There’s Only One Place Your Emergency Fund Should Be. Here’s Why
By: Christy Bieber |
– First published on Jan. 1, 2024
Having emergency savings in the bank is a cornerstone of personal finance. You should have three to six months of living expenses saved in an emergency fund. Doing so could be the ticket to staying out of credit card debt and avoiding a whole lot of financial stress if you’re faced with any unexpected expenses.Since the average consumer unit spends $72,967 per year, according to the Bureau of Labor Statistics, having six months of living expenses saved could mean you need as much as $36,483.50 set aside in case of emergencies.That’s a lot of money, so you may be tempted to try to invest it or do something strategic with it in order to maximize your return on investment. You should not do that. In fact, there is only one place where your emergency fund should be. Here’s what it is.This is where your emergency fund needs to goYour emergency fund should be in a high-yield savings account. It belongs there for a few reasons:You can’t lose the money. If you pick an FDIC-insured savings account, your funds are safe, up to FDIC insurance limits. There’s no risk you will end up with less than you need when an emergency strikes.You can take the money out when you need it. You don’t have to agree to leave your funds invested for a certain period of time as you would if you chose a certificate of deposit (CD). You also don’t have to worry about whether you’ll end up taking your money out at a bad time, as you would if you put it into the stock market.You can still earn a reasonable rate of return. A high-yield savings account typically offers a better rate than a regular savings account or a checking account. So even though you usually won’t earn as much as you would if you put your money into the stock market, you can ensure you aren’t losing a lot of ground due to inflation.You won’t be as tempted to spend the money. If you kept your emergency fund in a checking account, it might be too easy to spend. By keeping it in a dedicated savings account, you’ll know you should keep your hands off it unless or until an emergency situation strikes.If you’ve worked hard to save money for emergencies, you don’t want the funds to be lost or inaccessible when the time comes. Putting them in savings is the best way to avoid that issue.Emergency money is not money to be investedAlthough it may seem disappointing to miss out on the higher returns you could get if you invested in the stock market or even in a CD, the reality is that’s not the purpose of your emergency fund.When you save money for emergencies, you’re investing in your peace of mind. You’re taking steps to ensure you can avoid costly debt or other financial issues. That’s more important than getting the highest possible return on these particular dollars. Your emergency fund can help keep your overall financial situation stable so you can afford to invest money in other ways, so let it serve its purpose by putting it into savings.
Is Your Car Insurance Becoming Too Expensive? Here’s What to Do
By: Steven Porrello |
– First published on Dec. 30, 2023
No, it’s not just you. Car insurance has gotten more expensive.The average price of car insurance has increased 19.2% since last November, according to the latest Consumer Price Index (CPI). Under that rate, you would be paying an extra $19.20 for every $100 you spend on car insurance each year, which is about $552 more if you, like the average driver, spend about $2,875 on car insurance annually.It’s frustrating to see your car insurance rate increase every year, especially if you’re a good driver or have had only one or zero recent incidents. Fortunately, there are some ways to proactively reduce your rate. Here are my top three tips.1. Switch insurance companiesLoyalty to one insurance company rarely pays off. Though some insurers have “loyalty discounts,” which purportedly save you money on your annual premium if you remain locked into your insurance policy, you’re almost always better off shopping around for insurance when your policy expires.Most people save hundreds, if not more, just by switching insurance companies regularly. Insurance pricing isn’t intuitive, and though one company may have offered you the lowest rate in the past, its current rate may be higher than other providers. For example, your insurance company may have been the main insurer in an area affected by a natural disaster. Even if you don’t live near that area, your rate could be affected, since the insurance company offsets costs from the claims by charging you slightly more.It won’t cost you to request quotes from other insurance companies. But if shopping around for insurance sounds boring, you could hire an independent insurance agent to do the work for you. These agents check rates from multiple insurance companies to provide you with the best price for your coverage. Since they get paid a commission, you won’t pay for their service. But they usually only work with big insurance companies, like Geico and Allstate, and may not check rates for smaller insurers.2. Pay by the mileIf you don’t drive frequently, you could pay pennies for your car insurance — literally.Pay-per-mile car insurance is a type of coverage that charges you a flat rate for every mile you drive. The pay-per-mile rate is usually a couple of pennies per mile. You’ll also pay a base rate, which is a fixed monthly cost. All in all, it’s an affordable option for those whose cars remain parked for days or weeks at a time.I’ve had a pay-per-mile policy before, and it helped me save about $480 annually. The only downside was that my insurance company was understaffed and took about three months to process my one and only claim — an incident in which my car was hit by a drunk driver.3. Get rewarded for good drivingIf you think you’re a good driver — and your spouse or close friends generally agree with you — you might be a good candidate for usage-based car insurance, otherwise known as telematics.Usage-based insurance typically involves downloading an app (or installing a device in your car’s OBD-II port) and allowing an insurance company to track your driving. Your insurer will pay close attention to your driving habits, like how fast you brake and how frequently you use your phone. It will then use this information to decide if you deserve a discount on your car insurance for good driving.I’ve used telematics twice, once with Progressive and now with my current car insurance company, Lemonade. Both times I’ve saved money, though I’ve noticed some flaws with how my driving was tracked. For example, Progressive penalized me whenever I would brake too quickly, even if it was unavoidable, such as when I was avoiding things in the road or responding to a car braking quickly in front of me. In short, you won’t get a perfect score, but even a passing score would result in some savings.All in all, saving money on car insurance comes down to checking what’s on the market and switching when you find a cheaper policy. You can do other things — like improve your credit score, reduce your coverage, or ensure you’re getting all your discounts — but for substantial savings, you’ll likely need to break up with car insurance companies frequently. Make a note of when your car insurance expires — don’t enroll in auto-renewal — and use our list of best car insurance companies to get a jumpstart on your insurance shopping.
Does Your Income Make You Upper Class, Middle Class, or Lower Class?
By: Christy Bieber |
– First published on Sept. 5, 2023
Incomes vary widely across the United States, with some people making many times the amount that others earn. If you’ve ever wondered how your personal finances stack up, and what “class” your income officially puts you in, here’s what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here’s what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time — your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It’s probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn’t mean people who don’t make a lot of money can’t be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here’s how you can improve your standingDon’t be discouraged if you aren’t in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you’re underpaid, it doesn’t hurt to make a request for more money — especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve — especially if you prioritize saving as much as you can for as long as you can.
My Brother Won a Car on The Price Is Right. Here’s What It Cost Him
By: Maurie Backman |
– First published on Dec. 6, 2023
When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.Taking the money and runningMy brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.Gearing up for a giant tax billMy brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.The exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.As a very basic example, let’s say you win $20,000 on a game show and fall into the 24% tax bracket based on your income. You might, in that case, end up having to pay as much as $4,800 on your winnings. If that $20,000 is a cash prize, you could simply reserve some of it for your tax bill. But what if you win a $20,000 vacation package, or $20,000 in furniture? It’s not like you can send the IRS a dining room chair or a loveseat and call things even.So be very careful when you’re looking at taking home any sort of game show prize. You may even want to meet with an accountant before applying to be on a game show to get some advice.The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you’ll likely end up losing a large chunk of that $26,000 when you account for the portion you owe the IRS.All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.
Here’s How to Buy 2 Limited Gold Bars at Costco (They Sell Out Fast)
By: Cole Tretheway |
– First published on Dec. 23, 2023
Regular Americans are no longer limited to buying gold through ETFs or bullion companies — you can buy the precious metal through Costco, your friendly local wholesaler. All you need is a Costco membership and access to the internet.Why? Well, the economy is being weird, so gold is a nice hedge. Nothing says stability like a chunk of gold. At the very least, you can use it to bonk the head of would-be pursuers when the apocalypse commences. Jokes aside, Costco is a popular doomsday prepper destination.Welcome to (almost) 2024, folks.Less interesting (but potentially more immediately useful), gold can be part of one’s investment portfolio. Typically, people don’t buy it in person, but you certainly can. And, judging by how often these gold bars sell out, the demand is there.Interested in buying high-quality gold from a trustworthy source? Read on to learn how to buy gold bars at Costco.How to buy gold bars at CostcoFollow these steps in order to make your gold bar purchase from Costco:Purchase a $60 yearly Costco Gold Star membership (the basic membership) if you don’t have one already.Check if gold bars are available on Costco.com. They may be sold out.Log into Costco.com and purchase up to two bars, the limit set by Costco.Provide your signature upon delivery. Make sure you’re at home on delivery day.Costco sells more than one brand of gold bars. Examples:1 oz Gold Bar PAMP Suisse Lady Fortuna Veriscan (New In Assay) (buy it here)1 oz Gold Bar Rand Refinery (New in Assay) (buy it here)In September, Costco CFO Richard Galanti said they sell out fast. If they’re sold out now, you can check back later; Costco may have restocked.Costco gold bars cost around $2,000Members who log into Costco can confirm that Costco gold bars sell for about $2,000 each, near the current market price of gold.Delivery is three to five days, and Costco doesn’t offer refunds. On the bright side, reviews are positive, and Costco has a reputation for delivering quality products.If there are none available on Costco’s website, check back later. Chances are, Costco will restock, giving interested buyers the opportunity to buy more gold.Pros and cons of buying Costco gold barsBuying gold bars from Costco comes with some upsides, as well as a few downsides.The prosCostco is trustworthy, the bars are affordably priced relative to other gold bars, and it’s a convenient way to store value without relying on a broker. Once you have it, it’s yours to keep, and nothing short of a break-in is going to rob you of your investment.Gold has historically become more valuable over time, albeit slower than the stock market. Its value is one of five good reasons to invest in gold.The consYou must be a Costco member, and there are simpler ways to diversify your portfolio. You can instantly purchase shares of a gold ETF through an online stock brokerage. You can also buy Bitcoin quickly as a hedge against widespread economic instability. Costco’s gold bars are not returnable either, so if you change your mind, you’re out of luck.Who should buy gold from Costco?Costco members who want to purchase gold bars from a trustworthy source should consider buying gold from Costco. It’ll probably be quality, and it’s an easy way to dip one’s toes into precious metals. If you’ve bought from Costco.com before, it’ll be a familiar experience.But members may want to keep an eye on other online sellers of gold. Sites like JM Bullion may offer better prices, especially when factoring in the $60 annual Costco membership fee. Do a quick side-by-side comparison to ensure you’re getting the best rate.I won’t be buying gold from Costco — I’d rather invest my money in Bitcoin and the stock market — but neither will I be warning away interested friends and family members. Buying Costco gold is one of many legitimate (if limited) ways to invest in gold.