Money Management

A rate cut may be coming imminently. Read on to see how to set yourself up for financial success. [[{“value”:”

Have you noticed that the cost of groceries and other expenses aren’t rising as quickly as they were at this time last year, or the year before? Thankfully, inflation has been cooling, which is a great thing for our budgets.

The Federal Reserve is clearly happy with the way inflation has been easing, too. In September, the central bank lowered its benchmark interest rate by half a percentage point in response to slowing inflation. And when it meets again this week on Nov. 6–7, there’s a good chance a second interest rate cut will be announced.

That move could impact your finances, and it pays to take these key actions before that happens.

1. Open a CD

Although the Fed doesn’t set certificate of deposit (CD) rates, when its benchmark interest rate drops, banks start to pay less. In fact, you may have already noticed that most CDs are no longer paying 5% like they were earlier in the year. That drop came as a result of the Fed’s September rate cut.

If you want to lock in a CD before rates fall again, act quickly. The good news is that plenty of banks are still offering great rates on CDs. Click here for a list of the best CD rates available now.

2. Check your credit score

A rate cut from the Fed will likely lead to lower interest rates for savings accounts and CDs. That’s the bad news.

The good news is that a rate cut should also lower the cost of borrowing on a whole. So now’s a good time to check your credit score and see if it needs a boost. If so, you can start mapping out a plan to raise your credit score so you can take advantage of lower borrowing costs for things like auto or personal loans.

Of course, raising your credit score is something that may take time. But it’s important to check your score now so you know what you’re dealing with. From there, you can start making sure your bills are paid by their due dates and work on reducing your credit card balances, both of which could lead to a higher credit score in time.

It also pays to check your credit report for errors. Correcting a mistake that works against you could lead to a fairly quick credit score boost, which is a good thing to have at a time when rates are falling.

3. Line up a real estate agent

Mortgage rates aren’t guaranteed to drop as soon as the Fed makes its next rate cut. But there’s a good chance they’ll fall in the coming months, which could make home ownership more affordable.

If you think you’ll want to move forward with a home purchase in the next few months, make some calls to line up a real estate agent as soon as possible. It’s best to do so before rates drop, because from there, the best agents in your area might find themselves too overloaded to take on new clients.

Of course, there’s a chance the Fed won’t end up cutting interest rates at its meeting later this week. But if that’s the case, then it will most likely move forward with another rate cut during its meeting in December.

The Fed is expected to make multiple rate cuts in the coming year to reverse the hikes it implemented in 2022 and 2023. So all of these moves make sense regardless of what happens on Nov. 6–7.

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Auto insurance costs have spiked higher in recent years. Could the worst finally be over? Keep reading for more details. [[{“value”:”

The cost of an average auto insurance policy will rise by 22% in 2024, and residents of some states could see the cost of coverage rise by 50% or more, according to Insurify. And this is on top of an average increase of 24% in 2023.

However, there’s good reason to believe that drivers will finally start to see costs stabilize in 2025. Here’s why, and where I predict auto insurance rates are heading next year.

If you’d like to save money on auto insurance, click here for our up-to-date list of the top cheap insurance companies.

Why has auto insurance spiked so much in the past couple years?

Although it’s been a painful time for many auto insurance customers, it isn’t because the insurance companies got together and simply decided to raise prices. There are some legitimate reasons behind the auto insurance spike, including the following.

Inflation

The U.S. just experienced its highest inflation in 40 years, and this has affected the automotive industry more than most. In the two-year period from 2020 to 2022 alone, the average cost of a new vehicle in the United States increased by 19%.

Repair costs

Not only has inflation made it more expensive to get parts for repairs, but wage growth has made repair-related labor costs more expensive. The cost of providing rental cars while repairing a vehicle has increased as well. In all, it’s estimated that the cost to repair vehicles increased by 17% in 2023 alone.

Litigation

More people are choosing to involve lawyers in accident claims in recent years, which has led to higher average settlement costs for insurers.

Weather events

There have been more weather related events in recent years, especially when it comes to those that cause widespread vehicle damage. As an example, hail-related claims have risen from 9% of all comprehensive claims in 2020 to nearly 12% last year.

It may seem odd that inflation was highest in the 2022–23 timeframe and we’re still seeing sharp increases. Insurance premium increases are often delayed, as they’re required to be approved by each state’s department of insurance. Because of this, cost increases your insurer is seeing might not be reflected in your policy’s cost for a year or more.

Could costs start to stabilize in 2025?

While there’s no way to know for sure, there are some reasons to believe that auto insurance could stabilize in 2025. I just mentioned how auto insurance changes often reflect things that happened a year or so before. With that in mind, consider the following:

Although the average new vehicle selling price jumped 19% from 2020 to 2022, it has only increased by about 4% in the two years since. In fact, some experts have projected that the average new vehicle selling price will fall slightly in 2025.After a couple of bad years for profitability, Fitch Ratings says that auto insurers are in far better financial shape in 2024 (so less of a need to increase premiums sharply).

To be sure, I don’t expect car insurance costs to decline in 2025, or anytime soon for that matter. But I predict that we’ll see premium increases at a 5% to 6% annual rate, which is in line with historical averages. In other words, I’d expect a more normal year for the auto insurance industry than we’ve seen recently.

The bottom line

Nobody has a crystal ball that can predict auto insurance rates. After all, few experts thought at the start of 2023 that we were set for a 50%-plus spike in just two years. However, after two rather painful years for auto insurance customers, while I don’t expect rates to get lower, I do think we’re finally getting close to a leveling off of premiums.

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People are commonly advised to buy a home when planning for retirement, but it’s not always the right solution. Find out why you shouldn’t consider buying. [[{“value”:”

Planning for your future retirement is going to require you to look at your finances in a holistic way. Not only do you have to consider if you have enough money to get through the day-to-day, you have to figure out what that day-to-day even looks like once you’re the captain of your own ship.

Will you take a part-time job? Will you travel or start a business? All of these are things to consider when you’re planning for your financial future. And since owned housing is often up to half of a person’s living expenses, it’s also important to consider if you’ll even own a house in retirement.

Although I’m a solid proponent of the power of owning real estate, I recognize that it’s not for everyone. So, here are some reasons why you shouldn’t buy a house in your retirement.

1. You want to travel

There are a lot of concrete financial reasons to not buy a house when you retire, but perhaps the most important reason is that you don’t want to be stuck in one place. If your retirement plans include traveling, you need to have the freedom to live in Airbnbs or buy an RV and drive it across the planet or spend half your year on a cruise ship and the other half visiting the grandkids.

Even if you get a mortgage with one of the best mortgage rates, it’s still an extra expense that might end up tying you down rather than freeing you up.

2. The cost of owning a home

Buying a house is one thing, but owning it is quite another. Depending on where your home is located and what kind of home it is, you may find there are considerable costs associated with owning a home.

For example, right now in places like Florida and the Texas Gulf coast, the cost of homeowners insurance is absolutely intense. Even here in Missouri, homeowners insurance rates have skyrocketed, and we’re not even in a hurricane zone.

And that’s not all. There are also maintenance costs and emergency expenses, which Angi has estimated to be approximately $2,458 and $1,667 in 2023, respectively. If you’re not even home for a big chunk of the year, it gets harder and harder to justify spending money on your house. This goes doubly so when your budget is limited and you have to make a lot of hard choices about money in general.

3. The amount of time and energy a home consumes

Owning a home takes more than just money, though. It also takes time — which you may not have a lot of if you have a long to-do list in your retirement. Even if you can do your own maintenance and repairs, you may well not want to. And cleaning a house much bigger than you really need? Forget about it.

According to a 2022 Angi survey, homeowners spend about 44 hours per month — the equivalent of an entire paid workweek — on maintaining their homes. If you don’t find joy in owning a house, you’re sure not going to enjoy maintaining it all the time.

This also goes back to things like traveling or just doing whatever you please. A house you own is your problem and your commitment, and you’ll have to balance its needs with your own.

Owning a home in retirement isn’t for everyone

Owning a home isn’t the guaranteed solution for everyone’s financial problems in retirement. For a lot of people, a home can be an added headache that they neither want nor need. If you’re of the opposite mind, though, go ahead and check out our list of top mortgage lenders to help you purchase the home you’ll retire in.

Whether you rent or buy in retirement, you should look at all your options to be sure you’re making a decision that will be right for you today and down the road.

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While 0% APR cards can help you save money, they also have their risks. Find out about the costliest mistakes you can make with this type of card. [[{“value”:”

Most credit cards make it expensive to borrow money. On credit cards that are charged interest, the average rate is a staggering 23.37%, according to Federal Reserve data. For every $1,000 in debt, you’re paying about $233 per year in interest.

In comparison, 0% APR credit cards look like an amazing deal. These have a 0% APR for an introductory period. During that time, you’re not charged any interest.

You can save quite a bit of money with this type of card, if you use it correctly. But there are a few common mistakes that could cost you thousands.

1. Not getting the right type of 0% APR offer

There are two types of 0% intro APR offers:

Purchases: You don’t pay interest on new purchases. This type of offer is used for paying off large expenses over time.Balance transfers: You don’t pay interest on balances you transfer from other cards. This type of offer is used for refinancing credit card debt, which means transferring it from a card with a high APR to a balance transfer card with a 0% intro APR.

Some cards offer both for equal time periods. Other cards only offer one of the two, or they offer one for much longer than the other.

For example, a card may have a 0% intro APR for 18 months on balance transfers, but only for six months on purchases. You wouldn’t want to get this card if your plan is to pay off new purchases over time. Or a card could have a 0% intro APR for 12 months on purchases, but balance transfers are charged the regular APR from the beginning. That wouldn’t work if your goal is refinancing credit card debt.

If you’re looking for a way to save on credit card debt, a long balance transfer offer is exactly what you need. Click here to see our curated list of top balance transfer cards, with 0% intro APRs lasting as long as 21 months.

2. Using the 0% APR as an excuse to overspend

One of the risks with 0% APR cards is that they can convince you to spend money you otherwise wouldn’t. You know you don’t need a new tablet, and you didn’t even open a 0% APR card for that. But you really want it, and it’s not as if you’d be charged interest (for now).

You’re still taking on debt, even if it does have a 0% APR for the time being. And you’ll still need to pay back all the money you borrow. If you spend an extra $3,000 because your card has a 0% intro APR, that’s $3,000 to repay in the future. It will also start costing you interest once your card’s introductory period ends.

Plan what you’re going to finance with your 0% APR card before you open it. Maybe you want to use this type of card to pay off an expensive car repair over time, without getting charged interest. That’s a good way to use a 0% intro APR. But resist the temptation to make additional purchases you don’t need.

3. Only making minimum payments

Another danger with 0% APR cards is that they remove the pressure to pay down your balance. There are no immediate consequences if you only pay the minimum every month. Because of that, some people stop putting much effort into paying off their credit cards.

But the 0% intro APR will eventually end. When it does, the APR will increase quite a bit — possibly to over 20%, if your card’s interest rate is similar to the national average. If you still have thousands of dollars in debt when that happens, you’ll start getting hit with expensive interest charges.

Come up with a payment plan that will have your card’s balance paid off during the intro period. Let’s say your card has a 0% intro APR for 15 months. You use it to pay for $4,000 in medical bills. You’d need to pay about $267 per month to have that balance paid off during the intro period. That assumes you don’t spend any more with the credit card.

A 0% APR card is a valuable money-saving tool. You could use one to finance purchases or get a balance transfer card to help with paying off your credit card debt. Like any other tool, knowing how to use it is important. Now that you know what to avoid, you can find the best credit card with a 0% APR for your needs and ensure you get the most out of it.

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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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Mortgage rates have been declining. But here’s why you may want to hold off on signing a home loan. [[{“value”:”

Mortgage rates are lower today than they were a year ago. Last October, the average 30-year loan rate was over 7%. As of this writing, the average 30-year mortgage is 6.44%.

But just a couple of weeks ago, mortgage rates were sitting closer to 6%. So all told, it’s a better time to sign a mortgage now than it was in late 2023.

That said, you may want to hold off on taking out a mortgage. Here’s why.

1. Home prices are still elevated

Although you can save on a mortgage now compared to last year, home prices are more expensive than they were a year ago. In September, the median existing-home sales price was $404,500, according to the National Association of Realtors (NAR). That’s up 3% from a year ago, when the median home sold for $392,700. It’s also the 15th consecutive month of year-over-year increases.

Even if you spend a bit less right now from a mortgage rate perspective, you may want to wait for home prices to drop further. That may happen during the winter months, when there tends to be a natural decline in buyer demand. Sitting tight until early 2025 could help you pay less.

2. Rates could fall even more

The Federal Reserve has already lowered its benchmark interest rate once this year. And it’s expected to move forward with additional rate cuts before 2024 ends.

That could lead to a further drop in mortgage rates. If you wait a bit longer to sign a mortgage, you might end up with a rate you’re even happier about.

That said, no matter when you decide to sign a mortgage, you need to shop around and compare offers. You can start by checking out this list of the best mortgage lenders and rates.

3. There’s not a ton of inventory to choose from

The NAR reported a 4.3-month supply of homes for September, up 23% from a year ago. But it’s still below the 6-month supply of homes that’s often needed to meet buyer demand in full.

When real estate inventory is down, sellers have the upper hand. They can command higher prices because as a buyer, you don’t have many choices.

But as mortgage rates continue to fall, which is expected to happen as we go into the new year, more sellers may be motivated to list their homes. That could lead to an increase in inventory, more choices, and better prices. So it pays to hold off on applying for a mortgage a bit longer if you can.

If you’ve been trying to buy a home for quite some time, you may be frustrated by your lack of progress. And you may be inclined to put a mortgage in place now that rates are a bit lower. But if you hold off for a few more months, you may find that you’re able to get a much better deal on a home and a loan to finance it.

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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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CD rates are still attractive. But read on to see why this financial writer is done with them for the year. [[{“value”:”

There was a period not so long ago when finding a 5% CD wasn’t difficult. Now, it’s a bit harder. And you may find that while you’re able to get close to 5%, that’s the best you can do.

Of course, a 4.75% CD, or something in that ballpark, is nothing to scoff at. I remember when I could barely get 2% out of a CD. By comparison, today’s rates are still pretty high.

Plus, if you shop around, you might do better than 4.75%. Click here for a list of the best CD rates.

But even though CDs are still paying generously, I’m not opening another one this year. Here’s why.

1. I don’t want to take money out of my emergency fund

I have a pretty solid emergency fund. For most people, three to six months’ worth of bills is enough, but I have closer to a year’s worth of essential bills in savings.

I’m self-employed, which means I don’t get unemployment if I lose all of my clients. Also, my self-employment income can be unpredictable, so I feel more comfortable having a larger cushion.

I could technically get away with transferring some of my emergency fund out of a savings account and into a CD to get a better rate. But that takes away from one of the benefits of a larger emergency fund — peace of mind.

The whole reason I have extra cash tucked away in savings is that I don’t want to stress about an extended period of being out of work. If I move some of that money into a CD for a higher interest rate, sure, I might make a little extra cash. But if I actually need to use that money, I’m going to be stressed about an early withdrawal penalty.

And if I end up taking an early withdrawal penalty, I negate the whole benefit of a CD anyway. So all told, it makes the most sense to keep my entire emergency fund in my savings account.

2. A CD doesn’t align with my financial goals

I aim to not spend my entire paycheck each month and save the difference. And I hope I’ll manage to save a little bit of money in November and December, even though I’m sure I’ll have a host of holiday expenses to cover.

But any money I save in the coming months is money I intend to invest. And that’s a smart move given what I want to use that money for — retirement.

When you’re saving for a goal that’s decades away, like retirement, sticking to CDs could mean losing out on bigger returns, even with rates being as high as they are today. For context, the S&P 500’s average annual return over the past 50 years is 10%.

Say I’m able to save another $500 this year. I could put it into a 12-month, 4.75% CD and earn about $12 in interest. Or, I could put it into a stock portfolio, leave it alone for 20 years, and grow it to about $3,360 if my portfolio gives me a 10% return during that time. That’s a $2,860 profit after subtracting the $500 I’m putting in.

Even if I were to keep renewing a $500 CD at 4.75% for 20 years, I’d only be looking at $1,265, or a profit of $765 when we take out my initial $500 deposit. And that assumes 4.75% CD rates are available for the next 20 years, which is unlikely.

If you have a shorter-term goal you’re saving for, then now’s a good time to open a CD. But if you’re saving for a milestone that’s further away, like retirement, you may want to open a top-rated brokerage account and start investing.

A decision I’m happy with

The idea of opening a CD while rates are still close to 5% is tempting — especially since rates are expected to fall as the Fed continues to make interest rate cuts. But a CD just doesn’t make sense due to my financial circumstances and goals.

If you’re in a similar boat, I’d suggest leaving your emergency fund tucked safely away in a savings account, and investing your money for long-term goals rather than limiting yourself to a CD.

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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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