Everyone should consider getting liability insurance, regardless of their circumstances. You might think you’ll never be responsible for injury or property damage; however, the truth is that mistakes happen. Unfortunately, when accidents occur, no one is immune to liability. If you want to cover yourself in case of a liability lawsuit, consider getting liability insurance. So, if something happens, you’ll have insurance coverage to protect you and pay for your suit if you lose, meaning you’ll have minimal out-of-pocket expenses. However, there are instances where the amount owed is more significant than your policy’s coverage limit. If that’s the case, you’ll have to pay the difference. With that in mind, it is best to have coverage, so umbrella insurance is essential. This article will discuss the necessary information regarding umbrella insurance.

What is Umbrella Insurance?

Umbrella or personal liability insurance will help protect you if you are party to a lawsuit and have damages larger than your coverage limit. An umbrella policy will help pay the difference, so you aren’t paying the total entirely out of pocket. Even if you already have homeowner’s, auto, or boat insurance, it is still best to get umbrella insurance. Umbrella insurance works with your other plans; however, it can protect you in areas your other policies don’t cover. In addition, umbrella insurance coverage provides additional liability coverage that car rental insurance does not cover. Also, umbrella insurance covers slander, libel, and false imprisonment claims, which other insurance policies do not cover. One of the benefits of umbrella insurance is that it provides much broader coverage than other policies. For example, most policies cover specifically named incidents. In contrast, umbrella insurance covers everything except for specific exemptions listed in the policy.

Umbrella Insurance vs. Excess Liability Insurance

Although the two policies are similar, excess liability insurance is not the same as umbrella insurance. Both insurance policies extend your coverage limit; however, umbrella insurance provides additional protection that your other policies do not cover. In other words, umbrella insurance offers a broader range of coverage than excess liability insurance.

How Does Umbrella Insurance Work?

To better understand umbrella insurance and how it works, let’s look at some examples where your base policies may not cover you while umbrella insurance would: Here is a detailed example: You run a stop sign and hit another vehicle. The car is damaged, and several people are injured. The vehicle requires $20,000 for repairs, while the cost of injuries totals $250,000. In addition, the driver you hit was a surgeon. Unfortunately, they broke their arm, which prevented them from working until they fully recovered. They sue you for $150,000. The total costs, including a lost lawsuit, would be $420,000. In this example, your primary insurance policy would likely not cover all the costs of the damages, including the other car, medical bills, and lawsuits. For instance, if your insurance policy only covered $200,000 for the incident, you would need to pay the remaining balance of $220,000. However, if you have umbrella insurance, the policy would cover the remaining balance, including legal fees for the lawsuit.

Do I Need Umbrella Insurance?

Unfortunately, getting sued is not uncommon; anybody can be buried in lawsuits and legal fees, ruining them financially. Even if you think you’ll never get sued, you can never be too sure. Deciding whether you need umbrella insurance can be case-dependent. But, you should be aware that anyone can be sued, and many are not prepared to pay legal fees and the overall lawsuit cost. With that in mind, even wealthy people can benefit from umbrella insurance since it protects their savings and assets from being taken from a lost case. The truth is that anyone can benefit from umbrella insurance. At the very least, it’ll give you peace of mind and, at most, could save you millions.

Takeaway

Deciding whether umbrella insurance is right for you can take some consideration. It’s important to note that it can mean the difference between being in massive debt versus paying nothing if there is an incident. Consider how much risk you’re at for liability and the value of your assets to help your decision. In addition, it may help to speak with an insurance agent to assess your risk and adequately inform you about the policy.

What Is Umbrella Insurance?

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Furnishing a new home or a new apartment can be stressful, especially if you don’t have a plan. There are multiple factors to consider, like So even if you start the project with optimism, it can become a challenging experience if you lack a plan. Luckily, furnishing your new space doesn’t need to be a headache. Instead, shopping for furniture can be fun and much easier if you plan and organize your ideas.

Creating a Budget

Creating a realistic budget is especially important once you sign a lease and pay your security deposit. You’ll need to consider any monthly payments or other expenses you have when creating your furnishing budget. If you have a low budget, keep in mind that you can always purchase less expensive furniture and replace it once you’ve settled in and saved more money. In addition, ask yourself questions about your current situation, like: If you have pets or are planning to move across the country in a few years, keeping your budget relatively low may be best. However, spending more on your furnishings may be best if you plan to settle in your new space for a while, especially since you’ll get more use out of them.

Spend or Save

Even though it’s always nice to save money, sometimes spending more on furniture is tempting. If that’s the case, then consider the following factors:

Shopping for Furniture

Shopping for furniture can be exciting if you know what you want and where to look. However, before you visit your local furniture shop or check online, measure the dimensions of your space. Get the floor and wall space dimensions and write it all down. Ultimately, this will save you much stress while you’re at the store and uncertain if something will fit in your living space. Next, it’ll be time to decide if you want to shop online or in person. For example, you can buy pretty much any furniture online; however, you may still prefer to shop in-store to see the items in person. Choosing a store that fits your budget and style needs is best. If you are working with a lower budget, try looking at your local secondhand stores and consignment shops. You can also check online marketplaces for people selling in your area. Also, depending on where you live and the time of year, you might be able to snag quality pieces of furniture that people are selling. Be on the lookout for estate, moving, or garage sales. If you have a large budget, you will have more options. Try researching online and then visit the store to review your options.

Should I Rent?

Renting furniture is a viable option too. It’s perfect for people who don’t plan on living in their space for long or want to wait to buy furnishings. However, renting does offer some flexibility. For example, some companies allow you to rent while making low monthly payments. Then, if you end up liking the piece of furniture, you’ll be able to purchase it by paying the difference. Renting furniture does give you access to high-quality, clean furniture until you’re ready to buy your own. Also, it is fast and easy because you typically don’t move the furniture yourself. When your rental term ends, the company will arrange pickup for the item. Plus, if you’re living in a place temporarily, you’ll save money.

Takeaway

Furnishing your new place is a big step, but it doesn’t have to be stressful. Typically, it is best to write out a plan for your furnishings, including your budget, what you need, and the dimensions of your space. Planning will help make the process easier.

Furnishing Your New Space

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If you’re looking to borrow money or rent an apartment, typically, you’ll need a credit reference. Credit references demonstrate an applicant’s ability to make timely payments.

What Is a Credit Reference?

Credit references are documents that indicate your creditworthiness to potential lenders or landlords. Although the most common type of credit reference is your credit history records, there are other options to prove your creditworthiness to potential lenders. Credit references provide insight into your borrowing ability and whether you can repay future loans. In addition, it also includes information about your current debt situation. For example, suppose your credit score is good, and you have a record of timely payments. In that case, the lender will probably accept your loan application. In contrast, having a history of falling behind on debt payments and a poor credit score would likely reject your application.

Types of Credit References

There are different types of credit references, each with varying degrees of effectiveness. Here are some credit references to know about:

Credit Report

Credit reports are the most popular of all credit references. Generally, employers, lenders, and landlords use credit reports to check your creditworthiness and financial standing. While evaluating your credit history, potential lenders consider your account’s age, the number of credit inquiries, and current debt level. You’ll probably face rejection if you have a poor credit score, many credit inquiries, or a large debt. Credit reports can be helpful since they contain your debt and payment history information. Remember, you can get a free copy of your credit report each year from the three major credit reporting bureaus by visiting AnnualCreditReport.com.

Asset Documentation

Asset documentation is another type of credit reference issued by financial institutions. Typically, the documents list your assets, such as savings accounts, stocks, bonds, or retirement funds. Having assets can increase your creditworthiness as it shows you can pay off your debts in the future.

Character Reference

A character reference is a credit reference obtained from a previous lender, landlord, or employer. It is a document through which your past lender, landlord, or employer can vouch for your character, integrity, and ability to pay off future debts. A character reference letter is beneficial if you are new to the U.S. or have zero credit history. For example, suppose you’ve paid off your past loans on time. In that case, you can have your previous lender vouch for you, thus improving your creditworthiness. Although character references are not an actual reflection of your financial condition or a foolproof credit reference, they can be an effective way to showcase your finances. They can improve your chances of getting a loan or renting an apartment.

Who Needs a Credit Reference?

You might need credit reference in the following situations:

Takeaway

Good credit references can help you get a loan or rent an apartment. In addition, you can get better rates and terms based on your credit score. Also, a good credit score enables you to get utility services without paying a hefty security deposit. An excellent credit reference can also give you more choices regarding where to get a loan or rent a place. It can also get you insurance at lower rates since most states allow insurance companies to use credit scores to determine their rates.

What Is a Credit Reference?

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Minimum payments seem like a great option for paying off your credit card debt— you can pay a low amount, avoid late fees, and keep your account in good standing. However, avoid paying the minimum amount unless you can’t afford to do otherwise. You might wonder why making only minimum payments could put you in a difficult situation when paying off your credit card debt. Over time, your balance increases because it’s accruing interest, making it take much longer to pay off. Plus, by the time you pay off your balance, you’ll have spent way more money on interest alone when compared to your original balance. This article will discuss minimum payments, their impact on your debt, and how to pay more.

What Is a Minimum Payment?

A minimum payment is the lowest amount you can pay on a credit card each month while avoiding late fees and keeping your account in good standing. Paying the minimum balance every month allows you to avoid penalty APRs, late fees, and any bad marks on your credit report. Making the minimum payment on your card will allow you to grow your credit while avoiding additional fees. However, if you can pay more, you should.

Impact of Paying the Minimum

Even if paying the minimum amount keeps you out of credit trouble, doing so will eventually come back to bite you. Each time you pay the minimum amount, the other money you owe is still outstanding and accumulating interest charges. Ultimately, you’ll have to pay that amount off. The longer you wait, the more significant that balance becomes, making it more challenging to pay off. If you’re not paying off your entire balance by the due date, your debt will accrue interest, and you’ll owe more money. Meaning, that each time you only pay the minimum amount, your balance will naturally increase due to your card’s interest rate. Paying off the entire balance is the only way to avoid accumulating interest. Let’s take an outstanding balance of $5,000, as an example, on a card that charges a 15% interest rate. Paying only 2.5% of the unpaid balance each month will take you over 18 years to repay the debt. Over those 18 years, you’ll pay almost the same amount you owe in interest charges. Check the “Minimum Payment Warning” on your credit card bill. It’ll show exactly how much credit card debt you’ve accumulated in the account. If you’ve only paid the minimum amount, it’ll indicate how many years it’ll take for you to pay it off. You might be surprised how long it’ll take.

Should I Pay More?

It is always best to pay more than the minimum amount. Credit card companies establish a low minimum balance. Typically, it’s either a fixed amount or a percentage of your balance. For example, it could be $25, or one or two percent of your debt, plus fees and accrued interest. While you can avoid late fees by paying the minimum each month, you’ll eventually pay more than when you started. If you pay more than the minimum amount, you’ll have less debt, making it easier to pay off in time. Try revisiting your “Minimum Payment Warning.” You’ll determine how long it’ll take to pay off the balance with your new payment amount. For example, if you start paying triple the minimum amount every month, you’ll pay off your debt by one-third of the time listed on the bill. If you can afford to pay more than the minimum, you should. If you can’t, you should consider cutting down on other expenses so you can make larger payments each month. Paying a little more each month can make a difference in the long run.

Takeaway

Minimum payments seem like a great idea; however, knowing what they are and how they can impact your finances is essential. Paying the minimum each month may offer more flexibility with your finances. Still, you’ll spend more money over time, getting you into more debt. It’s best to pay more if possible, and the better you and your finances will be. Paying down the entire balance each month is best to avoid accruing any interest and increasing your debt.

Making Only Minimum Payments

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Managing household expenses, for many people, is not a fun thing to do. But as the ball drops in Times Square, many are resolving to make it a goal for the coming year. Keeping track of and managing your finances and creating an efficient household budget is essential and will help you manage your spending within the limits of your finances.

Why Is It Important to Have a Household Budget?

Creating and maintaining a manageable household budget is a financial resource you simply cannot overemphasize. If you are looking for financial security for yourself and/or your family, getting your finances under control is your only answer. If you are not convinced, below are three reasons why a household budget is essential.
  1. It Ensures You Are Not Spending Money You Don’t Have Too many individuals spend more money than they actually have, and it is usually because of credit cards. In fact, according to WalletHub, each household’s average credit card debt was at $9,260 in Q2 2022. Individuals who abuse and overuse their credit cards do not always realize they are spending more than they have until they begin drowning in debt. If you create a budget and stick with it, you will not get yourself in this situation. You will know exactly:
    • Your earned monthly income
    • The amount you can afford to spend each month
    • The amount you will need to save
  2. It Helps You to Stay On Track With Long-Term Goals A household budget will help you determine your long-term goals and allow you to work towards them. Without a plan in place, you will end up drifting through life aimlessly, throwing money at shiny impulse buys. You will not be able to save money for that much-needed vacation, new car, or a downpayment on your new house if you are spending like this. A budget will force you to map your goals out, save your money, and keep track of how you are doing so you will be able to finally achieve the goals you set out.
  3. It Helps You to Identify Problem Areas Today, people pull their debit cards out for just about every purchase. However, this can present an issue – you are actually detached from how much those purchases are costing you. Those little amounts that come out of your checking account are easy to ignore. When you have a budget, and you can begin tracking your expenses, you may be surprised. Perhaps you racked up a pizza or food delivery bill the following month, or maybe you went a little overboard on your grocery spending.

Where to Begin

To get started creating a household budget spreadsheet:

Things to Consider When Creating Your Household Budget

Takeaway

A budget provides you with more control over what you are spending your hard-earned money on and shows you the areas you can make cuts if necessary. But, your first step is to create one if you have not already.

New Year? New Budget Resolution

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Bringing sustainable living into your life doesn’t mean drastically changing your lifestyle or increasing your budget to make more sustainable purchases. Instead, making changes to your lifestyle can be as simple as taking the time to ensure that your grocery purchases are sustainable. In addition, eating sustainable foods can lower your carbon footprint, support ethical food systems, and protect ecosystems. Moreover, making sustainable food choices doesn’t necessarily entail spending more money on food. Instead, there are ways to shop for groceries sustainably while keeping a tight budget. In this article, we will guide you through making sustainable food choices.

Before You Begin

While you may want to jump in and head to your local grocery or health food store, you should take a few small steps at home first.

Sustainable Shopping

Making sustainable shopping choices is one of the first and most essential steps to creating sustainable food choices. Here’s what to do:

Reducing Food Waste

Even if you make all these changes to your shopping, you could be doing much better if you’re still throwing out a lot of your food. Did you know that the average U.S. household wastes nearly a third of its food? So even if you’re sure your household isn’t wasting this much, you’re still probably wasting more than you think. You could probably do a better job of reducing that number, whatever it is. Try using the following methods:

Takeaway

Making sustainable food choices doesn’t have to strain your budget. Instead, try planning out your meals and make minor changes to how you think about food. By doing so, you’ll significantly improve your sustainable food choices.

Making Sustainable Food Choices

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Gas prices have been surging in 2021/2022 due to inflation and supply-chain issues related to the pandemic. Then, more recently, the war in Ukraine has caused the price of oil, and therefore gas, to jump even higher. In the United States, we’ve hit all-time highs for gas, the closest prices being the cost of gas after the 2008 financial crisis. So if you’re wondering how to deal with these gas prices, you are not alone. Although there are no ways to avoid the high gasoline prices altogether, there are some ways to help you save on gas and keep your wallet from emptying as quickly.

Save on Gas

Research Gas Prices

Researching gas prices is an effective way to avoid the expensive stations while sticking to the more affordable ones.

Change Your Driving Habits

Altering your driving habits can be beneficial when looking to cut back and save on gas. While it may not be the most favorable option, it will save you the most money.

Takeaway

Unfortunately, gas is a necessary expense for most of us. However, there are ways to lessen that expense. Learning your local gas prices and altering your driving habits will save you the most money. In addition, you can utilize public transportation to get you to your destination. Finally, if you learn how to save money when gas prices are high, you can continue these methods when the prices are lower to keep the savings coming.

Dealing With High Gas Prices

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If you’re shopping for a savings account for a minor child or young adult with minimal or no balance requirement and a short maturity period, try a Small Saver Certificate (SSC).

What Is a Small Saver Certificate?

Small saver certificates, or SSCs, are deposit savings accounts with minimal to no balance requirements and a maturity period ranging from 3 to 24 months. Typically, this type of account targets young adults or minors who are beginning to save money for the first time and will make smaller deposits. SSCs were first set up in the 1980s to provide banks with short-term deposits with a maturity period of 18 months. This type of account was for helping banks compete with money market accounts with the same maturity window. Later on, young adults and children were primarily using SSCs to start saving money. Some of the essential characteristics of an SSC are:

Advantages and Disadvantages

An SSC can help young people develop a savings mentality early on. In addition, due to the nature of an SSC, young adults can make smaller deposits within a fixed term. Once they get an idea of investing in a deposit savings account, they’ll be able to move on to more complex investments, like stock exchanges or investment accounts. An SSC can also help banks develop their younger investors as prospective customers. For example, most banks and credit unions encourage young investors to set up bi-weekly or monthly recurring deposits. Most SSCs do not carry monthly fees and are FDIC- or NCUA-insured, allowing young adults to invest in a safe and controlled environment. Some SSCs also come with checking account-like features like online and mobile banking and paperless check options. An SSC’s main disadvantage is having a much lower interest rate than the industry standard. In addition, SSCs renew automatically at a lower rate. After maturity, investors can transfer the funds from the SSC to a different savings instrument like a CD or money market account for better returns. However, some SSCs still have more competitive terms that match CD’s interest rate and maturity period to lure in young investors.

Using a Small Saver Certificate

A young adult or minor should start investing with an SSC. Saving in an SSC is easy due to its minimum or zero balance requirements. In addition, the shorter maturity period with a decent interest rate also helps. The primary purpose of an SSC is to teach someone how to save for a fixed term. Typically, this applies to young adults and minors looking to be more responsible. Here are some facts you need to know before investing in an SSC:

Withdrawing From an SSC

Small saving certificates are deposit savings accounts that function similarly to a CD. Like a CD, the funds should stay in your SSC until its maturity date, and then you can withdraw the funds without penalty.

SSC vs. Savings Account

While both types of accounts are FDIC- or NCUA-insured, savings accounts are more flexible since they allow withdrawal over a period without penalty. However, SSCs are similar to CDs since they need to hit their maturity date before the withdrawal.

Adding Money to an SSC

SSCs are available in small denominations, like $100 and $200. While some institutions allow you to add money to the account after opening, typically, you’ll increase your deposits by opening new ones.

Takeaway

SSCs are simple deposit instruments that can teach young adults and minors how to save. However, while they can be a great way to build better savings habits, they do not earn like other savings tools.

Understanding a Small Saver Certificate (SSC)

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Credit cards have changed the way we all shop. With a credit card in hand, you can walk into any store and walk out with a purchase. And rather than pay for that purchase out of your current monthly budget or the cash you have on hand, you can pay for it over time, plus interest. But how well do we understand what ‘plus interest’ means? Depending on how you handle making credit card payments, you might go from being a savvy shopper to someone who overpays for things they buy.

What Is Credit Card Interest?

Interest is the price you pay for borrowing money. Credit card issuers typically state their interest rate as an Annual Percentage Rate or APR. You pay interest at the APR rate when you fail to pay the entire balance before the due date. Whenever you fail to pay your entire balance before the due date, the credit card company imposes interest on the unpaid amount, which adds more to your debt. If you fail to pay your balance the following month, you’ll pay interest on top of your interest. Your credit card balance can quickly grow if you consistently leave an unpaid balance at the end of each billing cycle.

Monthly Interest Calculations

Credit card interest is charged monthly, based on your outstanding balance. Each time you carry forward a credit card balance, the interest gets added to the balance based on your APR. Your credit card statement will list what that APR is.

Types of Credit Card Interest

Credit card companies tend to charge a variable interest rate based on fluctuating market conditions. As a result, fixed interest rates are relatively uncommon except for personal loans and mortgage situations. Credit card issuers may also have different types of rates, depending on how you use the card and whether you’re an existing customer or not. Interest can be the following types: For almost all cases, the APR will depend on your credit score. A good credit score (720 or more) can help you qualify for a lower interest rate since your lender will consider you a lower risk. On the other hand, having a poor credit score will increase your interest rate.

Factors Impacting Your Interest

The following factors can influence your credit card’s interest rate:

Prime Rate:

Typically, the Federal Reserve sets a ‘prime rate’ that credit card companies use to establish the rate of interest to be charged for their credit cards. Also, your credit score, credit history, and other factors may be used to determine your credit card’s interest rate.

Hard Credit Inquiry:

The issuing credit card company will perform a hard credit inquiry based on your credit report whenever you apply for a card. The credit inquiry will look at your history of payments, credit score, and the number of credit accounts you own. Due to these criteria, it is best to improve your credit score before applying for a new credit card.

Ways to Lower Your Interest

Credit card interest can easily drain your finances while pulling you into more debt. Here are some tips for lowering your credit card interest while managing your cards better:

Takeaway

Credit cards are great for adding flexibility to your finances while earning rewards. Paying off your entire monthly balance will help you avoid unnecessary credit card interest expenses.

Understanding Credit Card Interest

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Paying your bills on time is not the only way to maintain a good credit score. Controlling your credit utilization and ensuring it stays low is another excellent way to improve your credit score. In a FICO score or VantageScore, you’ll need to keep your credit utilization under 30% to maintain a good credit score.

What Is Credit Utilization?

Essentially, your credit utilization rate compares how much you owe on your credit cards to your total credit limit. This rate shows up as a percentage and significantly impacts your credit score. To calculate your credit utilization rate, you’ll need to do the following: For example, let’s say you own two credit cards with a total credit limit of $10,000. One card carries a balance of $5,000, making your credit utilization rate 50%. The rate represents you using half of your available credit. On the other hand, a lower credit utilization rate means you use less of your available credit. In addition, it shows that you’re managing your credit accounts well by not overextending your finances. Lowering your credit utilization rate can boost your credit score by 30%. It is also essential to keep individual credit card utilization rates low. For example, if you have two credit cards, it is better to have one card carry $3,000 and the other carries $2,000 than one having $5,000. Your overall credit utilization rate still will be 50%; however, one card will have a 60% rate while the other has a 40% rate.

Credit Utilization’s Impact on Credit Score

Your credit card utilization rate plays a significant role in your credit score. The lower your rate is, the higher your score will be. On the other hand, the higher your utilization, the lower your score. To maintain a healthy credit score, you’ll need to keep your expenses in check and avoid having high balances. In addition, the total number of opened credit accounts and your credit history will also matter. For example, using only one of many cards to make purchases can adversely affect your credit score, especially if you have a short credit history. Alternatively, spreading your expenses across multiple cards with excellent credit history can improve your credit score.

Improving Credit Card Utilization

If you want to reduce your credit utilization rate to boost your credit score, try the following steps:

Takeaway

Maintaining a low credit utilization rate while paying off your monthly balances is best. Accomplishing these tasks will drastically improve your credit score while allowing you to enjoy your credit card’s reward program.

How Credit Card Utilization Impacts Your Credit Score

View Resource How Credit Card Utilization Impacts Your Credit Score