credit score isn’t great

You’d think your credit score would have nothing to do with your car insurance rates. After all, you’re not asking your auto insurance company to lend you money. But actually, poor credit could make you seem like a riskier person to insure — even if your driving record says otherwise. So if you’re able to boost your credit score, it might result in savings on auto insurance.

7. You have too many lapses in coverage

If you own a car, you need auto insurance. But if you go for a period of time without coverage, once you buy insurance again, you could end up being charged more due to a previous lack of coverage.

8. You live in a big city

City drivers may be more likely to fall victim to auto theft than those living in suburbs. So if you’re a city dweller, that alone might result in higher auto insurance premium rates.

9. You’re older, younger, or female

Ramsey insists that insurance companies look at age and gender when determining premium rates. And he says that drivers who are under 25 and over 75 tend to have higher costs. For the former, it’s a matter of having less experience on the road. For the latter, it’s a matter of being perceived to have a slower reaction time (and perhaps concerns about vision issues). Ramsey also says that in some states, women pay more for car insurance than men. That’s a shame given that they commonly earn less than men, too.

In some cases, you might end up paying more for car insurance due to circumstances you can’t control, like your age and gender. But there are some things you can do to lower your premiums, like driving safely, boosting your credit, and raising your deductible.

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.

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