Money Management

Found a rock-bottom fare with a budget airline? Here’s what to know before you book. 

Here’s a situation many of us have been in — you need to book an affordable flight. You go to Google Flights or your travel tool of choice and start comparing options. And right there, when you sort by price, is a flight that’s much cheaper than all the rest. What’s the catch?

These fares are typically offered by budget airlines, also known as low-cost or ultra-low-cost airlines. Flying with budget airlines can be a great way to travel on the cheap, but there are some important things you need to know before you pull out your credit cards and make a reservation.

1. Almost everything costs extra

The price you see from a budget airline gets you the bare minimum: A seat and allowance for a personal item. Most budget airlines charge extra for everything else, including:

Choosing a seatCarry-on luggageChecked luggageIn-flight drinks and snacks

Make sure to add up how much everything you need will cost, and then compare that to what other airlines are charging. If you need to bring a carry-on bag, and you want to choose your seat, you may find that a budget airline isn’t the bargain it originally appeared to be.

Many budget airlines even charge a fee for printing your boarding pass at the airport. For example, Spirit Airlines charges $25 at its check-in counters for each boarding pass. To avoid this, check in online and print your boarding pass at home.

2. Add-ons are usually cheaper the earlier you buy them

If you book with a budget airline, purchase all the add-ons you need as early as possible. Prices generally go up if you buy later. For example, adding a carry-on or checked bag to your reservation will most likely be cheapest if you do it when booking your flight. The price will then be higher if you do it while checking in online, and even more expensive at the airport.

3. They’re more likely to have delays and cancellations

Budget airlines recorded lower on-time percentages and higher cancellation percentages than legacy carriers, based on Bureau of Transportation Statistics data from 2021 and 2022. These aren’t common occurrences, especially cancellations, but they’re more likely with low-cost and ultra-low-cost carriers.

It’s always smart to be ready for flight issues, just in case. If you’re flying with a budget airline, it’s even more important. Consider purchasing a travel insurance policy. Or, look into travel credit cards that include this as a complimentary benefit.

4. They don’t have as many routes

The largest airlines have the fleets to cover a massive number of routes. Their size also means they can offer more routes per day. Budget airlines, in contrast, are more limited. That means:

They may not have direct flights available when legacy carriers do.They often fly into smaller airports, because those airports charge airlines less in fees.They may have a much more limited schedule for the flight you want, such as one departure per day or even just a few per week.

This is another reason why budget flights aren’t always such an amazing deal. If flying with a budget airline will include a stop and take 12 hours, while a legacy carrier will get you there nonstop in three hours, that’s a lot of extra time to save $100 on a ticket.

5. Lines at the airport can be long

Budget airlines are known for having some seriously long check-in and bag drop lines, which aren’t great for the whole air travel experience. Always check in online, especially since you’ll avoid extra fees for printing your boarding pass at the airport. And if possible, stick to a carry-on. If you need to check a bag, arrive extra early and be prepared to wait awhile.

If you’re looking for the lowest price on a flight, a budget airline could be a good choice. They work especially well for people who travel light and don’t need any bells and whistles, like the option to upgrade to first class. But it’s important to know what to expect so you aren’t in for any unwelcome or expensive surprises.

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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.Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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New year. New annual letter. New must-read investing lessons from one legendary investor. 

Every year, legendary investor Warren Buffett writes a letter to Berkshire Hathaway’s shareholders, and the 2023 edition was recently released. And although he’s been doing this for decades, Buffett shares some valuable investing lessons with each year’s letter. In this year’s letter, here are three pieces of wisdom the 92-year-old Oracle of Omaha wants investors to know.

1. Stock markets aren’t efficient — so use them to your advantage

Berkshire Hathaway owns more than 60 subsidiary businesses and has a stock portfolio worth about $325 billion. And while Buffett and his team have made a couple of meaningful acquisitions in the past several years, the bulk of the company’s investment capital has gone into publicly traded stocks.

All things being equal, Buffett prefers to own entire businesses. But to acquire an entire business usually involves paying a hefty premium.

On the other hand, it can be relatively easy to buy shares of publicly traded companies at favorable prices, especially if you’re willing to wait for mispricings in the stock market. As Buffett said in his letter, “It is crucial to understand that stocks often trade at truly foolish prices, both high and low. ‘Efficient’ markets exist only in textbooks.”

2. Set yourself up to outperform in the bad times

This technically wasn’t a piece of advice written by Buffett. Rather, in each year’s letter, Berkshire prints a year-by-year history of the company’s stock performance compared with the total returns of the S&P 500.

Since Buffett took over Berkshire Hathaway — then a struggling textile company — in 1964, its shares have produced 3,787,464% total returns (not a typo) through the end of 2022.

But a closer look at the data shows one very interesting pattern. The S&P 500, which is widely considered the best benchmark for U.S. stock market performance, has produced a negative total return in 13 separate years since 1964. And during those years, Berkshire has outperformed the market 11 times.

Buffett’s No. 1 rule is “don’t lose money.” And while Berkshire certainly has bad investments from time to time, the defensive thinking Buffett uses in his investment strategy has been a big part of the company’s success over time. The lesson: Avoiding massive losses during the tough times can be just as important to your long-term gains as doing well when the market is strong.

3. Don’t get discouraged by losing investments

Buffett has made some investments over the years that didn’t work out well, and some ended up being quite costly. For example, Buffett and Berkshire’s team bought large stakes in the four major airlines just before the COVID-19 pandemic hit, and ended up selling them at a loss to avoid the uncertainty the pandemic caused. And Buffett himself admitted overpaying for Kraft Heinz and IBM stock in Berkshire’s portfolio.

However, in the letter he emphasized that Berkshire’s “secret sauce” is that it has had a few massive winners. The examples he highlighted are Coca-Cola and American Express. Berkshire acquired stakes in both companies for $1.3 billion in 1994 and 1995, respectively. Today, those two investments have a combined value of $47 billion and pay Berkshire more than $1 billion in annual dividends.

Apple is another example, as Berkshire’s investment in the tech giant is already sitting on more than $100 billion in unrealized gains less than a decade after being added to the portfolio.

The point is that the effects of big long-term winners in your brokerage account will drown out the effects of more than a few losers over time. As Buffett puts it, “The weeds wither away in significance as the flowers bloom.”

Buffett’s letters are a master class in investing wisdom

When newer investors ask me for book recommendations, one of the items on my list is simply to go back and read all of Buffett’s letters. All are posted for free on Berkshire Hathaway’s website, and each one contains several unique (and often timeless) investing lessons. Buffett has had the most impressive investing career in modern history, and you can learn a lot about his investing style absolutely free.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. Matthew Frankel, CFP® has positions in American Express and Berkshire Hathaway. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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Should you add them to your list? 

If your credit card bills are sky-high these days, you’re in good company. Not only are living expenses generally elevated thanks to inflation, but food costs in particular are up 11.3% over the past year, according to January’s Consumer Price Index.

The good news is that if you have a Costco membership, you have a prime opportunity to reap some savings by buying food and household essentials in bulk. But you’ll need to be careful when going that route. And so you may want to heed the advice of financial guru Dave Ramsey when it comes to your Costco shopping.

The things you should buy at Costco, according to Ramsey

Generally speaking, for a bulk purchase to make sense, you need to satisfy two criteria. First, the item needs to be something you’re familiar with and use regularly. Secondly, it needs to have staying power.

Ramsey cautions against buying bulk items with a limited shelf life, because in many cases, they’ll go bad on you before you get a chance to use them — even if you think that’s not the case. For example, you might think buying a case of bulk strawberries is a good idea if you like them, your kids like them, and they’re eaten pretty often in your household.

But when you buy any sort of produce, you can never really be sure how much time you’ll have before it goes bad. In some cases, your produce might last four or five days. In other cases, it might only last a day or two before rotting. So even if you and your family members are big strawberry fans, you’re taking an inherent risk by bulking them in bulk.

To be fair, Costco happens to have a very generous return policy. So chances are, if you were to buy strawberries in bulk only for them to spoil shortly thereafter, you could probably get a refund.

The point, however, is that buying perishables in bulk can be risky. That’s why Ramsey insists that when it comes to bulk buying, these are the types of Costco items you may want to limit yourself to:

ToiletriesDental care items, such as electric toothbrush heads and dental flossPaper products, such as toilet paper and paper towelsBatteriesGumCerealCanned goodsRiceDry beans

Granted, in some cases, buying these items in bulk might be a risk, too. If your family doesn’t eat cereal very often, for example, then it’s not a great idea to buy it in bulk, as it might go stale on you before you finish it. But in general, these are the items Ramsey recommends buying in bulk.

Don’t throw your money away

Your goal in joining Costco was no doubt to save money, not lose money. So it’s important to make sure you’re buying in bulk strategically.

It’s also a good idea to compare Costco’s prices to those offered by your local supermarket, especially during periods when your nearby grocery store is running a sale. The cost of something like cereal might actually be cheaper at your neighborhood supermarket when it’s heavily discounted, even though it might be perpetually discounted at Costco.

A lot of people are having trouble paying their bills and growing their savings account balances these days. Buying in bulk could be a great way to fight back against inflation, especially within the context of groceries and household supplies. But you’ll need to make sure you choose your bulk purchases carefully.

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

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Canceling nonrefundable travel is getting kicked while you’re down. 

As schools take their spring breaks, everyone from college kids to families are planning trips to escape the last bits of winter and enjoy the new season. Unfortunately, for too many of these would-be travelers, life is going to get in the way.

And if they booked nonrefundable travel, they could be out hundreds. Unless, of course, they used the right credit card.

Many popular travel rewards credit cards have high annual fees. But those fees are often considered worth paying for the perks. When it comes to canceled travel plans, the perk with the most to offer: travel insurance.

Lost bags, canceled trips, and more

The travel insurance that comes with your travel rewards card will vary a lot depending on the specific card you own. In general, the high-end cards — those with $500-plus annual fees — will have the most extensive coverage. That said, a few mid-tier cards also have impressive insurance perks.

Some of the most common things covered by credit card travel insurance include:

Trip cancellation or interruption coverage: This insurance can reimburse you for nonrefundable travel if your trip is canceled (before you leave) or interrupted (while traveling) for a covered reason.Trip delay coverage: If your trip is delayed for a covered reason (usually because of a common carrier delay), then you may be reimbursed for things like hotel stays and food.Lost luggage reimbursement: If the airline (or other common carrier) loses your luggage, you could be reimbursed for the cost of the contents.Delayed baggage insurance: Sometimes your luggage isn’t all the way lost — just not where you are. Necessities, like clothing and toiletries, you purchase could be reimbursed.Emergency evacuation and transportation: Vacations off the beaten path can be relaxing. But most quality healthcare is somewhere on the path. If you need emergency transportation, this perk could potentially reimburse the cost.

Every type of travel insurance will have caps on how much you can get and how often you can make a claim. Read your card’s benefits guide to find out the details on what you can expect.

You must use the card to pay for your trip

Perhaps the most important thing to understand about credit card travel insurance is that it usually only kicks in when you pay for your travel with that card. Simply being a cardholder isn’t enough.

For example, say you need to cancel a nonrefundable flight due to a medical emergency. If you paid for your flight entirely with your card, you’re covered. If you used multiple cards or another card entirely, you’re likely out of luck.

The only exception to this rule is when you use rewards. But not just any rewards. They generally need to be rewards from the same issuer.

For example, say you have an American Express card with travel insurance. To enjoy coverage, you would need to pay for your travel with your Amex card and/or with Amex Membership Rewards points.

Most card policies also have time limits for how long you have after the cancellation to file a claim. This can be as little as a few weeks, so file your claim as soon as possible.

Accidents, weather often covered

There’s minor variability in what counts as a covered event between issuers. But most policies will have similar allowances:

Accidental bodily injury, sickness, or death of the covered traveler or their traveling companions (or their families)Inclement weather (we’re not talking a little rain; as Amex puts it, the weather needs to be severe enough that it “prevents a reasonable and prudent person from traveling”)Change in military orders for the covered traveler or their spouseTerrorist action or hijackingJury duty or subpoena that cannot be postponed or waived

The list of covered situations provided by issuers can be vague — often on purpose. So if you have an event that isn’t specifically on the no-go list (more on that below), it may be worth trying to file a claim even if your reason isn’t directly listed.

Schedule conflicts, finances NOT covered

While many of the most common reasons we cancel travel are considered to be covered events, just as many are not covered. This list is long, and it can include:

You changed your mind / changed your plansYour financial situation has changedYou need to cancel due to a pre-existing medical conditionYou are traveling against the advice of a physicianYou are traveling into a warzone (declared or not)

Another common exception is when part of your travel has been canceled by a common carrier. As Chase puts it, cardholders aren’t covered for “travel arrangements canceled or changed by a common carrier, tour operator, or any travel agency unless the cancellation is the result of severe weather or an organized strike affecting public transportation.”

It’s also good to note that you typically won’t be reimbursed by your card’s travel insurance if you were already reimbursed from another source. If you purchased a separate travel insurance policy, for instance, your card’s policy may require you to file your claim with the third-party service first.

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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.American Express is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Brittney Myers has positions in American Express. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

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