How to Save and Spend Money at the Same Time

Many people try to save money by cutting costs and curbing their spending urges. Unfortunately, such a hard-line approach to saving money is a lot like crash dieting – it’s stressful and depressing.

And, worst of all, after you can’t take anymore, you tend to binge on the very thing you’ve been trying to curb, leaving you in an even worse position than you were when you started out.

Can I make a suggestion? Instead of trying to stop your spending cold turkey, learn how to spend money AND save it at the same time. Much like smart dieting, it’s a way of striking a balance between saving money and getting the spending buzz we’re so desperately addicted to.

Here are three ways to do that:

#1: Use Cash.

The problem with credit cards is that they can spell financial disaster in one fell swipe. But when you use cash, you have a tangible limit on how much money you can spend. As a result, you budget your money more carefully and make smarter purchases.

My advice: When you DO have credit cards, promise yourself to use only a maximum of 30% of the available balance – and be sure to pay in full, and on time, every single month. But use cash for the bulk of your spending – if you can manage it, keep your credit cards at home. (And if you’re in massive debt, cut them up into pieces until you pay everything off.)

If you don’t like carrying cash around, then here’s another option: Use debit cards, because you can’t spend what you don’t have with debit cards. Ask your employer if your salary can be directly deposited into your debit card account, and then use the card for your purchases.

#2: Set a Time and Budget Limit for Shopping.

When shopping for anything, make a list of things you need to buy and stick to it – no side trips to the department store! Also, set a budget limit and commit to NOT spending any more than that.

Taking five minutes to make the list and limit can save you hundreds of dollars a month, plus a great deal of stress.

#3: Reward Yourself.

Whenever you successfully save money – such as by getting out of the supermarket or mall within the time limit you gave yourself, or when you successfully stayed within budget for the month – treat yourself to a well-deserved reward.

Buy something nice that costs only a small fraction of the money you saved. As much as you can, buy only one item. The next time you successfully save money, reward yourself again.

The key is to become your own #1 fan when it comes to your financial decisions. Cheer yourself on as you make better and smarter financial decisions. The more you reward yourself, the more you hammer the good habits home.

So remember: Don’t go on a money-diet. Instead, get money-smart. Keep these three tips in mind and start spending money AND saving it at the same time.

For help increasing your credit score to save even more, contact Credit Absolute for a free consultation today!

Source: creditabsolute.com

Dear Penny: I Have $700K, but Spending Gives Me Panic Attacks

Dear Penny,

I’m a 61-year-old woman with $700,000 saved for retirement. I own my own home (with a mortgage), and I have more than five months of daily expenses in a cash account. I have a few investment accounts in addition to the cash and I basically follow a 60/20/20 budget for my after-tax and after-retirement dollars.  

Why can’t I stop freaking out about money? I save for home repairs, and then freak out when I write the check. I save for a new car and then freak out when it’s time to buy it. I HAVE THE MONEY.

I’m not poor, but I have been cash poor in the past. I have always saved for retirement, but I can’t stop freaking out. And by freaking out, I mean literally days of heart-pounding panic attacks where Xanax is my only friend.  

How do other people handle this? 

-L.

Dear L.,

Fear is healthy to a degree. It’s what makes us wear our seatbelts and avoid dark alleys at night. Some level of money-related fear is also a good thing. If you didn’t worry there was a chance you’d run out of it, why wouldn’t you spend every dollar?

But there’s a big difference between healthy fear and the serious anxiety that you’re experiencing. An advice columnist is no substitute for mental health treatment. Whatever you do, it’s essential that you discuss your anxiety with a professional.

I wish I could tell you that $700,000 is more than enough for you. But that wouldn’t be an honest answer. There’s no way I can tell you with certainty that any level of savings is a guarantee you’ll never run out of money. Even billionaires wind up in bankruptcy court. But there’s plenty you can do to reduce the risk of whatever outcome you fear.

Financial health isn’t just about any one number. That $700,000 could be more than enough if you live in a low-cost area and plan to work for several more years. But if you live in Manhattan, you want to retire next year and people in your family frequently live past 100, it could leave you woefully short. Context is what matters here. The amount you have saved is meaningless without knowing your lifestyle, goals and concerns.

What I’m wondering is how much actual planning you’ve done beyond just saving. Do you have an age in mind for when you want to retire? Have you thought about when you’ll take Social Security? Do you plan to stay in your home and, if so, will you be mortgage-free by the time you retire?

All of this may seem overwhelming to think about when money already causes you so much stress. But worrying constantly plays a mind trick on you. You spend so much brain space and energy on worrying that it can feel like you’re actually taking action.

I want you to do what seems counterintuitive and think about the absolute worst-case scenarios. But I don’t want you doing this alone. I’d urge you to meet with a financial adviser, since you have the means to do so.

Write down your biggest fears so that you can discuss them together. Are you afraid of outliving your savings? Are you worried the market will crash right as you’re about to retire? Or that health care costs will eat up your retirement budget?

A financial adviser doesn’t have any special sourcery that can guarantee none of these things will happen. What they can do, though, is help you reduce the risk of those worst-case scenarios. If you’re worried about running out of money, they can help you plan how much you’ll safely be able to withdraw from retirement accounts and when you should take Social Security. Of course they can’t stop a stock market crash from happening, but they can make sure your investments are safely allocated based on your goals.

It sounds like you’re someone with a low risk tolerance, which means you probably want to invest conservatively. Perhaps a good investment for you would be to pay off that mortgage using a chunk of that savings. Will it be scary to fork over that much money at once? Of course, especially since the interest savings will probably pale compared to your investment returns. But if you can sleep more soundly knowing that what’s probably your biggest expense is taken care of, it could be worth it. I’m not saying that’s something you should absolutely do, but it’s worth discussing with your financial pro.

I suspect that when you think realistically about your worst-case scenarios, you’ll realize things aren’t as dire as you imagined. Suppose for some reason you had to quit working tomorrow. Your plans for retirement would probably change significantly. But at the same time, you wouldn’t be left without food or a home.

You say you’ve been cash poor in the past. Yet you overcame that and even managed to save for retirement when you didn’t have much money. You aren’t doomed to repeat your past.

I think if you do what’s scary and face your fears head-on — with the help of both a financial and a mental health professional — you can reduce the anxiety you feel about money. That’s not to say you’ll never worry about money again. But you can get to a place where fears about money aren’t dominating your life.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. Send your tricky money questions to [email protected].

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Source: thepennyhoarder.com

When Will the Next Housing Market Crash Take Place?

I’ve noticed a trend lately. Everyone’s a real estate expert.

It seems the most recent crisis and recovery has turned just about every single person into a guru on all things to do with home buying and selling.

I suppose part of it has to do with the fact that the massive housing bubble that formed a decade ago swept the nation and was front page news.

It also directly affected millions of Americans, many who serially refinanced their mortgages, then found themselves underwater, then eventually short sold, were foreclosed upon, or held on for the ride back up to new heights.

It’s a common conversation piece these days to talk about your local housing market.

Thanks to greater access to information, folks are scouring Redfin and Zillow and coming up with theories about what that home should sell for, or what they should have listed it for.

Neighbors are getting upset when nearby listings are not to their liking for one reason or another. What were they thinking?!

A New Housing Bubble Mentality

  • Real estate is red-hot again thanks to limited supply and intense demand
  • It can feel like an ominous sign that we’re headed down a dark road again
  • But that alone isn’t reason enough for the housing market to crash again
  • There have to be clear catalysts and financial stress for another major downturn

All of this chatter portends some kind of new bubble mentality in my mind, though it seems everyone is just basing their hypotheses on the most recent housing bust, instead of perhaps considering a longer timeline.

One could look at the recent run-up in home prices as yet another bubble, less than a decade since home prices bottomed around 2012.

After all, many housing markets have now surged well beyond their previous lofty levels seen about 15 years ago when home prices peaked.

For example, Denver area home prices are about 86% higher than they were in 2006. And back then, everyone felt home prices were completely out of control.

In other words, home prices were haywire, and are now nearly double that.

Meanwhile, the typical U.S. home is currently valued around $273,000, per Zillow, which is about 27% higher than the peak of $215,000 seen in early 2007.

It’s also nearly 70% higher than the typical home price of $162,000 back in early 2012, when home prices more or less bottomed.

So if want to look at home prices alone, you could start to worry (though you also have to factor in inflation which will naturally raise prices over time).

But they say bubbles are financially driven, and we’ve yet to see a return to shoddy underwriting.

I will say that there’s been a recent return of near-zero down financing, with many lenders taking Fannie and Freddie’s 97% LTV program a step further by throwing a grant on top of it.

This means borrowers can buy homes today with just 1% down payment, and even that tiny contribution can be gifted from someone else.

So things might be getting a little murky, especially if you consider the increase in prices over the past four or five years.

One could also argue that affordability is being supported by artificially low mortgage rates, which history tells us won’t be around forever.

There’s also a general sense of greed in the air, along with a feeling amongst homeowners that they’re getting richer and richer by the day.

That type of attitude sometimes breeds complacency and unnecessary risk-taking.

But When Will Home Prices Crash Again?!

real estate cycle

  • If you believe in cycles, which seem to be pretty evident in real estate and elsewhere
  • We will see another housing crash at some point relatively soon
  • There appears to be an 18-year cycle that has been observed for the past 200 years
  • This means the next home price peak (and then bust) might begin in 2024

All of those recent home price gains might make one wonder when the next housing market crash will take place.

After all, home prices can only go up for so long before they drop again, right?

Well, the answer to that age-old question might not be as elusive as you think.

The real estate market apparently moves in cycles that some economists think can be predicted to a relatively high degree.

While not a perfect science, there seems to be “a steady 18-year rhythm” that has been observed since around the year 1800.

Yes, for over 200 years we’ve seen the real estate market follow a familiar boom and bust path, and there’s really no reason to think that will stop now.

It puts the next home price peak around the year 2024, followed by perhaps a recession in 2026 and a march down from there.

How much home prices will fall is an entirely different question, but given how much they’ve risen (and can rise still), it could be a long, long way down.

And we might not have super low mortgage rates at our disposal to save us this time, which is a scary thought.

You’ll Never Get Back Into the Housing Market…

  • There are four main phases in a real estate cycle
  • A recovery period and an expansion period
  • Followed by hypersupply and an eventual downturn
  • Don’t believe the hype that if you don’t buy today, you’ll never get the chance!

Another housing bust in inevitable, despite folks telling us we’ll never get back in again if we sell our home today, or don’t buy one tomorrow.

There are four phases to this predictable cycle, including a recovery phase, which we’ve clearly experienced, followed by an expansion phase, where new inventory is created to satisfy demand. This is happening now.

At the moment, home builders are ratcheting up supply to meet the intense demand in the market, with some 45 million expected to hit the average first-time home buyer age this decade.

The problem is like anything else in life, when demand is hot, producers have a tendency to overdo it, creating more supply than is necessary.

That brings us to the next phase, a hypersupply period where builders overshoot the mark and wind up with too much new construction, at which point prices plummet and a recession sets in.

The good news (for existing homeowners) is that according to this theory, we won’t see another home price peak until around 2024.

That means another three years of appreciation, give or take, or at least no major losses for the real estate market as a whole.

So even if you purchased a home recently and spent more than you would have liked, it could very well look cheap relative to prices a few years down the line.

The bad news is that the real estate market is destined to stall again in just three short years, meaning the upside is going to diminish quite a bit over the next few years.

This might be especially true in some markets that are already priced a little bit ahead of themselves, which may be running out of room to go much higher.

But perhaps more important is the fact that home prices tend to move higher and higher over time, even if they do experience temporary booms and busts.

So if you don’t attempt to time the market you can profit handsomely over the long term, assuming you can afford the underlying mortgage.

And remember, there’s more to homeownership than just the investment.

Source: thetruthaboutmortgage.com

What Is Collision Coverage – Do You Need It in Your Auto Insurance?

Nearly all states require car owners to carry auto insurance. In these states, drivers must carry liability policies that compensate victims for medical expenses and property damage caused by the policyholder’s actions behind the wheel.

No states require collision coverage or comprehensive coverage. But that doesn’t mean they have no value. On the contrary, both types of coverage can significantly reduce out-of-pocket repair costs on newer, higher-value vehicles.

Neither collision nor comprehensive coverage is free, of course. Adding either (or both) will increase your auto policy’s premiums. That makes it all the more important to understand whether they’re worth carrying.

To determine whether collision insurance makes sense for you, you first need to understand what it is, what it covers and excludes, and the factors that may affect its premium costs.

Collision Coverage: What It Is and What It Covers

Collision auto insurance coverage pays for vehicle repair and replacement costs caused by rollovers or collisions with other vehicles or stationary objects. Incidents that may result in damage covered by a collision policy include:

  • Collision With Another Vehicle. Your collision coverage should kick in after a crash involving another vehicle or vehicles. It doesn’t matter whether the other vehicle is stationary (for instance, parked or waiting at a light) or in motion. Collision coverage applies in either case.
  • Collision With a Stationary Object. Collision insurance covers damage resulting from run-ins with stationary nonvehicle objects, such as fences, buildings, trees, and embankments. Generally, your vehicle needs to be in motion for collision coverage to apply. Collision insurance doesn’t cover damage caused by a tree falling on a parked, vacant car, for instance.
  • Rollover or Fallover. Collision insurance covers damage resulting from single-vehicle crashes where the vehicle rolls or falls over. Collision coverage applies even if the vehicle comes to rest on its own, rather than as a result of hitting a stationary object.

What Collision Coverage Doesn’t Cover

Collision car insurance does not protect drivers against financial or legal liability for damage, injury, or liability resulting from:

  • Collision With an Animal. Collision insurance doesn’t cover expenses resulting from vehicle-on-animal collisions. If you hit a deer on the open road and no other vehicles are involved in the crash, you probably won’t be eligible for compensation under your collision policy. Instead, you’ll need to file a comprehensive claim — if you have comprehensive coverage, that is.
  • Other Animal-Related Damage. Collision insurance doesn’t cover animal damage to stationary vehicles either. That’s also the purview of comprehensive coverage.
  • Noncollision Damage Caused by Objects. Damage caused by falling or flying objects isn’t covered by collision insurance, even when it occurs while the vehicle is in motion. Common examples include windshield damage from a high-speed pebble kicked up by the vehicle ahead and body damage caused by unsecured highway debris.
  • Weather-Related Damage. Collision coverage does kick in after crashes in which weather plays a role, such as rollovers or multicar crashes on icy roads. But it doesn’t cover weather-related damage to stationary or moving vehicles — say, roof damage caused by wind-loosed tree branches or hail. Such damage is covered by comprehensive insurance.
  • Damage Caused by Fire or Explosion. Vehicle fires or explosions not directly caused by a collision or rollover are not covered by collision insurance. This rule may apply even if the vehicle fire subsequently causes a covered crash. Your insurer might cover the damage caused by the impact but not the fire damage to the engine compartment.
  • Theft and Vandalism. Collision coverage does not cover damage or injury resulting from theft or vandalism. This applies even if the damage is due to a collision, such as when a car thief crashes into an object or vehicle while fleeing.
  • Damage Caused by Negligence. Your claim may be denied if your negligence or inattentiveness was to blame, even if the damage would typically be covered by collision insurance. For example, if you park on a steep incline with the parking brake disengaged and your vehicle rolls down the hill, striking a lamppost, your insurer might not cover the resulting damage to your vehicle.
  • Damage Due to Your Own Participation in Criminal Activity. If you strike another vehicle or roll over while fleeing police, for example, the resulting damage won’t be covered by your collision policy.

Many drivers mistakenly assume collision coverage provides another layer of medical or liability coverage for incidents in which it also covers collision-related vehicle damage. Unfortunately, this is not true. Your collision policy won’t pay for a passenger’s medical bills after a car-on-tree crash, nor any civil damages you might incur if they subsequently sue you and win.


Collision Coverage Costs: Factors Affecting Collision Premiums

How much should you expect to pay for collision auto insurance coverage? Your collision premium will vary based on factors such as:

  • Your Vehicle’s Value. A more valuable vehicle can sustain more damage (in dollar terms) before being deemed a total loss. As a result, collision coverage is more expensive on higher-value vehicles, assuming all other factors remain constant. For the same reason, comprehensive coverage is also more expensive for high-value vehicles.
  • Your Vehicle’s Make and Model. Your vehicle’s make weighs heavily on the cost to repair it. Although actual costs vary, the general rule is that premium vehicles of all makes (foreign and domestic) and higher-end foreign vehicles (such as Lexus and BMW) cost more to repair than value-oriented domestic and foreign makes (such as Chevrolet and Honda).
  • How Much You Drive. The more you drive, the more likely you are to run into trouble on the road. Expect to pay more for collision coverage as a result.
  • Your Vehicle’s Vulnerability to Potential Hazards. Safety features that reduce crash risk and severity can reduce collision premiums. Such features include lane departure warnings and automated emergency braking.
  • Your Collision Policy’s Deductible. The surest way to reduce your collision policy’s premiums without trading down for a cheaper vehicle is to raise its deductible. That said, if you subsequently file a claim, you’ll pay higher out-of-pocket costs on your higher-deductible policy.
  • Your Auto Insurance Claim History. Many insurers now allow one “free” claim before factoring claim history into underwriting decisions. If you’ve filed multiple claims during a five-year rolling period, your collision premium will almost certainly be higher than if you were claim-free.

When It Makes Sense to Add Collision Coverage

Should you add collision insurance to your auto coverage policy? Is it worth the added premium expense to ensure you won’t pay more than your collision deductible for covered repair work? In these scenarios, the answer may be yes.

  • Your Auto Lender or Lessor Requires It. The most common reason to carry collision (and comprehensive) coverage is that the terms of your auto loan or lease require it. If you lease or finance the purchase of a new car, you’ll almost certainly be required to carry collision and comprehensive coverage until your loan or lease is paid in full, typically a span of five years. To make matters worse, you’ll probably need to keep your deductible low (no more than $500).
  • The Vehicle Is Relatively Valuable. In purely financial terms, it makes more sense to add collision coverage on a relatively valuable vehicle, even if you own it outright. Without collision coverage, a severe crash could result in thousands of dollars of out-of-pocket expenses. Your vehicle might not warrant collision coverage as long as you’d think. Cars depreciate rapidly during the first three to five years on the road and lose value more slowly after that.
  • Your Collision Risk Is Relatively High. If you drive 25,000 miles a year on treacherous roads, your risk of sustaining crash damage costly enough to warrant a collision claim is higher than your homebound neighbor’s. Your decision to carry collision coverage is more likely to pay off in the long run.
  • You’d Rather Pay Upfront to Avoid a Major Out-of-Pocket Expense. Collision coverage makes sense for drivers who’d prefer to pay higher monthly or annual auto insurance premiums to preclude a hefty out-of-pocket expense should the worst occur. Of course, this bet might never pay off — most cars never get into crashes serious enough to warrant collision claims. And collision coverage isn’t the only option available to risk-averse drivers. A robust emergency fund can serve the same purpose.

Final Word

Every budget-conscious driver wants to save money on car insurance. Adding collision coverage might not seem consistent with this goal. piling an optional type of auto insurance onto a policy that already passes legal muster is virtually sure to make that policy more expensive.

Then again, a bad crash early in a newer car’s life could cost more in repair or replacement costs than your total collision premium during the first part of its life. In this all-too-common scenario, your collision coverage will more than pay for itself. Also, if you borrowed money to buy the car, your lender might require collision coverage until the note is paid in full.

Bottom line: Don’t be so quick to write off collision coverage just because it’ll add to your total premium costs. Sometimes, paying more upfront pays off in the long run.

Source: moneycrashers.com

Life Events that Impact Car Insurance Rates

  • Car Insurance

Insurance is a numbers game. Underwriters base their rates on the likelihood of an insured making a claim; the more likely you are to claim, the higher your insurance premiums will be. It’s as simple as that. To get the best rates, therefore, you need to present yourself as a low-risk customer. 

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

But what can you do to reduce this risk; what major life events are impacting your chances of getting affordable car insurance cover?

Birthdays

Your 18th and 25th birthday have a massive impact on your auto insurance policy. After these dates, your risk plummets, and your rates soon follow. Car insurance companies base their rates on probabilities, as discussed above, and a 16- to 17-year-old is twice as likely to have a car crash than an 18- to 19-year-old. 

At this young age, you pay a higher deductible because your insurance needs are greater, but as soon as you turn 18, you can secure lower rates and bring those car insurance costs down.

A teen driver is between 2 and 5 times more likely to have an accident and suffer bodily injury than a driver aged between 25 and 35, so car insurance costs will reduce even further once you reach 25.

The cheapest rates tend to be reserved for policyholders aged between 50 and 60. At this age, insurance premiums cost around $1,200 on average, compared to the $5,000+ paid by the average 16- to 18-year-old teen driver. However, costs begin to increase again after this age. Even if you have a relatively clean driving record, auto insurers will consider you to be a greater risk and will increase your premiums as you age.

Motorists over the age of 80 can expect to pay roughly the same as those aged between 20 and 29, for example.

Getting Married

Your marital status is considered by underwriters for most insurance policies, including homeowners insurance. Again, it’s all about probability, and statistically speaking, married policyholders carry less risk than their single counterparts. Where car insurance is concerned, this is even more poignant, as you’re more likely to use your spouse’s car. 

Your insurance company may also provide you with a multi-car discount, allowing you to save even more on your car insurance policy. Speak with your provider to discuss potential savings and benefits. 

As an example, a married couple will pay around $1,600 on average for a joint policy with Geico, and if they have more than two cars between them, they can shave up to 25% off the cost.

By the same token, however, these rates may increase if you get divorced, with the average increase being around $120 to $140.

Buying A Home

In the eyes of an insurance company, you’re more responsible when you buy a home and your rates may decrease as a result. However, the best thing about this life event is that it allows you to take advantage of multi-policy discounts. 

If you take out many different policies with the same provider, you can shave hundreds of dollars off your annual premiums and will be covered for everything from property damage to medical costs, physical injuries, vandalism, and breakdowns, all with the same company.

Buying a home also improves your chances of securing credit and it gives you more options when times are tough. Homeowners can tap into their home equity whenever they need a little cash and because they can use their home as collateral, they can also benefit from low-interest secured loans.

Buying a home is one of the biggest life changes you can make and it’s also a costly one as it leaves you with substantial and long-term debt, but it’s a decision that generally carries more positives than negatives.

Getting a Job

As an employee you can benefit from company discounts and policy offers, potentially saving on a host of insurance policies and shaving dollars off your car insurance policy. This isn’t true for all jobs and all employers, but it’s worth looking into.

Ask your employer if there is any way you can save money on your insurance and if there are any other benefits you can take advantage of.

Paying Off Debt

Repaying debt is a huge accomplishment, especially when you consider that three-quarters of all Americans will die with substantial debts and many of those will have lived with debt throughout their adult life. 

Repaying debt provides you with a little more financial freedom and is a significant weight off your shoulders, but it can also reduce the price of your auto policy by improving your credit score.

Bad credit increases your risk significantly and is factored into a lot of calculations, including job applications and security clearances.

How Much Does Car Insurance Cost?

The exact price of your car insurance policy will depend on a number of factors, from coverage limits to your age, personal circumstances, driving history, and type of car. Whether you have a new car or a used car will impact the price, but whether it has features such as emergency braking, anti-lock brakes, and airbags, will also make a difference.

Discuss your options with insurance agents, compare rates from multiple companies, and don’t forget to consider extras such as rental car expenses and collision coverage. Your goal is not to simply get the cheapest auto insurance premiums and move on. You need to think about what will happen if you ever have an accident and file a claim. If you’re cheap today you could be hit with some costly expenses in the future.

Summary: Comparison Shop and Benefit

Every time a major life event occurs, you should consider changing your insurance policy. Car insurance isn’t like life insurance or health insurance; it doesn’t increase as you age and the cheapest policy isn’t the one you’re offered at the first time of asking. If anything, the opposite is true, because as discussed above, teen drivers and young drivers pay huge premiums every month.

Comparison shop, negotiate, and don’t be afraid to look for a new provider. Car insurance companies do everything they can to compete with one another and switching is a great way for policyholders to take advantage of different circumstances and secure reduced premiums.

Source: pocketyourdollars.com

Teen Car Insurance: Cheap Car Insurance

  • Car Insurance

Teen drivers are significantly more likely to claim on a car insurance policy than adults. Car insurance companies offset these costs by charging higher rates, often 3x or 4x more than adult drivers. But by shopping smartly, comparing prices, and utilizing a few simple tricks, a teenage driver can save hundreds on car insurance premiums without sacrificing coverage.

Find your best rate on Car Insurance!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

Why Young Drivers Pay More

Insurance is all about risk and probability. The more likely you are to claim, the higher your insurance costs will be. And because they can’t look into the future, they have to base this probability on statistics. They know, for instance, that a driver aged between 16 and 18 is between 1.5x and 2x as likely to claim as one aged between 18 and 20, and more than four times as likely as one over the age of 25.

A teen driver is three times as likely to be involved in a fatal crash than someone aged 20, and, according to the CDC, this age group accounts for 8% of the total cost of road traffic accidents, even though they make up for just 6.5% of the total population.

It’s not just the age group, either, as research also suggests that male drivers are twice as likely to claim as female drivers. All of these statistics are taken into account when establishing insurance premiums, which is why they tend to be much higher.

Cheap Car Insurance Quotes for a Teenage Driver

New drivers can expect to pay considerably more than experienced drivers with a safe driving record. This is especially true for 16-year olds, who are charged more than any other age range.  To give you an idea of just how different costs can be, take a look at these premium averages:

  • 16 = $3,900
  • 17 = $3,500
  • 18 = $3,100
  • 19 = $2,200
  • 20 = $2,000

Your age, car, record, and discounts (discussed below) will typically have more impact on the policy cost than the insurance provider you choose, but the rates still differ considerably. After getting a free quote from several top providers, we found that the following offered the cheapest rates on average:

  1. Geico
  2. State Farm
  3. Nationwide
  4. Progressive
  5. Allstate

Teen Car Insurance: Adding a Young Driver to your Policy

One of the best ways to save money with young driver insurance is to add them to your policy. If you have been with the same insurer for a number of years, there’s a chance they will contact you when your child is ready to drive. They likely know your children’s ages and use automated promotions to send them offers as soon as they are of age.

If not, contact them and get a quote and then compare this to quotes received from affordable car insurance providers.

Generally speaking, the average household can expect a price rise of around 150%, and the rate is much higher if the new driver is a male. 

Insurance Discounts for Teens

If you’re a good driver and a safe driver, you can save money on your quotes, even when you’re a teen driver added to your parent’s policy. There are numerous discounts that can help you, including:

Good Student Discount

If you have good grades, you can get cheap car insurance, it’s as simple as that. The rates will still be higher than what you’d be quoted as an adult, but good student discounts can save you between 5% and 10% every year. Generally speaking, you need at least a B average to take advantage of these discounts.

Living Away

If you’re a student living away from home, you can qualify for a discount. Some insurance companies offer as much as 30% off, but the average is around half this. To qualify, you need to be living away from home, such as on campus, while at school.

Defensive Driving

If you have completed a defensive driving course or other driver training, then you can get the best car insurance for less. These courses prove that you can handle yourself on the road and they greatly reduce your chances of making a claim.

Type of Car

One of the biggest things influencing car insurance rates is the type of vehicle you drive. A new car typically comes fitted with anti-theft and safety features, securing you a driver discount by reducing the chances of that car being stolen or involved in a serious accident.

The safest cars are all SUVs, which might not be the best or cheapest choice for new teen drivers. However, as long as you focus on a relatively new vehicle, and don’t opt for a sports car, you can secure a good price.

Low Mileage

You can get cheap car insurance if you drive very little and agree to a telematics device being added to your car. This device will be used to monitor your driving habits, focusing on how many miles you do. 

If you’re a teen driver doing just a handful of miles a day, this could be a great option and may save you between 30% and 50%.

Things that Could Increase Auto Insurance Rates

Numerous things can increase the cost of insurance coverage and this is true whether the young driver has their own policy or has been added to a household policy.

  • Minor Violation: A minor violation can increase your auto insurance premiums by as much as 40%. These violations include speeding tickets, which are far more common in younger drivers.
  • Major Violation: A major violation could double the cost of those premiums. These violations include DUIs and road traffic accidents.
  • Claims Record: How many claims you have will dictate how much your auto insurance coverage costs, so keep this in mind the next time you apply.

Bottom Line: Cheap Car Insurance for Teen Drivers

Teen drivers can be very expensive and if you need to add one to your policy, you can expect those rates to climb considerably. However, your kids need to learn somehow; they need to build a safe driving record, get some experience, and prove to auto insurance companies that they deserve a discount in the future.

So, let them get their learners permit, help them buy their first car, and encourage them to collect car insurance discounts and drive safely. That way, in just a few years, they’ll have the experience and the record needed to get even cheaper insurance.

Source: pocketyourdollars.com

What to Do With Your 401(k) During a Stock Market Crash

You know the story of “The Tortoise and the Hare”? It turned out slow and steady won the race.

That applies to investing, too.

Last year, as the Dow Jones Industrial Average rose and fell daily — and even hourly — to the economic effects of COVID-19, the financial roller coaster ride left plenty of investors feeling a bit queasy.

If you had a 401(k) or IRA, you may have felt your own steep drop in the pit of your stomach. As it turned out, though, the 2020 stock market crash — and more importantly, the subsequent recovery — provided a good lesson in playing the long game as an investor.

Here’s what you need to keep in mind if you’re inclined to panic about your 401(k) amid turmoil in the stock market.

How Your Retirement Investments Work

To understand why you shouldn’t panic too much about your retirement accounts, you need to know how they work.

A 401(k) is an employer-sponsored investment plan while Individual Retirement Accounts — either traditional or Roth IRA — are typically set up by the individual to invest money toward retirement.

If it’s a 401(k) or traditional IRA, you get the tax benefit up front and pay when you withdraw; with a Roth IRA, the withdrawals are tax-free. Either way, by adding money on a regular basis, these accounts let you grow your nest egg that you can live on in your retirement.

In the beginning, you’ll have more time to take risks on investments — like stocks — and when you get closer to retirement age, you’ll shift investments to less-risky categories like bonds and cash that don’t lose their value during a market slump.

So even if there’s a dip in the stock market, you’ll have time to recover if you’re younger and you’ll be better protected from fluctuations as you near retirement.

What to Do With Your 401(k) During a Slump

Watching your 401(k) balance take a tumble isn’t anyone’s idea of fun. We get it.

But a down market is not a time to panic, according to Certified Financial Planner Holly Donaldson of St. Petersburg, Florida.

That’s because the cash component of your account, as well as the contributions you should absolutely continue to make, can be used to buy up more funds at rock-bottom prices.

So selling is the last thing you want to do because you’d be locking in your losses.

In fact, Donaldson suggests ignoring your newsfeed if it puts you in a panic about your retirement accounts.

“What I advise is you use the calendar and not the news,” said Donaldson, who suggested checking in with your portfolio on a quarterly basis rather than a daily one.

Pro Tip

Even if your account balance takes a nosedive, don’t withdraw your money from an IRAor 401(k) — the penalties for early withdrawal are substantial.

She noted that it typically takes the stock market one to two years to correct itself, so a single day — or even a few weeks — of volatility should not change your long-term strategy.

Don’t try to time your investments. Instead, use dollar-cost averaging, which means you invest on a regular schedule no matter what’s happening in the stock market.

Avoiding the stress of hourly updates on your investments is key to not only a balanced financial portfolio but your mental health, too.

“If a 27-year-old wants to increase their chances of suffering chronic anxiety, then yeah, sure, look at your 401(k) every day,” she said.

And even if you’re closer to retirement, Donaldson recommended talking to a financial planner or speaking to your employer’s 401(k) representative to ensure your portfolio has the right mix of stocks, bonds and cash.

Slow and steady. Wins it every time.

Tiffany Wendeln Connors is a staff writer/editor at The Penny Hoarder. Read her bio and other work here, then catch her on Twitter @TiffanyWendeln.

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Source: thepennyhoarder.com