Are you in the market for a new or new-to-you car? If so, you’ve probably wondered “How much car can I afford?”
While your local car dealership might be happy to tell you the sky’s the limit regarding your car purchase, your personal budget might be telling you a different story. Spending more than you can afford on a car turns that car from a blessing into a burden.
How much should I spend on a car?
Deciding how much to spend on a car starts with knowing your current financial numbers. You'll need to know your current income, expenses, and savings amounts.
Know your numbers
There are several financial factors that can influence how much you should spend on a car. The amount of money you earn, of course, needs to be taken into account.
When determining how much you earn, always use your net take-home pay to start with. From there, factor in the other financial obligations you have.
In other words, look at your budget. If you don’t normally use one, now is a good time to start. Having a clear view of all other monthly financial obligations will help you better determine how much you can afford.
The 50-30-20 budget plan can be helpful. In short, the 50-30-20 budget plan works like this:
50 percent of your budget goes toward must-have and must-do obligations, such as housing expenses and child care
30 percent of your budget goes toward savings and debt obligations
20 percent of your budget covers unnecessary expenses and “fun” money
There are many ways to design a budget, but the 50-30-20 budget gives you a good place to start. It will certainly point out of there are any areas that are totally out of whack.
What do you have in savings?
Having a healthy savings account balance is important when making a car purchase as well. If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
If you don’t have an emergency fund with a balance equal to three to six months’ worth of expenses, building that emergency fund up should be a priority.
With an added car payment, having a plush savings balance will help you ensure you can cover the new payment even if you hit a financial bump. Or, for instance, if the car needs repairs.
Determine the total cost of the car
Once you have looked at your budget and determined the amount of money per month you are comfortable spending on a car you'll want to be clear on the total car costs before you make your purchase. Affording a new car isn’t simply about the payment.
There are several other costs associated with car ownership, such as:
Insurance policy costs
Fuel and parking costs
Maintenance and repair costs
You can call your insurance company ahead of time and get a quote for the new vehicle you're considering. If you are still trying to narrow down what type of car you want, check out this list of the most and the least expensive cars to insure.
Call your insurance company ahead of time and get a quote for the new vehicle you're considering.
Fuel costs are fairly easy to determine. A Google search will give you the MPGs of any car you could think of. Compare that to your current car to see if your costs will change.
Maintenance and repair costs can be harder to determine but you can get an idea by using averages across a brand. Here's an article from Autowise that displays the cheapest and most expensive cars to maintain.
Be sure to factor in an accurate estimate of these additional car ownership costs as you determine a purchase price and payment amount you’re comfortable with.
Get the right kind of car loan
Doing your due diligence as you shop for a car loan is important as well. You do not have to get financing through the dealership. You will likely do better getting a loan yourself through your bank. At the very least, have an understanding of what rate you would qualify for before heading into the dealership so you know if they are offering you a fair rate.
I love making things automatic. Whether it is bill-paying, direct deposit, prescription renewals, or investing, making things automatic makes life easier, and that is where our Betterment investing review comes in.
When it comes to retirement planning, an overwhelming number of online tools and websites promise to help you create a dynamic and profitable portfolio while minimizing fees.
This growing list of services includes robo-advisors, a class of financial websites that offer to manage your portfolio with minimal in-person interaction and a heavy reliance on the latest investing tools and software.
One of the most popular robo-advisors by far is Betterment. Conceptualized by its founders in 2008, Betterment has since grown to help its customers invest billions of dollars of their hard-earned dollars. This is an investment platform that puts your investing on cruise control, and even allows you to make money watching TV! You can open an account with no money at all, and get the benefit of professional, low-cost investment management that enables you to invest in thousands of securities with as little as a few hundred dollars.
It hasnât been easy. With other competitors like Wealthfront and Personal Capital always a few steps behind them, Betterment has struggled to find a way to stand out. Even with the competition, Betterment has emerged as one of the top online brokerage accounts and continues to grow its market share.
Open an account
0.25% to 0.40% annual management fee, depending on the plan
No trade, transfer or rebalancing fees
No minimum balance
Hands-off investing tailored to your goals and risk preference
About Betterment
Betterment is an online, automated investment manager that uses advanced algorithms and software to find the perfect investment strategy for your portfolio and individual needs.
The main difference between investing your money with a traditional financial advisor and Betterment is that there is minimal human interaction. Unless you email or call in, your communication with an individual advisor will be very minimal.
But, there is some good news to counteract the lack of individual service. Because of lower operating costs, Betterment is able to charge lower fees than traditional financial advisors. This can be huge for individuals who want to take a hands-off approach to their retirement accounts, yet donât want to pay top dollar for access to a top-tier financial advisor in their area.
Using complex investment software, Betterment allocates your investment portfolio based on your individual circumstances, investment time horizon, and thirst for risk.
In the meantime, they keep fees at a minimum by using ETFs (exchange-traded fund) that let you have a diversified portfolio, like mutual funds, but are tradeable much like stocks.
Since ETFs come with very low expense ratios, Betterment is able to pass those savings along to the consumer. Although the program already manages over $16 billion for their clients, they are still growing at a rapid pace.
Because the service is able and willing to deal with investors at all stages of wealth accumulation, it has become a go-to for both experienced and novice investors with various investing goals.
Further, Bettermentâs portfolio strategy isnât geared just for retirement savings; the service can also improve your returns on dollars you invest for short-term and medium-term goals like saving for college, taking an annual vacation, or building up a cash reserve.
How Betterment Works
Like post other robo-advisors, Betterment provides complete, automated investment management of your portfolio. When you sign up for the service, youâll complete a questionnaire that will determine your risk tolerance, investment goals, and time horizon. From that information, Betterment determines your portfolio will be designed as conservatives, aggressive, or some level in between.
Over time however, Betterment may adjust your portfolio to become gradually more conservative. For example, as you move closer to retirement, your asset allocation will be gradually shifted more heavily in favor of safe investments, like bonds.
Your portfolio will be constructed of exchange traded funds (ETFs), which are low-cost investment funds designed to track the performance of an underlying index. In this way, Betterment attempts to match the performance of the underlying indexes, rather than to outperform them. For this reason, investing with Betterment â and most other robo-advisors â is considered to be passive investing. (Active investing involves frequent trading of stocks and other securities in an attempt to outperform the market.)
Betterment also uses allocations based on broad investment categories. There are three in total:
Safety Net â These are funds allocated for near-term needs, such as an emergency fund.
Retirement â This will naturally be your long-term investment account and held in tax-sheltered IRAs.
General Investing â This allocation is dedicated to intermediate goals, maybe saving for the down payment on a house or even for your childrenâs education.
Given that each of the three broad goals has a different time horizon, the specific portfolio allocation in each will be a little bit different. For example, the Safety Net will be invested in cash type accounts for safety and liquidity.
Betterment Advantages And Disadvantages
Betterment Pros:
Thereâs no minimum investment required.
The low annual fee of 0.25% on the Digital plan can allow you to have a $20,000 account managed for just $50 per year, or a $100,000 account for just $250.
Tax-loss harvesting is available at all taxable accounts.
Betterment Premium provides unlimited access to certified financial planners, providing a service similar to traditional investment advisors, but at a fraction of the cost.
The No-fee Checking and Cash Reserve give you cash management options to go with your investing activities.
Betterment offers several portfolio options, including Smart Beta, Socially Responsible Investing, and the BlackRock Targeted Income Portfolio.
The use of value funds also adds the potential for your investment accounts to outperform the general market, since value stocks tend to be underpriced relative to their competitors.
Flexible Portfolio will give you some control over your investment allocations, which is a feature absent from most robo-advisors.
Betterment Cons:
Bettermentâs annual advisory fee is on the low end of the robo-advisor range. But there are some robo-advisors charging no fees at all.
Betterment doesnât offer alternative investments. These include natural resources and real estate, which are offered by some of their competitors.
External account syncing is available only with Betterment Premium.
The Betterment Investment Methodology
Like most other robo-advisors, Betterment manages your investment account using Modern Portfolio Theory, or MPT. The theory emphasizes proper allocations into various asset classes over individual security selection.
Your portfolio is divided between six stock asset allocations and eight bond asset allocations. Each allocation is represented by a single ETF thatâs tied to an index specific to that asset class. The single ETF will provide exposure to scores or even hundreds of securities in each asset class. That means collectively your investment will be spread across thousands of securities in the US and internationally.
The six stock asset allocations are as follows:
US Total Stock Market
US Value Stocks â Large Cap
US Value Stocks â Mid Cap
US Value Stocks â Small Cap
International Developed Market Stocks
International Emerging Markets Stocks
The eight bond asset allocations are as follows:
US High Quality Bonds
US Municipal Bonds (will be held in taxable investment accounts only)
US Inflation-Protected Bonds
US High-Yield Corporate Bonds
US Short-Term Treasury Bonds
US Short-Term Investment Grade Bonds
International Developed Market Bonds
International Emerging Markets Bonds
Tax-loss Harvesting
Since Betterment offers tax-loss harvesting with taxable investment accounts, most asset classes will have two or three very similar ETFs. This will enable Betterment to sell a losing position in one ETF to reduce capital gains in winning asset classes. Alternative ETFs are then purchased to replace the sold funds to maintain the target asset allocations in your account.
Tax-loss harvesting is becoming an increasingly popular investment strategy because it effectively defers capital gains taxes into future years. Itâs available only for taxable accounts, since tax-sheltered accounts have no immediate tax consequences.
How Betterment Compares
Here’s how Betterment compares to the previously mentioned companies, Wealthfront and Personal Capital.
Betterment
Wealthfront
Personal Capital
Minimum Initial Investment
$0
$500
$100,000
Advisor Fee
0.25% on Digital; 0.40% on Premium (account balance over $100k)
0.25% on all account balances
0.89% on most account balances; reduced fee on balances > $1 million
Live Advice
On Premium Plan only
No
Yes
Tax-Loss Harvesting
Yes, on all taxable accounts
Yes, on all taxable accounts
Yes, on all taxable accounts
401(k) Assistance
Yes, on Premium Plan only
No
Yes
Budgeting
No
No
Yes
Betterment Accounts and Options
For the first few years of Bettermentâs existence they offered a single investment account serving as a one-size-fits-all plan. But thatâs all changed. They still offer basic investment accounts, but they now give you a choice of multiple investment options.
Betterment Digital
This is Bettermentâs basic investment plan. There is no minimum initial investment required, nor is there a minimum ongoing balance requirement. Betterment charges a single fee of 0.25% on all account balances.
You can also add any other portfolio variations, except the Goldman Sachs Smart Beta portfolio, which has a $100,000 minimum account balance requirement.
Betterment Premium
Betterment Premium works similar to the Digital plan, but it delivers a higher level of service. The plan provides external account synching, giving Betterment a high altitude view of you your entire financial situation. External investment accounts can help in enabling Betterment to better coordinate your portfolio allocations with assets held in outside accounts. They can also make recommendations out to better manage those external accounts.
And perhaps the biggest advantage of the Premium plan is that it comes with unlimited access to Bettermentâs certified financial planners. In this way, Betterment is competing more directly with traditional investment advisors, but doing it with a robo-advisor component.
Youâll need a minimum of $100,000 to invest in the Premium plan, and the annual advisory fee is 0.40%. Thatâs just a fraction of the usual 1% to 2% typically charged by traditional investment advisory services.
Betterment Cash Reserve
The account pays a variable interest rate, currently set at 0.40% APY. Betterment doesnât actually hold these funds directly, but rather invest them through participating program banks.
Thereâs no fee for this account, and you can move money as often as you want. And for those with very high cash balances, the account is FDIC insured for up to $1 million through the program banks.
Betterment Socially Responsible Investing (SRI)
SRI portfolios are becoming increasingly popular in the robo-advisor space. It involves investing in companies that meet certain standards for social, environmental, and governance guidelines. Betterment indicates that the ETFs they use in their SRI portfolio have produced a 42% increase in their social responsibility scores.
SRI portfolios work with both the Digital and Premium plans, using a similar investment methodology. But they make certain modifications, holding ETFs based on SRI in place of the ETFs used in non-SRI portfolios.
SRI portfolios do not require a minimum balance and charge no additional fees. And like their Digital and Premium plans, taxable SRI investment accounts take advantage of tax-loss harvesting.
Betterment Flexible Portfolios
The key word in the name is âflexibleâ because the main feature is adding personal options to your portfolio allocations.
This is done by adjusting the individual asset class weights in your portfolio. For example, if you have a 7% allocation in emerging markets, you may choose to increase it to 10% if you believe that sector is likely to outperform others. But you can also decrease the allocation if it makes you feel uncomfortable.
Betterment Tax-Coordinated Portfolio
This is less of a formal portfolio and more of an investment strategy. It must be used in combination with a taxable investment account and a tax-sheltered retirement account. Betterment will then allocate investments based on their tax impact.
For example, income generating assets â that produce high dividend and interest income â are held in a tax-sheltered account. Investments likely to generate long-term capital gains are held in a taxable investment account, since you will be able to take advantage of lower long-term capital gains tax rates.
Goldman Sachs Smart Beta
This option is for more sophisticated investors, and requires a minimum account balance of $100,000. And since it is a high risk/high reward type of investing, it also requires a higher risk tolerance.
Betterment uses the same basic investment strategy as they do in other portfolios. But itâs an actively managed portfolio that will be adjusted in an attempt to outperform the general market. Securities will be bought and sold within the portfolio and can include either individual securities or Smart Beta ETFs.
The portfolio has many variations, including a wide range of allocations. Stocks are chosen based on four qualities: good value, strong momentum, high quality, and low volatility.
And like other portfolio variations Betterment offers, there is no additional fee for this option.
BlackRock Target Income Portfolio
Betterment recognizes that some investors are more interested in income than growth. This will particularly apply to retirees. The BlackRock Target Income Portfolio invests in portfolios based on your risk tolerance. This can mean low, moderate, high, or even aggressive.
Those categories may seem unusual for an income generating portfolio. But while the portfolio attempts to minimize risk of principal, it also recognizes that some investors are willing to add risk to their portfolio in exchange for higher returns.
A low-risk portfolio may have a higher allocation in US Treasury securities. An aggressive portfolio may center primarily on high-yield corporate bonds or even emerging-market bonds that have higher interest rates due to greater risk.
Betterment No-fee Checking
Provided by Betterment Financial LLC in partnership with NBKC Bank, this is a true no-fee checking account. Not only are there no monthly maintenance fees, but there are also no overdraft or other fees. Theyâll even reimburse all ATM fees and foreign transaction fees you incur. And thereâs not even a minimum balance requirement.
Youâll be provided with a Betterment Visa Debit Card with tap-to-pay technology, that you can use anywhere Visa is accepted. All account balances are FDIC insured for up to $250,000. And as you might expect from a company on the technological cutting edge, you can deposit checks into the account using your smartphone.
Check out our full Betterment checking review.
Betterment Key Features
Minimum initial investment: Betterment requires no funds to open an account. But you can begin funding your account with monthly deposits, like $100 per month. This method will make it easier to use dollar-cost averaging to gradually move into your portfolio positions.
Available account types: Joint and individual taxable investment accounts, as well as traditional, Roth, rollover and SEP IRAs. Betterment can also accommodate trusts and nonprofit accounts.
Portfolio rebalancing: Comes with all account types. Your portfolio will be rebalanced when your asset allocations significantly depart from their targets.
Automatic dividend reinvestment: Betterment will reinvest dividends received in your portfolio according to your target asset allocations.
Betterment Mobile App: You can access your Betterment account on your smartphone. The app is available for both iOS and Android devices.
Customer contact: Available by phone and email, Monday through Friday, from 9:00 am to 8:00 pm, Eastern time.
Account protection: All Betterment accounts are protected by SIPC insurance for up to $500,000 in cash and securities, including up to $250,000 in cash. SIPC covers losses due to broker failure, not those caused by market value declines.
Financial Advice packages: Betterment offers one-hour phone conferences with live financial advisors on various personal financial topics. Five topics are covered:
Getting Started package: This package gives new users the professional vote of confidence they need as a professional will assess their account setup. $199
Financial Checkup package: This package takes it a step further, providing the customer with a professional opinion on their portfolio and financial circumstances. $299
College Planning package: As its name implies, this package helps parents who are investing with the goal of paying for their childrenâs college education in the next 5-18 years. $299
Marriage Planning package: Merging finances can be tricky, so Betterment created this plan to help engaged couples and newlyweds to succeed as they unite their lives and assets. $299
Retirement Planning package: Your investment goals and strategies change as you near retirement. This particular package helps keep you on target to meet them. $299
Retirement Savings Calculator: Robo-advisors are popular choices for retirement accounts. For this reason, Betterment offers the Calculator to help you project your retirement needs. By entering basic information in the calculator (it will sync external accounts if you have a Premium account â including employer-sponsored retirement plans) it will let you know if you are on track to meet your goals or if you need to make adjustments.
How To Sign Up For A Betterment Account
The Betterment sign up process is one of the most user-friendly out there for any brokerage. It comes with easy-to-follow instructions and as streamlined registration process which users can navigate through in a matter of minutes.
First get the process started by clicking the button below.
Sign up for a Betterment Account
After the initial sign up process, users can expect a simple transaction as they transfer funds into the account, much like moving money from a checking to savings account.
When you begin the sign-up process, youâll be given a choice of four different investment goals:
I chose âInvest for retirementâ. It will ask your current age, your annual income, then give you a choice of accounts to use. That includes a traditional, Roth, or SEP IRA, or even an individual taxable account. I selected a traditional IRA.
Based on a 30-year-old with a $100,000 income, Betterment return the following recommendation:
You even have the option to have the specific asset allocations listed. After clicking âContinueâ, youâll be asked to provide your email address and create a password. Youâll then be taken to the application, which will ask for general information, including your name, address, phone number, and how you heard about Betterment.
Once your account has been set up, you can fund it immediately, by connecting your bank account, or by setting up recurring deposits.
You can also set up other accounts, such as âManage spending with Checkingâ or âInvest for a long-term goalâ.
Why You Should Open An Account With Betterment
While nearly anyone who invests could benefit from the online portfolio management and advising, this service is definitely geared to certain types of investors. In most cases, Betterment will work best for:
Hands-off investors who have some investing knowledge â Since it takes care of the heavy lifting for you, it works best for investors who want to take a hands-off approach to their investment portfolio. Passive investors can let Betterment handle the logistics while using online account management to keep a close eye on their accounts.
Novice investors who need help â Beginning investors who are just learning the ropes can turn to Betterment for online portfolio management with low fees. The many online tools and user-friendly interface make it easy for beginners to get a grasp on basic financial concepts and investing strategies.
Robo-advisors are growing in popularity and could easily replace in-person advisors in the near future. With lower fees and advanced software that can maximize results, online investing is certainly gaining an edge.
Whether Betterment is right for you depends on your individual needs and investing goals. If youâre a hands-off investor who wants to grow your retirement funds without paying a lot of fees, then Betterment might be ideal. Additionally, beginning investors can benefit handsomely from the online tools and investing education offered through the Betterment website.
If you think Betterment investing might be exactly what your portfolio needs, sign up for a new account today.
However, if you determine that you would be better served by a more hands-on approach, check out the other online brokerage account options. Being a certified financial planner, I have had a chance to work with several of these platforms and have done the following reviews:
Motif Investing Review
Lending Club Review
Ally Invest Review
The post Betterment Investing Review: Make Investing Automatic appeared first on Good Financial Cents®.
The time has finally come: youâre ready to retire. For many, this means living off savings or social security, but in reality, now that youâre unemployed itâs time you started making real money. Investing after retirement is a great way to continue making income, cover expenses in lieu of a regular paycheck, and stay plugged into the booming American economy.
Social security is drying up
If you plan on retiring any time after the next 20 years, you shouldnât count on social security funds. A 2014 report estimates that social security will no longer be able to pay full benefits after 2033. This means that those that retire after this demarcation point should expect to supplement federal aid with individual income â such as investments.
Life expectancy is increasing
Clean living, improved healthcare resources, increased social awareness, and many other factors have all contributed to a steady increase in life expectancy over the years. Today, being young at heart means more than ever â retirees can expect to live an additional 15 – 20 years into their twilight years. The average life expectancy today is 80, which is almost a decade older than the to 71 year life expectancy of 1960.
Investing is fun
Many retirees will take up new hobbies to fill the time previously occupied by professional obligations. Why not make your daytime hobby making money? Day trading stocks is the perfect retiree activity because itâs just as complicated as you want it to be. You can trade casually, and pick up some minor gains here or there. Or, go in full bore and make it your new job. After all, investments provide extra money, so have some fun with it.
Delaying social security payments boosts your benefits
Letâs say your investments are performing exceptionally well, and maybe you donât necessarily need social security yet. Your social security payout increases by 8 percent for every year you delay payments. So if youâve held off on social security, and it has come time to cash out investments, your federal retirement benefits will be worth far more than usual.
Moving
Want to spend the next chapter of your life in Myrtle Beach? Naples, Florida? Now that youâre retired, youâre free to live anywhere you want â unfettered by professional constraints, the world is your oyster. But thereâs one problem: how will you afford it? Your savings account should be preserved for medical expenses, and you already checked the couch cushions for loose change. Well, investments with high yield interest rates or dividend payments are a good way to boost your income and gain a little extra cash.
You earned it
What has decades of penny pinching amounted to if you canât spend your savings during retirement? Part of the reason you budgeted so carefully in your professional years is to ensure security as you grow old. Well, here you are, and itâs time to tap that sacred savings account. As you assess your finances in old age, consider how much savings youâre willing to gamble on the market â what do you have to lose?
Thereâs no better time to invest than now
This is not to say that the market is particularly ripe for new investors right now â although 2017 saw record high economic numbers â but more so that anytime is a good time to invest. You can guarantee the market will fluctuate in your 15+ years of retirement, but thatâs not the point. As long as you build a portfolio that can bear a bear market, you will be in good shape to weather market slumps. As they say, âdonât play with scared money.â
Grandchildren
Your kids are all grown up, but that doesnât mean youâre off the hook. As a retired grandparent, youâre in charge of vacations, dinners out, movie nights, and other fun activities with the grandkids. And, you guessed it, one of the best ways to bankroll fun money is through thriving investments. In fact, while it might not be the most exciting prospect for the kid, a safe, slow-maturing investment is a great grandkid birthday gift.
Jumpstart a startup
Are you passionate about the future of tech? Small philanthropies? Artisan dog treats? Whatever your calling may be, there is likely a startup that you can help get off the ground. One study found that 100 million startups try to get off the ground every year, and they need your help. Invest in a cause you care about, and in the process make someoneâs entrepreneurial dreams come true.
Broaden your horizons
Now that youâre retired itâs time to read those books you never got around to, learn a new skill, travel the world, and, most importantly, diversify your portfolio. Financial experts suggest that retirees pursue many different types of assets to help offsite potential market volatility.
Travel
For most, vacation tops the list of most anticipated retirement activities. Itâs easy to get swept up in fantasies of cold beer and catching rays on the beach, but you you need a way to pay for it. Investments are a good way to compound your savings, and make a little extra vacation money.
Health
Studies show that retirees require upwards of $260,000 to cover medical expenses as they age. Maybe, thanks to years of frugality, you have this kind of money in savings, but it never hurts to stash away a little extra cash. The population nearing retirement needs to be able to expect the unexpected, so use the stock market as an opportunity to compound your emergency fund in case of expensive medical bills.
Taxes
Just because youâre retired doesnât mean you can avoid the taxman â after all, according to Benjamin Franklin, alongside death, taxes are one of the two certainties in life. While you no longer have to pay payroll taxes, you will still pay taxes on social security benefits. Plus, you are required to pay taxes on IRA withdrawals. Tax season can feel extra overwhelming if you are without a reliable source of income, so avoid the April financial crunch and tap investment gains to pay taxes during retirement.
Support a company you care about
If youâre on the verge of retirement you probably had a long, prosperous career. Maybe you jumped around to different positions, or maybe you logged a couple decades at one company. Either way, chances are there is a company you want to be involved with that you never got a chance to work at. Investing in a company is a good way to gain a sense of belonging, and do your part to support a company dear to your heart â even if you never actually worked there.
Stay sharp on market trends
All of the financial benefits of investments aside, investing in the market gives you a reason to care. One of the scariest prospects of retirement is the threat of complacency, so fend off apathy by giving yourself a reason to stay up-to-date. You are far more likely to take a keen interest in economic trends when you have a little skin in the game.
If youâre concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.comâs free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter gradesâplus you get a free credit score updated every 14 days.
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The post 15 Reasons to Invest After Retirement appeared first on Credit.com.
Coronavirus hasnât entirely ended life as we knew it, but itâs certainly caused changes, some of which are likely to be with us for a very long time.
For some the coronavirus is literally a matter of life and death, and it raises an important question: how does coronavirus affect life insurance?
No one likes to think about the possibility of losing their life, or that of a loved one to this virus, but for over 150,000 families here in the US, it has turned out to be a reality.
Letâs examine the impact it may have on your existing policies, and perhaps more importantly, how it may affect applications for new life insurance coverage.
How Does Coronavirus Affect Life Insurance You Already Have?
Thereâs good news if you already have a life insurance policy in place. Generally speaking, the insurance company will pay a death benefit even if you die from the coronavirus. With few exceptions, life insurance policies will pay for any cause of death once the policy is in force. There are very few exceptions to this rule, such as acts of war or terrorism. Pandemics are not a known exception.
If youâre feeling at all uncomfortable about how the coronavirus might impact your existing life insurance policies, contact the company for clarification. Alternatively, review your life insurance policy paying particular attention to the exclusions. If thereâs nothing that looks like death due to a pandemic, you should be good to go.
But once the policy is in place, there are only a few reasons why the insurance company can deny a claim:
Non-payment of premiums â if you exceed the grace period for the payment, which is generally 30 or 31 days, your policy will lapse. But even if it does, you may still be able to apply for reinstatement. However, after a lapse, you wonât be covered until payment is made.
Providing false information on an application â if you fail to disclose certain health conditions that result in your death, the company can deny payment for insurance fraud. For example, if youâre a smoker, but check non-smoker on the application, payment of the death benefit can be denied if smoking is determined to be a contributing cause of death.
Death within the first two years the policy is in force â often referred to as the period of contestability, the insurance company can investigate the specific causes of death for any reason within the first two years. If itâs determined that death was caused by a pre-existing condition, the claim can be denied.
None of these are a serious factor when it comes to the coronavirus, unless you tested positive for the virus prior to application, and didnât disclose it. But since the coronavirus can strike suddenly, it shouldnât interfere with your death benefits if it occurs once your policy is already in force.
How Does Coronavirus Affect Life Insurance Youâre Applying For?
This is just a guess on my part, but I think people may be giving more thought to buying life insurance now they may have at any time in the past. The coronavirus has turned out to be a real threat to both life and health, which makes it natural to consider the worst.
But whatever you do, donât let your fear of the unknown keep you from applying for coverage. Though you may be wishing you bought a policy, or taken additional coverage, before the virus hit, now is still the very best time to apply. And thatâs not a sales pitch!
No matter whatâs going on in the world, the best time to apply for life insurance is always now. Thatâs because youâre younger and likely healthier right now than youâll ever be again. Both conditions are major advantages when it comes to buying life insurance. If you delay applying, youâll pay a higher premium by applying later when youâre a little bit older. But if you develop a serious health condition between now and then, not only will your premium be higher, but you may even be denied for coverage completely.
Donât let fears of the coronavirus get in your way. If you believe you need life insurance, or more of it, apply now.
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That said, the impact of the coronavirus on new applications for life insurance is more significant than it is for existing policies.
The deaths of more than 100,000 people in the US is naturally having an effect on claims being paid by life insurance companies. While thereâs been no significant across-the-board change in how most life insurance companies evaluate new applications, the situation is evolving rapidly. Exactly how that will play out going forward is anyoneâs guess at the moment.
What to Expect When Applying for Life Insurance in the Age of the Coronavirus
If youâre under 60 and in good or excellent health, and not currently showing signs of the virus, the likelihood of being approved for life insurance is as good as itâs ever been. You can make an application, and not concern yourself with the virus.
That said, it may be more difficult to get life insurance if you have any conditions determined to put you at risk for the coronavirus, as determined by the Centers for Disease Control (CDC).
These include:
Ages 65 and older.
Obesity, defined as a body mass index of 40 or greater.
Certain health conditions, including asthma, chronic kidney disease and being treated by dialysis, lung disease, diabetes, hemoglobin disorders, immunocompromised, liver disease, and serious heart conditions.
People in nursing homes or long-term care facilities.
Now to be fair, each of the above conditions would require special consideration even apart from the coronavirus. But since theyâre known coronavirus risk factors, the impact of each has become more important in the life insurance application process.
If any of these conditions apply to you, the best strategy is to work with insurance companies that already specialize in those categories.
There are insurance companies that take a more favorable view of people with any of the following conditions:
Over 65
Kidney disease
Certain lung diseases, including Asthma
Liver disease
Certain heart conditions
More Specific Application Factors
But even with insurance companies that specialize in providing coverage for people with certain health conditions, some have introduced new restrictions in light of the coronavirus.
For example, if you have a significant health condition and youâre over 65, you may find fewer companies willing to provide coverage.
The insurance company may also check your records for previous coronavirus episodes or exposures. Expect additional testing to determine if youâre currently infected. Most likely, the application process will be delayed until the condition clears, unless it has resulted in long-term complications.
Travel is another factor being closely examined. The CDC maintains an updated list of travel recommendations by country. If youâve recently traveled to a high-risk country, or you plan to do so in the near future, you may be considered at higher risk for the coronavirus. How each insurance company handles this situation will vary. But your application may be delayed until youâve completed a recommended quarantine period.
Other Financial Areas to Consider that May be Affected
Since the coronavirus is still very much active in the US and around the world, financial considerations are in a constant state of flux. If youâre concerned at all about the impact of the virus on other insurance types, you should contact your providers for more information.
Other insurance policies that my warrant special consideration are:
Employer-sponsored life insurance. Thereâs not much to worry about here, since these are group plans. Your acceptance is guaranteed upon employment. The policy will almost certainly pay the death benefit, even if your cause of death is related to the virus.
Health insurance. Thereâs been no media coverage of health insurance companies refusing to pay medical claims resulting from the coronavirus. But if youâre concerned, contact your health insurance company for clarification.
Action Steps to Take in the Age of the Coronavirus
Many have been gripped by fear in the face of the coronavirus, which is mostly a fear of the unknown. But the best way to overcome fear is through positive action.
I recommend the following:
1. Be proactive about your health.
Since there is a connection between poor health and the virus, commit to improving your health. Maintain a proper diet, get regular exercise, and follow the CDC coronavirus guidelines on how to protect yourself.
2. If you need life insurance, buy it now.
Donât wait for a bout with the virus to take this step. It’s important for a number of reasons and the consequences of not having it can be severe. Compare the best life insurance companies to get started.
3. Consider no medical exam life insurance.
If you donât have the virus, and you want to do a policy as quickly as possible, no medical exam life insurance will be a way to get coverage almost immediately.
4. Look for the lowest cost life insurance providers.
Low cost means you can buy a larger policy. With the uncertainty caused by the coronavirus, having enough life insurance is almost as important as having a policy at all. Look into cheap term life insurance to learn more about what you can afford.
5. Keep a healthy credit score.
Did you know that your credit score is a factor in setting the premium on your life insurance policy? If so, you have one more reason to maintain a healthy credit score. One of the best ways to do it is by regularly monitoring your credit and credit score. There are plenty of services available to help you monitor your credit.
6. Make paying your life insurance premiums a priority
This action step rates a special discussion. When times get tough, and money is in short supply, people often cancel or reduce their insurance coverage. That includes life insurance. But that can be a major mistake in the middle of a pandemic. The coronavirus means that maintaining your current life insurance policies must be a high priority.
The virus and the uncertainty itâs generating in the economy and the job market are making finances less stable than theyâve been in years. Youâll need to be intentional about maintaining financial buffers.
7. Start an emergency fund.
If you donât already have one place, start building one today. If you already have one up and running, make a plan to increase it regularly.
You should also do what you can to maximize the interest youâre earning on your emergency fund. You should park your fund in a high-interest savings account, some of which are paying interest thatâs more than 20 times the national bank average.
8. Get Better Control of Your Debts
In another direction, be purposeful about paying down your debt. Lower debt levels translate into lower monthly payments, and that improves your cash flow.
If you donât have the funds to pay down your debts, there are ways you can make them more manageable.
For example, if you have high-interest credit card debt, there are balance transfer credit cards that provide a 0% introductory APR for up to 21 months. By eliminating the interest for that length of time, youâll be able to dedicate more of each payment toward principal reduction.
Still another strategy for lowering your debts is to do a debt consolidation using a low interest personal loan. Personal loans are unsecured loans that have a fixed interest rate and monthly payment, as well as a specific loan term. You can consolidate several loans and credit cards into a single personal loan for up to $40,000, with interest rates starting as low as 5.99%.
Related: The Best Life Insurance Companies
Final Thoughts
Weâve covered a lot of ground in this article. But thatâs because the coronavirus comes close to being an all-encompassing crisis. Itâs been said the coronavirus is both a health crisis and an economic crisis at the same time. It requires strategies on multiple fronts, including protecting your health, your finances, and your familyâs finances when youâre no longer around to provide for them.
Thatâs where life insurance comes into the picture. The basic process hasnât changed much from the coronavirus, at least not up to this point. But thatâs why itâs so important to apply for coverage now, before major changes are put into effect.
The post How Does Coronavirus Affect Life Insurance? appeared first on Good Financial Cents®.
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Your washing machine. Your car. Your front tooth.
If any of those broke right now, would you be able to get it fixed immediately? Or would you have to walk around with a gap in your smile for months until you could get the money together?
If you canât afford to pay to fix it today, youâre not alone. Most people donât have $400 saved in case of an emergency either. So before your car breaks down on the side of the road on your way to an interview, make sure you have a solid emergency fund of at least $500.
Donât know how to get there? Having a budget (that you actually stick to) can help you get there. Hereâs one budgeting strategy we recommend, and four other tips that can help you keep your expenses in line.
1. The 50/30/20 Budgeting Rule
The 50/30/20 rule is one of the simplest budgeting methods out there, which is why youâve probably heard us talk about it before if youâre a regular TPH reader. There are no fancy spreadsheets or pricy apps to download (unless you want to), and itâs very straightforward.
Hereâs how it shakes out: 50% of your monthly take home income goes to your essentials â your rent, your groceries, your minimum debt payments, and other necessities. 30% of your cash goes to the fun stuff, and 20% is dedicated to your financial goals. That could be paying more than the minimum on your debts or adding to your investments. And it definitely includes building up your emergency fund!
If you take a look at your budget and realized you donât have enough leftover to contribute to your emergency fund, here are a few ways to help balance your budget:
2. Cut More Than $500 From One Of Your Must-Have Bills
Youâre probably overpaying the bills you have to pay each month. But you can cut those expenses down, without sacrificing anything. Maybe even enough to cover that window your kid just smashed with a ball. Definitely enough to grow your emergency fund a meaningful amount.
So, whenâs the last time you checked car insurance prices?
You should shop your options every six months or so â it could save you some serious money. Letâs be real, though. Itâs probably not the first thing you think about when you wake up. But it doesnât have to be.
A website called Insure.com makes it super easy to compare car insurance prices. All you have to do is enter your ZIP code and your age, and itâll show you your options.
Using Insure.com, people have saved an average of $540 a year.
Yup. That could be $500 back in your pocket just for taking a few minutes to look at your options.
3. Earn Up to $225 in Easy, Extra Cash
If we told you you could get free money just for watching videos on your computer, youâd probably laugh. Itâs too good to be true, right? But weâre serious. You can really add up to a few hundred bucks to your emergency savings with some mindless entertainment.
A website called InboxDollars will pay you to watch short video clips online. One minute you might watch someone bake brownies and the next you might get the latest updates on Kardashian drama.
All you have to do is choose which videos you want to watch and answer a few quick questions about them afterward. Brands pay InboxDollars to get these videos in front of viewers, and it passes a cut onto you.
InboxDollars wonât make you rich, but itâs possible to get up to $225 per month watching these videos. Itâs already paid its users more than $56 million.
It takes about one minute to sign up, and youâll immediately earn a $5 bonus to get you started.
4. Ask This Website to Pay Your Credit Card Bill This Month
Just by paying the minimum amount on your credit cards, you are extending the life of your debt exponentially â not to mention the hundreds (or thousands) of dollars youâre wasting on interest payments. You could be using that money to beef up your emergency savings, instead.
The truth is, your credit card company is happy to let you pay just the minimum every month. Itâs getting rich by ripping you off with high interest rates â some up to nearly 30%. But a website called AmOne wants to help.
If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
The benefit? Youâll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), youâll get out of debt that much faster. Plus: No credit card payment this month.
AmOne keeps your information confidential and secure, which is probably why after 20 years in business, it still has an A+ rating with the Better Business Bureau.
It takes two minutes to see if you qualify for up to $50,000 online. You do need to give AmOne a real phone number in order to qualify, but donât worry â they wonât spam you with phone calls.
5. Get a Side Gig And Make More Money
Letâs face it â if your monthly income is less than what your monthly expenses are (and youâve run out of things to cut), you need more money.
Well, we all could use more money. And by earning a little bit extra each month, we could make sure weâre never taken by surprise when an ER visit tries to drain our savings.
Luckily, earning money has never been easier with the rise of the âGig Economyâ. Here are 31 simple ways to make money online. Which one could you do to pad your emergency savings?
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Having a baby means countless changes in your life, and they can happen very quickly. Diapers. Day care. Days running on little sleep. While it may not be on the top of your parenting list, budgeting for a new baby can help prepare your family for the excitement that’s ahead.
Kelsa Dickey is a financial coach and co-owner of Fiscal Fitness, a financial coaching company based in Phoenix. For her and her husband, budgeting has helped reduce money stress since they had their daughter in 2015.
“I absolutely worry less about finances because we budget our money,” Dickey says. “I find budgeting incredibly liberating.”
How do you prepare financially for a baby so you can worry less about finances as a parent? Here are four tips that expecting parents can use to help figure out their new financial reality and learn how to budget for a baby:
1. Prep for pregnancy expenses
Budgeting for a new baby often starts long before the baby arrives. You may have to account for medical bills, prenatal vitamins and maternity clothes, for example. Budgeting for a new baby can become easier if you account for these new expenses before you even need to make the purchases.
Alli Wittbold, a former teacher and blogger at Mom Smart Not Hard, and her husband, were able to save a significant amount on their medical bills when they had their daughter in 2016. Before they were even pregnant, they thought about ways to save money and researched the maternity coverage on both of their insurance plans. They found the coverage on her husband’s plan was much better than hers. By switching their coverage to her husband’s plan before getting pregnant, they were able to save thousands of dollars in maternity-related medical expenses.
While not all pregnancy expenses can be so well-planned in advance, sit down with your budget and make a list of all the new, common costs you’ll need to account for as you prepare for your family’s newest addition. Talking with other parents can help you get a sense for costs that may creep up higher than expected (for Dickey, it was maternity clothes, including new shoes and compression socks), as well as those not even on your radar.
“You can’t plan for everything, but if you can plan for even 75 percent of what you’ll need, the other 25 percent will be that much easier to tackle.”
2. Save for baby-related costs
For the Dickeys, budgeting for a new baby meant accounting for increased monthly spending on things they’d anticipated, such as diapers, wipes, baby food and day care. But they also encountered plenty of unexpected expenses. For instance, Dickey planned to nurse and found that nursing supplies and support took a big chunk out of their budget.
“Paying for one-on-one help and consulting was not something I anticipated,” she says.
The Wittbolds also encountered unexpected costs when budgeting for a new baby. They didn’t plan for supplies for when their baby got sick. “During our daughter’s first cold, we ran out to buy a humidifier and nasal aspirator,” Wittbold says.
To cope with unexpected expenses related to their daughter, the Dickeys adjusted their budget and began putting a set amount of money into a specific savings account each month. “I highly recommend doing this because you don’t necessarily know what you will or won’t need, so this allows for some flexibility,” Dickey says.
If you’re looking for additional strategies to learn how to budget for a baby, consider starting an emergency fund to help you better budget for a new baby’s unexpected expenses.
“You can’t plan for everything, but if you can plan for even 75 percent of what you’ll need,” Dickey says, “the other 25 percent will be that much easier to tackle.”
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3. Get creative with your purchases
While baby items can be fun to shop for (think cute little onesies), paying full price on everything can make it nearly impossible to budget for a new baby. The Wittbolds were gifted a lot of the things they needed at their baby shower, but they also shopped secondhandâa great tip for those worried about how to budget for a baby. They perused local classifieds and online marketplaces, and they even picked up hand-me-downs from friends with older children.
The Wittbolds also found creative (and fun) ways to save money by pooling resources from their friends. “My husband had a ‘daddy diaper party’ with all of his guy friends. As a gift, each friend brings a box of diapers,” Wittbold says. “We didn’t have to buy diapers for months.”
4. Account for income changes
Whether you intend to take a parental leave from work or have one parent stay at home to care for your child, you may have to figure out how to budget for a baby with less income than you’re used to.
Dickey and her husband own their financial coaching business, and they were worried about loss of income since they don’t work for an employer with maternity or paternity leave benefits. She knew she wanted to take six weeks off after having her daughter, so they started saving for the drop in income as soon as they knew they were pregnant.
“It made it so I didn’t worry and knew I could enjoy that time off with my daughter,” she says.
Wittbold decided to cope with her time off work as a school teacher by enacting a spending freeze once she was no longer earning an income. “For us, this means no spending aside from grocery store essentials, baby essentials like diapers, gas and of course bills,” she says. “To prepare for this, I stocked our freezer with homemade meals that could be dumped in the Crock-Pot or popped in the oven.”
Not long after her daughter was born, Wittbold decided to continue staying at home rather than return to her teaching position. She needed longer-term solutions to account for one less full-time income. After seeking out online opportunities, she found a remote position where she could teach English online. This helped her start earning enough part-time money to make staying at home possible.
“I teach every morning from 5:00 a.m. to 8:00 a.m.,” she says. “This change meant an additional $1,200 for our family every month.” This kind of flexible side hustle that you can maintain while parenting is a great way to bring in additional income if you’re budgeting for a new baby and looking for ways to save money when you have a baby.
“Budgeting has forced us to do things like meal plan, create cleaning schedules and use our time more effectively in order to earn money from home. This all results in less stress and more time with our baby because we are using the time we have more intentionally.”
Sleep soundly (well, eventually) thanks to your budget
While you might not be able to sleep through the night anytime soon, budgeting for a new baby will help give you peace of mind. Knowing you have a plan for expected and unexpected expenses, as well as understanding ways to save money when you have a baby, can allow you to make the most of your time with your family.
“Budgeting has forced us to do things like meal plan, create cleaning schedules and use our time more effectively in order to earn money from home,” Wittbold says. “This all results in less stress and more time with our baby because we are using the time we have more intentionally.”
The post Budgeting for a New Baby? Babyproof Your Budget in 4 Steps appeared first on Discover Bank – Banking Topics Blog.
The post Smart Moves to Make with Your Tax Refund appeared first on Penny Pinchin' Mom.
It is tax season!
You know the goal is not to get much of a refund.
However, a refund is always better than paying in!
But when that money shows in your account donât go and blow it on what you want! Make some smart moves with your refund.
Pay off debt
If you have debt then that means you should not have fun with any extra money. Nope. Every penny that you earn (beyond your regular income) should be used to pay off your debt.
While some experts will claim to pay the bill with the highest interest rate, I recommend paying the lowest balances first. The reason is you see results.
If you are getting $2,000 back and owe $500, $1500 and $2500, pay off two of your bills. Now, youâve got one payment and can roll all three monthly payments into one and pay that largest bill off more quickly.
You see progress in moving from three debts to one and that alone can be enough to keep you motivated.
Build your emergency fund
Experts used to say that your emergency fund should be three months of income for a family. After watching many struggle through the last recession, I recommend it be six-nine months instead!
I get that is a LOT of money to save up, but your tax refund can be the perfect way to build up your savings. But donât put it in your regular savings account. You donât want to be tempted to spend it.
Set up a new account at your bank. Deposit your refund into the account that is for emergencies only. Donât touch it.
Now youâve got money earmarked for your emergencies and should never touch it unless absolutely necessary.
Invest in your future
It is fun to spend money now but if your retirement accounts have taken a beating (or if they are non-existent) it is time to make that investment.
Visit with a financial expert and set up an IRA or other type of retirement savings account and invest that money. That $1,000 you fund today will be worth much more when it is time to cash it in.
Make upgrades
Look around your house for appliances or vehicles that may need to soon be replaced. When you catch a sale, make the investment now. Donât wait for it to break down completely.
If you do wait, you may be forced to pay full price and your money wonât go as far. Being proactive and replacing what needs to be when the price is right is a smart money move.
Make home improvements
Look around the house to see what needs to be repaired or updated. Is the paint starting to peel on the trim? Is the carpet wearing out?
Your house is an investment youâve made so you need to take care of it. Peeling paint can lead to dry rot. Old carpet could lead to more stains, odors or even damage to the subfloor (which could cost you even more).
Take care of your house so when the time comes to sell, it is in great shape so you can get top dollar.
Do something for yourself
There is nothing wrong with making an investment in your well-being. In fact, it could be a very smart move.
When you feel better about yourself and give yourself the opportunity to get or do things you donât normally, it changes your perspective. You get the chance to focus on you and that is a GOOD thing.
Splurge on that handbag. Go out to dinner. Set up that spa day. Just donât go too overboard.
Spend it as a family
You can also get the family to weigh in what you can do with your refund. You may have no debt; an emergency fund and retirement looks great. That means you can do something fun!
Talk with the kids about what to do with the refund. It may be a vacation or adventure. It may mean buying a basketball hoop or bikes for everyone.
Work together to determine the best way to use the money.
A tax refund is your money. Use it wisely.
The post Smart Moves to Make with Your Tax Refund appeared first on Penny Pinchin' Mom.
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Have you made your resolutions yet? It can feel a little daunting trying to figure out what you need to focus on, so we made it easy: These are the resolutions everyone else is taking on in 2021, according to a survey by Wallethub, and you should, too. Plus â how to accomplish them.
1. Make A Realistic Budget And Stick To It
This one sounds familiar, right? Oft-regarded as Old Faithful when it comes to New Yearsâ resolutions, it holds that title for good reason. Having a budget you can actually stick to will set you up for financial success, no matter what your goals are.
Itâs easy to slip away from our good financial habits as the year goes on, so itâs particularly important to find a budgeting system that works for your lifestyle and wonât be hard to maintain.
We recommend the 50/30/20 method. Itâs simple, yet effective, and has a bit of a cult following, too! Hereâs how it shakes out:
50% of your take-home income every month covers your fixed expenses â rent, utilities, groceries, minimum debt payments, etc. 30% goes towards the things you can live without, but donât want to (like food delivery, a Netflix subscription and travel). Finally, the last 20% of your monthly income is dedicated to your financial goals.
2. Look For A Better Job: Make up to $69/Hour
The most surefire way to achieve your financial resolutions and stay within that budget you made is to earn more money.
2020 made that really hard for most people. Which is why finding a better job, that you actually enjoy â and will pay you more â is a top resolution for 2021.
But what if you could create that higher-paying and more rewarding job? Thereâs an ideaâ¦
Can you open an excel spreadsheet? Does earning $69 an hour sound appealing? How about the freedom to work remotely while helping others succeed?
Those are the perks of working as a bookkeeper, says Ben Robinson, a CPA and business owner who teaches others to become virtual bookkeepers through online courses called Bookkeepers.com.
You donât have to be an accountant or even really good at math to be successful in this business. In fact, all you need are decent computer skills and a passion for helping business owners tackle real-world problems. The ability to stay moderately organized is helpful, too.
You can make up to $69 an hour, according to data from Intuit, the creator of QuickBooks, and you have no commute. Itâs a great opportunity for parents who want a part-time job, recent college grads or anyone who wants to bring in real money working from home.
Robinson shares what it takes to be a virtual bookkeeper, plus tips for making this career work for you in his free class at Bookkeepers.com. If you stick with the classes, you could be running your own business in just a few months.
3. Pay Off Credit Card Debt: Wipe Out All Your Debt by Tomorrow
2020 was actually a good year for paying down credit card debt â Americans did more of it this year than they ever have.
But thereâs still work to be done, which is why paying off credit card debt is one of the top financial resolutions this year. Because if you still have credit card debt, you know. The anxiety, the interest rates, the fear youâre never going to escapeâ¦
And the truth is, your credit card company doesnât really care. Itâs just getting rich by ripping you off with high interest rates. But a website called AmOne wants to help.
If you owe your credit card companies $50,000 or less, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.
The benefit? Youâll be left with one bill to pay each month. And because personal loans have lower interest rates (AmOne rates start at 3.49% APR), youâll get out of debt that much faster. Plus: No credit card payment this month.
AmOne wonât make you stand in line or call your bank, either. And if youâre worried you wonât qualify, itâs free to check online. It takes just two minutes, and it could help you pay off your debt years faster.
4. Monitor Your Credit Report
Did your credit score take a dive this year? Or is still stuck at a âfairâ grade? Then monitoring any changes on your credit reporting and working to improve your score should be one of your financial resolutions for this year, too.
When it comes to your credit score, itâs important to stay organized and keep tabs on it. After all, itâll play an essential role in any big purchase you want to make â whether thatâs a home or a car.
So if youâre looking to get your credit score back on track â or even if it is on track and you want to bump it up â try using a free website called Credit Sesame.
Within two minutes, youâll get access to your credit score, any debt-carrying accounts and a handful of personalized tips to improve your score. Youâll even be able to spot any errors holding you back (one in five reports have one).
James Cooper, of Atlanta, used Credit Sesame to raise his credit score nearly 300 points in six months.*** âThey showed me the ins and outs â how to dot the Iâs and cross the Tâs,â he said.
Want to check for yourself? Itâs free and only takes about 90 seconds to sign up.
5. Get Insured In Case Of A Catastrophe. You Could Give Your Family up to $1 Million
Talk about a scary year. If a global pandemic didnât have you thinking about your own mortality, what else could? With that thought in mind, people are adding âbuy life insuranceâ to their list of 2021 to-dos.
Have you thought about how your family would manage without your income if something happened to you? How theyâll pay the bills? Send the kids through school? Nowâs a good time to start planning for the future by looking into a term life insurance policy.
Youâre probably thinking: I donât have the time or money for that. But your application can take minutes â and you could leave your family up to $1 million with a company called Bestow.
Rates start at just $16 a month. The peace of mind knowing your family is taken care of is priceless.
If youâre under the age of 54 and want to get a fast life insurance quote without a medical exam or even getting up from the couch, get a free quote from Bestow.
6. Add A Month To Your Emergency Fund
Having an emergency fund is important; you know that. But itâs easy to deprioritize it when things are going fine. And as 2020 showed us, you can lose your job at the drop of a hat, meaning a full emergency fund can be what keeps your lights on.
So prioritize your emergency fund this year. If you donât have one yet, start by opening an account that will help you grow your money.
One way to do that is with a company called Aspiration. It lets you earn up to 16 times the average interest on the money in your account.
Not too shabby!
Enter your email address here to get a free Aspiration Spend and Save account. After you confirm your email, securely link your bank account so they can start helping you get extra cash. Your money is FDIC insured and they use a military-grade encryption which is nerd talk for âthis is totally safe.â
7. Pay Bills Right After Payday
Itâs easy to get swept up in the joy that is payday and immediately start buying things you donât need. But as the final financial resolution on this list, paying your bills right away can help keep the rest of your goals on track.
It means you can avoid late fees on your utilities, which can really add up and destroy your budget. You can pay off your credit card debt without mounting interest charges. And you can prevent any hiccups that would dock your credit score a few points.
Whatever your financial goals are this year, we know you can achieve them! Hereâs to making 2021 your best financial year yet.
Kari Faber is a staff writer at The Penny Hoarder.
***Like Cooper, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.
Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
When it comes to excuses consumers give for their poor credit scores, banks and lenders have heard it all.Â
Maybe you lost your job and couldnât pay your student loan payment for a few months. Or perhaps you thought youâd gotten a deferment but were too busy job hunting to find out for sure.Â
Maybe you thought you paid your credit card bill but itâs actually sitting on your kitchen counter waiting for the mail.
Whatever the reason for your low credit score, one thing is for certain â lenders donât care.
In fact, banks and other lenders lean on your credit score and other factors to determine whether they should approve you for a credit card or a loan â and thatâs about it. Your personal situation is never considered, nor should it be.
It would be wonderful if credit card companies understood that âlife happensâ and made special exceptions to help people out, but that’s not the world we live in. As most of us already know, thatâs not typically how credit works. Credit cards are backed by banks, and banks have rules for a reason.
Now, hereâs the good news: Credit cards can help rebuild your credit, earn cash back for each dollar you spend, make travel easier, and serve as an emergency fund if youâre stuck paying a huge bill at the last minute. This is true even if you have poor credit, although the selection of credit cards you can qualify for may be somewhat limited.Â
Keep reading to learn about the best credit cards for bad credit, how they work, and how you can get approved.
Best Cards for Bad Credit This Year
Before you give up on building credit, you should check out all the credit cards that are available to consumers who need some help. Our list of the best credit cards for bad credit includes some of the top offers with the lowest fees and fair terms.
Total Visa®
Discover it® Secured
Credit One Bank® Visa® Credit Card
Secured Mastercard® from Capital One®
Milestone® Gold Mastercard®
Credit One Bank® Unsecured Visa® with Cash Back Rewards
#1: Total Visa®
The Total Visa® is one of the easiest credit cards to get approved for in today’s market, and itâs easy to use all over the world since itâs a true Visa credit card. However, this card does come with high rates and fees since itâs available to consumers with poor credit or a limited credit history.
Processing your application will cost $89, which is extremely high when you consider the fact that most credit cards donât charge an application fee. Youâll also pay an initial annual fee of $75 and a $48 annual fee for each year thereafter.
Once you sign up, youâll be able to pick your preferred card design and your credit card payments will be reported to all three credit reporting agencies â Experian, Equifax, and TransUnion. This is the main benefit of this card since your on-time payments can easily help boost your credit score over time.Â
For the most part, the Total Visa® is best for consumers who donât mind paying a few fees to access an unsecured line of credit. Since this card doesnât dole out rewards, however, there are few cardholder perks to look forward to.Â
APR: 35.99% APR
Fees: Application fee and annual fee
Minimum Credit Score: Not specified
Rewards: No
#2: Discover it® Secured
While secured cards donât offer an unsecured line of credit like unsecured credit cards do, they are extremely easy to qualify for. The Discover it® Secured may not be ideal for everyone, but it does offer a simple online application process and the ability to get approved with little to no credit history.
Keep in mind, however, that secured cards do work differently than traditional credit cards. With a secured credit card, youâre required to put down a cash deposit upfront as collateral. However, you will get your cash deposit back when you close your account in good standing.
Amazingly, the Discover it® Secured lets you earn rewards with no annual fee. Youâll start by earning 2% back on up to $1,000 spent each quarter in dining and gas. Youâll also earn an unlimited 1% back on everything else you buy.
The Discover it® Secured doesnât charge an application fee or an annual fee, although youâll need to come up with the cash for your initial deposit upfront. For the most part, this card is best for consumers who have little to no credit and want to build their credit history while earning rewards.
APR: 24.74%
Fees: No annual fee or monthly fees
Minimum Credit Score: Not specified
Rewards: Yes
#3: Credit One Bank® Visa® Credit Card
The Credit One Bank® Visa® Credit Card is another credit card for bad credit that lets you earn rewards on your everyday spending. Youâll earn a flat 1% cash back for every dollar you spend with this credit card, and since itâs unsecured, you donât have to put down a cash deposit to get started.
Other benefits include the fact you can get pre-qualified for this card online without a hard inquiry on your credit report â and that you get a free copy of your Experian credit score on your online account management page.
You may be required to pay an annual fee up to $95 for this card for the first year, but it depends on your creditworthiness. After that, your annual fee could be between $0 and $99.
APR: 19.99% to 25.99%
Fees: Annual fee up to $95 the first year depending on creditworthiness; after that $0 to $99
Minimum Credit Score: Not specified
Rewards: Yes
#4: Secured Mastercard® from Capital One®
The Secured Mastercard® from Capital One® is another secured credit card that extends a line of credit to consumers who can put down a cash deposit as collateral. This card is geared to people with bad credit or no credit history, so itâs easy to get approved for. One downside, however, is that your initial line of credit will likely be just $200 â and that doesn’t give you much to work with.Â
On the upside, this card doesnât charge an annual fee or any application fees. That makes it a good option if you donât want to pay any fees you wonât get back.
Youâll also get access to 24/7 customer service, $0 fraud liability, and other cardholder perks.
APR: 26.49%
Fees: No ongoing fees
Minimum Credit Score: Not specified
Rewards: No
#5: Milestone® Gold Mastercard®
The Milestone® Gold Mastercard® is an unsecured credit card that lets you get pre-qualified online without a hard inquiry on your credit report. You wonât earn any rewards on your purchases, but you do get benefits like the ability to select your cardâs design, chip and pin technology, and easy online account access.
You will have to pay a one-time fee of $25 to open your account, and thereâs an annual fee of $50 the first year and $99 for each year after that.
APR: 24.90%
Fees: Account opening fee and annual fees
Minimum Credit Score: Not specified
Rewards: No
#6: Credit One Bank® Unsecured Visa® with Cash Back Rewards
The Credit One Bank® Unsecured Visa® with Cash Back Rewards lets you earn 1% back on every purchase you make with no limits or exclusions. Thereâs no annual fee or application fee either, which makes this card a winner for consumers who donât want to get hit with a lot of out-of-pocket costs.
As a cardholder, youâll get free access to your Experian credit score, zero fraud liability, and access to a mobile app that makes tracking your purchases and rewards a breeze. You can also get pre-qualified online without a hard inquiry on your credit report.
APR: 25.99%
Fees: No annual fee or application fee
Minimum Credit Score: Not specified
Rewards: Yes
The Downside of Credit Cards with Bad Credit
While your odds of getting approved for one of the credit cards for bad credit listed above are high, you should be aware that there are plenty of pitfalls to be aware of. Here are the major downsides youâll find with these credit cards for bad credit and others comparable cards:
Higher fees: While someone with excellent credit can shop around for credit cards without any fees, this isnât the case of you have bad credit. If your credit score is poor or you have a thin credit profile, you should expect to pay higher fees and more of them.
Higher interest rates: While some credit cards come with 0% interest for a limited time or lower interest rates overall, consumers with poor credit typically have to pay the highest interest rates available today. Some credit cards for bad credit even come with APRs as high as 35%.
No perks: Looking for cardholder benefits like cash back on purchases or points toward airfare or movie tickets? Youâll need to wait until your credit score climbs back into âgoodâ or âgreatâ territory. Even if you can find a card for applicants with bad credit that offers cash back, your rewards may not make up for the higher fees.
No balance transfers: If youâre looking for relief from other out-of-control credit card balances, look elsewhere. Credit cards for bad credit typically donât offer balance transfers. If they do, the terms make them cost-prohibitive.
Low credit limits: Credit cards for bad credit tend to offer initial credit limits in the $300 to $500 range with the possibility of increasing to $2,000 after a year of on-time monthly payments. If you need to borrow a lot more than that, youâll have to consider other options.
Security deposit requirement: Secured credit cards require you to put down a cash deposit to secure your line of credit. While this shouldnât necessarily be a deal-breaker â and it may be required if you canât get approved for an unsecured credit card â youâll need to come up with a few hundred dollars before you apply.
Checking account requirement: Most new credit card accounts now require cardholders to pay bills online, which means youâll need a checking account. If youâre mostly âunbanked,â you may need to open a traditional bank account before you apply.
Benefits of Improving Your Credit Score
People with bad credit often consider their personal finances a lost cause. The road to better credit can seem long and stressful, and itâs sometimes easier to give up then it is to try to fix credit mistakes youâve made in the past.
But, there are some real advantages that come with having at least âgoodâ credit, which typically means any FICO score of 670 or above. Here are some of the real-life benefits better credit can mean for your life and your lifestyle:
Higher credit limits: The higher your credit score goes, the more money banks are typically willing to lend. With good credit, youâll have a better chance at qualifying for a car loan, taking out a personal loan, or getting a credit card with a reasonable limit.
Lower interest rates: A higher credit score tells lenders youâre not as risky as a borrower âa sign that typically translates into lower interest rates. When you pay a lower APR each time you borrow, you can save huge amounts of money on interest over time.
Lower payments: Borrowing money with a lower interest rate typically means you can usually get lower payments all your loans, including a home loan or a car loan.
Ability to shop around: When youâre an ideal candidate for a loan, you can shop around to get the best deals on credit cards, mortgages, personal loans, and more.
Ability to help others: If your kid wants to buy a car but doesnât have any credit history, better credit puts you in the position to help him or her out. If your credit is poor, you wonât be in the position to help anyone.
More options in life: Your credit score can also impact your ability to open a bank account or rent a new apartment. Since employers can request to see a modified version of your credit report before they hire you, excellent credit can also give you a leg up when it comes to beating out other candidates for a job.Â
In addition to the benefits listed above, most insurance companies now consider your credit score when you apply for coverage. For that reason, life, auto, and home insurance rates tend to be lower for people with higher credit scores.
This may seem unfair, but you have to remember that research has shown people with high credit scores tend to file fewer insurance claims.
How to Improve Your Credit: Slow and Steady
When you have a low credit score, there are two ways to handle it. If you don’t mind the consequences of poor credit enough to do anything about it, you can wait a decade until the bad marks age off your credit report. Depending on when your creditors give up and write off your debt, you may not even need to wait that long.
If you donât like the idea of letting your credit decay while you wait it out, you can also try to fix your past credit mistakes. This typically means paying off debt â and especially delinquent debts â but it can also mean applying for new loan products that are geared to people who need to repair their credit.
If you decide to take actionable steps to build credit fast, the credit cards on this page can help. Theyâll give you an opportunity to show the credit bureaus that youâve changed your ways.
Before you take steps to improve your credit score, however, keep in mind all the different factors used to determine your standing in the first place. The FICO scoring method considers the following factors when assigning your score:
On-time payments: Paying all your bills on time, including credit cards, makes up 35% of your FICO score. For that reason, paying all your bills early or on time is absolutely essential.
Outstanding debts: How much you owe matters, which is why paying off your credit cards each month or as often as possible helps your score. According to myFICO.com, the amounts you owe in relation to your credit limits make up another 30% of your FICO score.
New credit: Apply for too many new cards or accounts at once can impact your score in a negative way. In fact, this determinant makes up another 10% of your FICO score.
Credit mix: Having a variety of open accounts impresses the credit bureau algorithm Gods. If all you have are personal loans right now, mixing in a credit card can help. If you already have four or five credit cards, it may be wise to back off a little.
Length of credit history: The length of your credit history also plays a role in your score. The longer your credit history, the better off you are.
If you want to improve your credit score, consider all the factors above and how you can change your behavior to score higher in each category. Itâs pretty easy to see how paying all your bills early or on time and paying off debt could make a big positive impact on your credit score when you consider that these two factors alone make up 65% of your FICO score.
If you want a way to track your progress, also look into an app like Credit Karma, one of my favorite tools. This app lets you monitor your credit progress over time and even receive notifications when your score has changed. Best of all, itâs free.
Should You Use a Credit Card to Rebuild Your Credit Score?
If youâre on the fence about picking up a credit card for bad credit, your first step should be thinking over your goals. What exactly are you trying to accomplish?
If youâre looking for spending power, the cards on this list probably wonât help. Some are secured cards, meaning you need a cash deposit to put down as collateral. Others offer low credit limits and high fees and interest rates, making them costly to use over the long-term.
If you really want to start over from scratch and repair credit mistakes made in the past, on the other hand, one of these cards may be exactly what you need. If youâre determined to improve your score, they can speed things along.
You may pay higher fees and interest rates along the way, but itâs important to remember that none of the cards on this list need to be your top card forever. Ideally, youâll use a credit card for poor credit to rebuild your credit and boost your score. Once youâve reached your goal, you can upgrade to a new card with better benefits and terms.
What if you could pay for your next date night or trip to the grocery storeâwithout having to dip into your budget? If you use cash back to your advantage, these benefits could become a reality.
In the past, you had to swipe a credit card to earn cash back. But with Discover Cashback Debit, you can earn cash back by spending with your debit card (you read that right: debit card), allowing you to reach your financial goals without the risk of going into debt.
To best use this budget bonus, you might be wondering, âWhat should I do with my debit card cash back?” According to Eric Rosenberg, financial consultant and founder of the website Personal Profitability, âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
Read on for things to do with cash back to help you achieve the right balance of responsibility and fun:
1. Save for a rainy day
Sometimes it seems like everything goes wrong all at once: You get a flat tire. The sink starts leaking (ugh, again!). You get a parking ticket. Since life can throw unexpected, costly curveballs your way, it’s important to have an emergency fund. Also known as a rainy day fund, an emergency fund is cash that’s set aside to cover unplanned, yet crucial, expenses.
âSo many people can’t afford the cost of an emergency from their savings,” Rosenberg says. If you don’t have this type of fund to fall back on, starting an emergency fund (or adding to an existing fund) could be a top priority when evaluating what to do with your cash back from a debit card.
When thinking about building an emergency fund as a thing to do with cash back, note that experts typically recommend putting aside at least three to six months of living expenses for this purpose. To maximize your emergency fund, you may want to consider moving these savings (and the cash back you’re putting toward this fund) to a high-yield savings account. That way, your emergency fund can steadily grow with interest until you need it. (P.S. More to come on how to automatically move your cash back into savings.)
2. Pay down your debt
If you owe, it can be tough to climb your way out of debt. Whether it’s from credit cards, student loans or a mortgage, interest is accruing and costing you money. Learning how to use your debit card cash back to offset debt can help you save on those interest payments down the road.
According to consumer money-saving expert Andrea Woroch, when you’re focusing on paying off debt, “It’s natural to cut back where you can. But you may eventually hit a wall where you can’t find ways to tackle expenses any further,” she says. That’s where learning how to use debit card cash back comes into play. Since a debit card with a cash back feature can allow you to earn for your everyday spending, those earnings can become a new source for paying down debt, Woroch adds.
3. Shore up for those special moments
You know you’d like to have more nights out, but they don’t come cheap. What to do with your cash back could include spending on special outings, Woroch says. Is there a restaurant you and your significant other have been dying to try? Is there a concert the whole family is super eager to see? There may also be larger events with family and friends to think aboutâplanning a milestone birthday or anniversary or that getaway with college buds. You can set aside your debit card cash back and earmark it for your relationships to create memories that will last a lifetime.
âYou could put [your cash back] into savings or treat yourself to something from your wish list.”
4. Support your children’s allowance
If you have kids, you’ve probably heard this one before: âMom, Dad, can I have some money?” Sometimes it can feel like you’re a walking ATM. One thing to do with cash back is to set aside an allowance for your kids. You can then use this cash to teach your children good savings habits and how to manage money on a monthly basis for the things they need and want, says Rosenberg of Personal Profitability. The best part: The money isn’t really coming out of your budget since you’re earning it for your everyday expenses and from money you’d be spending anyways. Win-win.
5. Stockpile funds for the holidays
In thinking about what to do with your cash back, spending it on gift-giving and holiday expenses may be a good goal. “Some people go into debt during the holidays. To help avoid that circumstance, use your cash back to get ahead,” Woroch says.
And, really do think ahead if holiday spending is on your list of things to do with your cash back. The earlier you stash your cash back away for the holidays, the longer it will have time to accrue if you put it in a savings account for safekeeping. Season’s greetings may be the last thing on your mind while you’re flipping burgers on the 4th, but planning ahead could really impact your end-of-year festive spending.
How to maximize your cash back
Now that you know what to do with your cash backâwhether it’s going to work for your emergency fund or funding emergency holiday giftsâconsider steps you can take to get the most out of your extra dough. For example, find a rewards program that matches your spending style. With Discover Cashback Debit, you can earn 1% cash back on up to $3,000 in debit card purchases each month.1 That’s up to $360 a year. Not too bad for just going about your daily debit card spending.
Get 1% cashback on Debit from Discover. 1% cashback on up to $3000 in debit card purchases every month. Limitations apply. Excludes Money market accounts.Discover Bank,Member FDIC.Learn More
To make the process of saving that extra cash even easier, consider opening a Discover Online Savings Account. If you sign up for Auto Redemption to Savings, your cash back will be automatically deposited into your savings account every month.
âThe hardest part about saving for many people is remembering to make a transfer or take the cash to the bank,” Rosenberg says. “If you can automate it, you are setting yourself up for success. It’s like saving while you sleep.”
If you’re still considering how to use your debit card cash back to the fullest, Woroch suggests paying for group purchases when you’re out with family or friends. “Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment],” Woroch says. “This way you can benefit from earning more rewards.”
When it comes to how to use your debit card cash back, the key is to make sure you have enough in your account and aren’t spending too much if you offer to temporarily foot the bill. You don’t want to overextend in order to earn, as you could be hit with overdraft fees or not have enough in your account to cover bill payments, Woroch says.
“Whether you’re going to dinner or renting a condo, cover the entire expense on your card and ask friends and family to pay you back with cash or [via mobile payment]. This way you can benefit from earning more rewards.”
Get ahead with a combination of strategies
If you’re looking for things to do with cash back, using these tactics can help you improve your financial foundation and have some fun along the way. Understand your needs and goals to help you create a cash back plan, and then maximize your strategy with tools to help you automatically direct your cash back to savings to limit the temptation to spend the money elsewhere.
“We are all so busy these days, and managing money is often pushed down on the to-do list,” Woroch says. Learning how to use your debit card cash back can help you put money management front and center. Start earning!
1 ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal, who also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries.
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