Money Management

Don’t pick a term length without reading this advice from Ramsey. 

Term life insurance policies are the best type of coverage for most people. This type of life insurance is in effect for a limited period of time, as opposed to whole life coverage which remains in effect for as long as premiums are paid. Since term life is much less expensive and most people don’t need permanent coverage, it’s usually the ideal option.

When buying a term life policy, the policyholder will need to decide how long the term lasts. This can be a complicated decision, but finance expert Dave Ramsey has some advice on choosing an appropriate term length. Here’s what Ramsey has to say on the issue.

Here’s what Ramsey says about an appropriate term length for life insurance

Most life insurers offer the option to buy term life insurance that is in effect for between 10 years and 30 years. But, Ramsey suggests a time frame somewhere in the middle of that range.

“Likely, you’ll want a policy for 15-20 years,” Ramsey said. “That’s long enough to give the kids time to grow up and (fingers crossed) get out on their own (meaning they’re no longer dependent, they’re independent!). It also allows you and your spouse time to build enough wealth to self-insure.”

Following Ramsey’s advice here would mean that the death benefit pays out only for policyholders who die within 15 to 20 years from the time of purchasing a policy. If coverage is purchased at the age of 30 for a 20-year term, the policy would be in effect until age 50. After that time, the death benefit would not pay out.

When the term policy ends, the policyholder might be able to renew it, get new coverage, or switch to a whole life policy — if they still need insurance. But there’s no guarantee any of these would be options as a lot would depend on health status, among other factors. Getting a new policy after that time could also cost a lot more in premiums, since insurers set prices based on age and risk of death during the coverage term.

Is Ramsey right?

For some people, Ramsey’s advice makes sense. But, the right coverage term should be determined based on the specific situation of the policyholder.

If someone buys life insurance at 25 after getting married but doesn’t plan to have kids for another five years, a 15- to 20-year term likely wouldn’t be nearly long enough. A 20-year term would run out at 45 when the kids are still in highschool and college bills haven’t yet been paid.

Buying life insurance at a younger age is also usually much cheaper for policyholders — but it means buying coverage for a longer term. For example, a person who buys coverage at 20 in anticipation of future marriage and children would definitely need a term that’s far longer than 15 years, or they might not even have coverage left by the time they get around to marriage and having their first kid.

Before deciding what term length is best, policyholders need to look at how long their loved ones really will depend on them — and make sure their policy lasts at least that long so they don’t leave their dependents struggling because the insurance ran out too soon.

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If you’re hoping for another stimulus payment, here’s what you need to keep an eye on. 

Stimulus checks authorized during the COVID-19 pandemic provided invaluable support. The money deposited into people’s bank accounts enabled them to pay the rent and bills while the economy was shut down.

In total, three payments were sent out, and many Americans have spent months waiting for a fourth — especially as rising prices put strain on their budgets. Congress has thus far failed to act, and those still hoping for another payment in 2023 should keep an eye on these three numbers to see if a fourth stimulus check is a possibility this upcoming year or not.

1. Inflation

Inflation sent prices surging last year, leaving many Americans struggling to pay for the basics. While there’s some evidence prices aren’t continuing their meteoric rise at the start of the new year, the Federal Reserve has warned that inflation is far from over.

In fact, on Wednesday Feb. 1, the Federal Reserve raised interest rates for the eighth time since March and cautioned that “ongoing increases in the (interest rate) target range will be appropriate.”

If prices keep climbing, Americans will feel more financial pressure — and momentum may grow for another stimulus check that Congress can’t ignore.

2. Unemployment

The rate of unemployed Americans has been declining, but there are some concerns this trend could turn around and more companies could begin layoffs — especially as tech companies have let millions of employees go in recent weeks.

If unemployment climbs too high, Congress could potentially step in to provide more stimulus relief to help those who are without jobs. During the COVID-19 pandemic, for example, Congress raised the amount of unemployment benefits available to qualifying workers and expanded eligibility for benefits as well.

3. Gross domestic product

The Bureau of Economic Analysis provides quarterly reports about the country’s gross domestic product (GDP). If there are two quarters of negative GDP growth, this is traditionally seen as an indicator of a recession.

Stimulus checks have been used in the past to help bolster the economy during a recession, and this could potentially occur again if the economy goes south.

Watching these numbers will be important in the upcoming year if you’re awaiting more stimulus money, so keep your eyes peeled for economic news that could suggest lawmakers will be forced into offering more financial support to struggling families.

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If you’re going to order grocery delivery, you might as well spend the least amount of money. 

Some people love the experience of heading to Costco, walking the aisles, and scoping out different products. But for other people, visiting Costco isn’t always in the cards.

Perhaps you live far from your closest Costco, so driving there will mean racking up a large credit card tab on gas alone. Or maybe you don’t have a car, or you have such a jam-packed schedule there’s no way you could possibly make time for a weekly Costco run.

Thankfully, you don’t have to set foot inside Costco to take advantage of its wide range of products. Not only are many Costco snacks and pantry staples available for delivery, but you can also order same-day delivery from Costco. That will allow you to purchase perishable goods in bulk, from milk to fruit to muffins.

Now, as you might imagine, you’ll spend more to have Costco groceries delivered than you will to buy them yourself in the store. But when it comes to ordering same-day delivery, you have choices. You could order through Costco’s website, or you could order through Instacart. The question is: Which is better?

The same service at different prices

Costco’s same-day delivery service is powered by Instacart. And Costco states explicitly on its website that it charges a markup for same-day delivery items to account for the service and delivery fees charged by Instacart.

Meanwhile, Instacart itself allows you to order groceries from Costco through the app. And there, you’ll also pay a markup compared to what you’ll pay at an actual Costco store.

But will it cost you the same amount of money to order same-day delivery through Costco.com as it will through Instacart itself? Not necessarily.

As an example, the cost of a 24-pack of Kirkland signature cage-free eggs comes up as $8.07 on Instacart for delivery to Central New Jersey. On Costco.com, that same item costs just $7.59 for same-day delivery.

Clearly, a $0.48 difference isn’t going to break the bank. But if you’re ordering multiple items, and they’re all a bit less expensive on Costco.com, then it could be worth going that route rather than placing an order through Instacart.

Also, when you order through Instacart, you generally incur service and delivery fees on top of the total cost of your items. Costco’s higher cost per item accounts for service and delivery costs already, so you can avoid that extra surcharge.

Be sure to compare your costs

In this example, ordering same-day delivery through Costco seems to be more cost-effective than ordering through Instacart. But it’s definitely worth noting that the cost for both services can vary by location. And you may find that Instacart is your less-expensive option depending on what you’re ordering and where you live.

As such, it pays to do a sample order through both Costco.com and Instacart and compare your totals. If you’re going to treat yourself to the convenience of grocery delivery, you might as well do so in the most inexpensive manner 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.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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Sometimes, a place just works for you. 

For most of my adult life, I’ve banked at a traditional brick-and-mortar bank. I may not have enjoyed paying for checks or having a monthly maintenance fee deducted from my checking account, but that’s the way things were done and I did not realize I had options.

Through the years, I’ve watched small banks be absorbed into larger national banks, and each time my husband and I moved, there have been fewer banks to choose from.

It wasn’t until about 12 years ago that I walked into a credit union to see what they were about. Once I joined, I never looked back. If you’re not a credit union member, here are eight perks I think you’d appreciate, too.

1. A credit union works for you

Credit unions offer the same services as traditional banks, including checking accounts, savings accounts, personal loans, mortgages, investment accounts, and financial advice. However, while banks are owned by shareholders, credit unions are owned by their members. Once you join, you become a member-owner.

A credit union exists to support people like you, not a group of shareholders. Rather than paying profits to shareholders, the money goes right back to the customers. That’s often in the form of lower interest rates and fees.

As a nonprofit organization, exempt from federal income tax, credit unions are in a better position to help you meet your financial goals.

2. You can be as involved or uninvolved as you prefer

Credit unions are run by an elected volunteer board of directors. As a member, you get to vote on who you want to make decisions on behalf of the credit union. In fact, if you’d like to serve on the board of directors, you can throw your name in the hat when election time rolls around.

It doesn’t matter if you have $1 million in the bank or $100, your voice is as important as anyone else’s.

3. You’re not just a number

When you walk into a credit union, you belong. It’s difficult to explain this “atmosphere,” but walking into a credit union to do business feels very different.

For example, the last time we purchased a car, we were able to run across town and sit down with a loan officer immediately. She didn’t grill us about our financial status because she had our entire credit union history on a screen in front of her.

It has never taken us so little time to secure a car loan. There was no sales pitch, just a “What can I do for you?”

4. You’re more likely to be approved for a loan

The fact that you’re not just a number at a credit union leads me to perk number four. Let’s say the transmission on your car dies a sudden, cruel death. You don’t have the cash to make repairs and need to take out a short-term loan. Even if your credit score is not ideal, you have a better chance of loan approval when you’re borrowing from your own credit union.

A loan officer has access to more than your credit score. They can tell from your history whether you’ve had the same job for a while, make regular deposits, don’t overdraw your bank account, and otherwise handle your credit union business wisely. They also have more flexibility when it comes to the approval process.

5. You’ll land better rates

Remember how a credit union is exempt from federal taxes and has no shareholders to share profits with? The money earned on things like auto loans, mortgages, and personal loans are shared with members like you through lower interest rates on loans and higher interest rates on savings accounts and investments.

6. You won’t be eaten alive by fees

Like most credit unions, mine charges no ongoing banking fees. I don’t pay a monthly maintenance fee and didn’t even have to pay for my first book of checks.

7. You’ll know who’s servicing your loan

We moved six months ago and purchased a new home. Weeks after closing on the house, we received a letter from the lender saying they’d sold the loan to another bank. It’s not that I especially care who services our mortgage, but it’s nice to know that when you take a loan out with a credit union they keep the loan in-house. That way, if you have any questions you can ask people you’ve come to know and trust.

8. Your money is protected

Just as bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC), credit union accounts are insured by the National Credit Union Administration (NCUA), an independent federal agency that insures federal credit unions. As long as a credit union has NCUA coverage, you’re insured for at least $250,000.

Ultimately, credit unions are part of your community. They’re involved in volunteer efforts, sponsorships, community cleanups, and much more. It’s all about building the community you live in, and that begins with making your financial life a little easier.

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It’s a lot of money, but some drivers pay that much for their car. 

Would you pay $1,000-plus each month if it meant you would eventually own your vehicle? Many drivers are making monthly car payments totaling $1,000 or more. That’s a lot of money to spend on a car. Some renters and homeowners pay that much on housing costs. A high car payment can significantly impact your finances, so you want to make sure you can afford to buy. Find out what you need to know before driving a new vehicle off the lot.

Monthly car payments have increased

It’s getting more expensive to finance new and used vehicles. Rising interest rates are one factor that has led to higher car payment costs. A recent report from Edmunds noted that 15.7% of consumers who financed a new vehicle in Q4 2022 committed to monthly car payments of $1,000 or more — which is a record high!

But not every driver is making a four-figure payment. In Q4 2022, the average monthly payment for a new car was $717, while the average monthly payment for a used car was $563. If you’ve been considering purchasing a new or used vehicle, you want to ensure you’re ready for the financial commitment.

Research the total cost of owning a car before you buy

Before taking on a car loan, make sure you research the total cost of buying a new or used vehicle. In addition to the price of the car itself, interest charges and car insurance expenses should be considered. It’s also not a bad idea to consider the cost of maintaining your car to keep it running well. Proper upkeep can help boost your car’s value.

If you need to replace your current car and are planning to finance a new or used vehicle, you may be able to save money by making a larger down payment when you buy. This strategy can be beneficial when interest rates are high. By making a larger down payment, you’ll need to finance less and can save a significant amount of money on interest charges.

If it’s not an emergency and you hold off on this purchase, now is an excellent time to start saving, so you have a sizable down payment by the time you’re ready to buy your car. Be sure to stash your extra cash in a high-yield savings account to earn interest as you save.

Keep your finances top of mind

Before making a big purchase, like a home or car, evaluate your personal finance situation. You should not only think about what you can afford right now but also consider whether you’d be able to continue to afford your purchase if a significant life change happened.

A solid emergency fund can help cover living costs if you lose your job, experience income changes, or experience another life change. If you don’t have an emergency fund, you may want to work on that financial goal before agreeing to a costly monthly car payment.

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A reverse mortgage could provide much-needed cash flow, but there is more to the story. 

If you’re retired, or getting close, you might be thinking of how much income you’ll have after retirement and whether it will be enough. Even with Social Security and retirement savings accounts, many retirees might be faced with a substantial drop in income after leaving work for good.

One option that can boost your retirement income is a reverse mortgage.

If you aren’t familiar, a reverse mortgage (as the name implies) works in the opposite way of a traditional mortgage you might use to buy a home. Instead of you making payments to a bank and gradually building equity in your home, a bank makes payments to you in exchange for your home equity.

For many retirees, a reverse mortgage can be a solid option to create extra income. But it isn’t right for everyone. Here’s a rundown of the pros and cons to consider before obtaining a reverse mortgage to help fund your retirement.

Advantages of a reverse mortgage

Obviously, the biggest reason to get a reverse mortgage is for extra retirement income. But there are some other advantages to using a reverse mortgage over other types of borrowing, such as a home equity loan:

Financial flexibility: You can choose to receive money as a fixed monthly payout, as a lump sum, or as a line of credit you can draw from if you need it.Keep your home: Sure, you could sell your house in retirement to access your equity, but then you have to move. With a reverse mortgage, you get to stay in your house for as long as you want. Even if a reverse mortgage results in a bank owning all of the equity in your home, you continue to live there, and don’t owe anything to the bank for as long as you’re alive, unless you decide to sell the home.Tax-friendly income: Payments you receive as a result of a reverse mortgage are not taxable income. In the eyes of the IRS, it is simply a return of money you already have (your home equity).Non-recourse loan: Nearly all reverse mortgages are non-recourse loans (double-check to make sure yours will be), which means that they are only backed by the home itself, not the borrower’s personal assets. No matter how much a borrower receives from a bank and how large the loan balance becomes, the amount due can never be more than the value of the home.

Potential drawbacks to consider

There’s no such thing as a perfect financial product, and reverse mortgages certainly are not an exception. Here are a few things to keep in mind before you consider a reverse mortgage for your retirement:

You lose your equity: The biggest reason to not get a reverse mortgage is that you’ll gradually lose the equity you’ve built in your home, and eventually you might have none at all. You’ll still be able to keep living in your home, but a reverse mortgage might not be the best option if you want to leave your home to your heirs.Lots of fees: Reverse mortgages have relatively high closing fees compared with other types of loans. Plus, when interest rates are high, your equity can start to disappear at a rapid pace.Other home expenses are your responsibility: You’re still responsible for paying property taxes, insurance, and maintenance on your home. If you fall behind on these expenses, the bank could force you to sell.

Is a reverse mortgage right for you?

The bottom line is this: Whether a reverse mortgage is right for you or not depends on your unique situation. For example, if you aren’t worried about leaving your home to your heirs and don’t mind the closing costs, a reverse mortgage can be a great way to build retirement income. On the other hand, if you like having your home equity as a financial safety net and you have other borrowing options, such as a HELOC (home equity line of credit), it might not be the best option.

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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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