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Apache is functioning normally

May 4, 2023 by Brett Tams

It’s easy to overspend, especially when you can buy things online with a couple of clicks or simply swipe a credit card. But over time, those purchases can really add up.

Approximately one in five American workers run out of money before their next payday, according to a recent survey. And, sticking to a budget is a problem many people have, other research shows.

Fortunately, there are strategies that can help you develop healthier spending habits. Here are six ways to stop spending money.

Ways to Curb Spending

1. Mapping Out a Budget

Without a budget, you can spend money mindlessly, without thinking much about it. Mapping out your spending patterns and essential expenses by creating a household budget can help you see where your dollars go and figure out where to cut back. In short, it can teach you how to be better with money.

To create a budget, start by tracking your current spending patterns. Check your monthly bank statements or receipts from recent purchases. You can also use a free tool to track your spending, which makes the process even easier.

Identify essential expenses from non-essential ones. Necessary spending includes such items as housing/rent, groceries, utilities, healthcare costs, and transportation. Non-essential costs are things like eating out, leisure travel, and entertainment. You may be surprised to see how small daily purchases — such as eating out for lunch every work day — can add up to a lot of money spent over the course of each month.

Once you figure out how much you tend to spend in each expense category, it may be easier to identify places where you could cut back and reduce excessive spending. A monthly budget can allot specific amounts of money for vital expenditures, savings, investing for retirement, and fun activities, too.

Recommended: 10 Personal Finance Basics

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2. Calculating Hourly Earnings

A night out may not seem like a huge splurge in the moment — especially when compared to your total earnings for the month. But, that same expense can quickly appear more significant, when you tabulate how many hours of work are needed to pay for it.

To figure out your hourly pay, divide your after-tax pay by the number of hours worked. If you get paid twice a month and work a 40-hour week, divide your total earnings by 80 (two weeks times 40 hours).

For instance, a birthday dinner and drinks with friends that costs $200 would translate to eight hours of work if you earn $25 per hour.

Whether that spend feels worth it is a personal decision, but determining how much you earn per hour may provide incentive to stop spending — or to consider carefully before you do to make sure the expense feels worth it.

Recommended: 15 Creative Ways to Save Money

3. Understanding What Triggers Spending

Whether it’s the gourmet food section at the grocery store, the Instagram influencer with the covetable closet of clothes, or that friend who drops big bucks on concert tickets, for all of us, the urge to spend can be triggered by emotions and outside influences.

Even something as seemingly innocuous as the physical shopping environment — think in-store displays, prominent markdown messaging, and subtler cues like store layout — can trigger people to want to spend. When figuring out how to stop spending money, it can be key to understand which emotional or psychological cues make you take out your wallet.

There are a couple ways that understanding your spending triggers may help. For starters, you might plan ahead to avoid scenarios that make you more prone to spend. And, when the urge to shell out cash strikes, evaluate whether the purchase is really necessary or if it mainly feels good but isn’t really helping you in the long run. These tactics can help you manage your money and feel in control.

4. Shopping with a Plan

Of course you can’t always avoid spending triggers. We all have to shop sometimes. Still, it may be easier to avoid the temptation to overspend by creating a shopping list and sticking to it.

For example, going grocery shopping may be easiest to do right after work. But, that time of day may also coincide with when you’re at your hungriest. Hungry shoppers, research shows, tend to buy more non-essential items.

Creating a set list of items to pick up can help you focus on what you really need — rather than buying out of want.

5. Sleeping on It

Before you buy something, take some time to think it over, rather than impulse spending.

Mulling over purchases can be beneficial. You can impartially evaluate whether you might still treasure the item months down the line, or more or less ignore it once the shopping impulse fades.

Studies show that activities that provide instant gratification, such as impulse shopping, activate feel-good chemicals in the brain. But, if that purchase comes at the expense of your long-term goal to save, buying now could set you up for deep regrets later on.

“Sleeping on it” for a few hours (or even days) may give you some necessary psychological distance from the urge to buy.

6. Finding It Cheaper

Of course, there are times when you’ll choose to spend money on specific purchases. Comparison shopping may help you cut back on expenses. You may be able to find the item cheaper elsewhere. Or, you might find a similar brand for less.

It’s also a good idea to keep an eye out for discounted pricing. Holding off on a bigger purchase until it goes on sale, at holiday time, for instance, may lead to additional savings.

Stopping Spending Money Starts with Awareness

Naturally, it’s not possible to stop spending money altogether. But adopting a few smart habits, such as budgeting, understanding your spending triggers, and shopping with a list, could help you take control of your money and spend less.

3 Money Tips

If you’re saving for a short-term goal — whether it’s a vacation, a wedding, or the down payment on a house — consider opening a high-yield savings account. The higher APY that you’ll earn will help your money grow faster, but the funds stay liquid, so they are easy to access when you reach your goal.
If you’re creating a budget, try the 50/30/20 budget rule. Allocate 50% of your after-tax income to the “needs” of life, like living expenses and debt. Spend 30% on wants, and then save the remaining 20% towards saving for your long-term goals.
If you’re faced with debt and wondering which kind to pay off first, it can be smart to prioritize high-interest debt first. For many people, this means their credit card debt; rates have recently been climbing into the double-digit range, so try to eliminate that ASAP.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit can earn up to 4.20% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 1.20% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 4/25/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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Source: sofi.com

Apache is functioning normally

May 4, 2023 by Brett Tams

Save more, spend smarter, and make your money go further

Maybe you just graduated college, or you scored your first “grown-up” job, and now you’re looking for a car that suits your transportation needs. Whatever your situation is, there are a lot of factors to think about before purchasing your first car — the most important one being your budget. Be sure to consider these five things to help you decide whether you can fit the cost of a car into your new monthly budget.

1. Your income

The most important factor that affects your bottom line when it comes to purchasing your first car is your monthly income — especially if you’re buying a brand-new ride. Car payments can be pretty hefty, and if you’re not sure about what you can foot out of pocket each month, it can spell trouble down the line.

It’s a good idea to pay as large a down payment as you can comfortably afford so that you can score lower monthly payments. Experts recommend a down payment of at least 20 percent of the vehicle’s total cost.

Before you head to the dealership, think hard about how much you can realistically budget for your car payment each month, in addition to how much you can set aside for routine maintenance and repairs. Even if you’re buying an older, inexpensive car without a monthly payment, it’s still imperative to have some savings in case issues crop up.

2. Your credit score

If you’re new to this whole “being an adult” thing, you might not have much credit. But establishing a solid credit score is crucial to your car budget, since it directly affects your interest rates when financing your first vehicle. Scoring a good interest rate can save you hundreds — if not thousands — of dollars.

If you don’t have any credit, or you have a credit score that needs some improvement, be wary of dealership salespeople who may try to talk you into a longer financing term. You’ll end up paying significantly more interest over the course of the term, which can negatively impact your future finances.

3. Your financing options

If you’re not purchasing your first car outright, you’ll have to finance it in some way. It might seem strange to shop for loans before you go car shopping, but it’ll give you a better idea of what kind of interest rate and loan amount you can expect once the time comes to secure a financing option.

Compare rates from your bank or credit union to other lenders to see who offers the best option for you. If possible, it’s smart to get pre-approved for financing before you walk into the dealership — that way, you know the cards are stacked in your favor.

If you have little or no credit, you may find that it’s best to wait on your car purchase until you’ve improved your score so that you can get a better interest rate. You’ll be able to better afford your vehicle in the long-term.

4. Your research

While researching cars that you’d like to take a look at and test drive, it’s wise to focus on practicality versus the latest sports car. In other words, prioritize what you absolutely need out of a vehicle rather than what you want. This keeps your car payments lower and helps reduce other ownership costs, such as routine maintenance, repairs and fuel expenses.

Look for vehicles that have a solid track record of safety, reliability and inexpensive maintenance. Reference trustworthy sources, such as Edmunds.com, Kelley Blue Book, J.D. Power and Consumer Reports, to find honest reviews and helpful information.

Make sure you also compare prices across multiple dealerships for each vehicle you’ve got your eye on to ensure you get the most bang for your buck.

5. Insurance rates

Once you’ve narrowed down a list of vehicles to shop around for, call around or go online to compare car insurance quotes for each one. It’s key to incorporate your monthly insurance cost into your budget. Not only is liability insurance required in the vast majority of states, but most lenders also require that you carry comprehensive and collision coverages (a.k.a. “full coverage”) for the life of the loan.

To get the most accurate auto insurance quotes, there are a few pieces of information you should have handy:

Year, make and model of each vehicle you’re getting quotes for
Your social security number, which allows insurers to pull your credit-based insurance score
Your driving record and insurance history (if you have one)
Your coverage and deductible needs, plus any optional coverages you’d like to carry
Purpose of the purchase — whether you’ll be using the car for business, commuting or pleasure
Safety and security features on each vehicle, which can score you discounts
Vehicle identification numbers (VINs), if possible
Address where you’ll be garaging the car (usually your home address)

Though this may seem like a lot to consider when deciding how to include your new car purchase in your monthly budget, it’s best to think about these things ahead of time. You’ll be sound in your purchasing decision and sound with your finances — a win-win!

Haden Kirkpatrick is the director of marketing strategy and innovation at Esurance, where he is responsible for all initiatives related to product and service innovation. He manages the annual planning processes for the marketing and service business units. Haden is an innovator who is constantly thinking about how IoT, blockchain and machine learning will impact the insurance industry. He is also a mobile guru, aspiring yogi and mixed martial artist.

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Apache is functioning normally

May 4, 2023 by Brett Tams

A couple years ago my wife and I set off on the journey of building our first home together. It was going to be our dream home.

To say that the process was a bit stressful is a slight understatement.

We both had an idea of what kind of house we wanted, but the location and the layout of our lot made it a bit more challenging.

We scoured through dozens of home books and on-line guides trying to find the perfect house plan.

We came very close, but never could find “the one”. That’s when we realized that we needed to hire an architect.

We were lucky that we knew a local architect Steve May of D.A.R.T Design so the decision process was very easy. If we hadn’t of known him, I could only imagine how difficult the hunt would be to find the perfect match for us.

To better assist you in selecting the right architect for your home building experience, I decided to interview him to find what things you need to know before you hire an architect. First, a little on his background (and a shameless plug):

Steve May has over 20 years of experience in the field of architecture, and has been a licensed architect for over 11 years. Steve began D.A.R.T. Design, Inc. in 2004. Prior to serving as the Owner and President of DART Design, Steve was a partner with Huff-May Architectural Group. Steve has extensive building code knowledge and is a member of the International Code Council.

1. What did you do to become an architect?

Once I received my degree in architecture I started my internship with an architectural firm. With my bachelors degree I was required to intern for 5 years prior to taking the Architectural Registration Exam (ARE). Degrees such as a masters only requires 3 years of internship but it takes and additional 2 years to get your degree.

So in essence it takes about 9 years of schooling and internship to apply for the ARE. The ARE, at the time I took the exam (there have since been changes) was 4 days long, had 9 parts and was given once a year in Chicago.

2. Are there any special credentials that one should look for in hiring an architect?

Some architects specialize in certain fields of design. If you are looking for an architect to design your hospital you would not want to hire one that specializes in airport design. Although this is not always the rule, there are exceptions where a particular firm may work in many areas from schools to sporting venues.

When looking for an architect for your particular project you want to look for someone who has experience with projects of the same scope, and possibly an architect that has the same vision or style of building that you desire.

Most architects can provide services for simple projects of any size.

When the project starts to become more complex, then the owner should start looking for an architect that has experience with projects of the same scope or similar in complexity.

3. What would one expect to pay when hiring an architect?

There are many variables that effect fees for projects. Some factors are, but not limited to, location, size, complexity, scope of services and bidding process.

Generally fees are based on a percentage of the construction costs and can vary from 3% up to 15%. A large project of simple complexity would be at the lower end and a small, complex project would be at the higher end. Once you have a scope of work you can negotiate fees with your architect and those can be in the form of a percentage of construction costs or a fixed fee can also be requested.

Residential architectural fees can be altogether different depending on the location. In some areas the law does not require an architect to provide drawings for residential construction. There are areas where the municipality requires that all buildings including residential are required to be designed by a licensed architect. Fees can increase when residential drawings are required to be stamped by a licensed architect.

4. What are some telling signs on when to avoid hiring the wrong architect?

When an architect is not willing to listen to the client and utilizing their ideas that would be a good time to back up and reevaluate your architect.

Your architect should know what questions to ask their clients to gather the information they need to put together a schematic design for the facility.

Our clients are the most important part of our company. We strive to provide a facility for our clients that will suit their needs for today and into the future. Whether it is a home or manufacturing facility the client and their ideas come first. We pride ourselves on retaining our clients and the only way to do that is to provide them with exemplary service.

5. With so many books and websites offering house plans, when would it be wise to hire an architect?

For residential your right, there are so many choices, and that can be confusing to lots of people. Most of my clients have come to me with a couple different floor plan ideas and some pictures of some houses they like and ask me to mold them together. They just cannot find one plan in a book that is what they really want. Taking these ideas and producing a home that meets their ideas and personal tastes is usually the hardest part of the process. A process that provides us with the most satisfaction.

When you hire an architect is really up to the individual and the type of project, although I would say the sooner the better. The architect can help from the very start, even when it comes to picking out the best site for your home.

The sooner you pick an architect, the better I think the project will go. The architect will not only help in the design and drawings of your facility but with the bidding process and selection of contractor. The architect can also be involved during the construction process to make sure that things are being built to the plans and specifications that were provided.

6. Is there anyway to do any background checks on architects before you hire them?

I am unaware of any “background” checks that you can do for architects. There are many associations out there such as the ALA and the AIA that a licensed architect can be a member of. This of course does not make them a good architect because all you have to do is be a licensed architect, in good standing, and pay your dues to join.

An individual can go to the licensing bureau of their state and check the license of the architect they wish to hire and make sure there are in good standing with the state.

The best way to choose your architect is to make sure they have done similar projects and check their previous work.

7. What should you do when you realize that you’ve hired a bad architect?

I would hope that this would not happen but there are architects that may not want to really listen and give the client what they want and instead push them towards what the architect wants. It is all about what makes the client happy and if they already have an idea of their needs than the architect should listen and design around those needs.

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If you find yourself dealing with an architect that does not “get” what you are looking for than that is the time to cut the cord. Pay them for the time they have invested and move on.

Don’t hesitate and hope things get better, they most likely won’t. You want someone that will work with you and guide you in the design process and make good suggestions not push you in a direction that is not comfortable. This is a large expenditure for you and you want something that you will be happy with.

8. What sort of information should someone already have before working with an architect to make sure they get the house they really want?

I have seen all kinds of things come through my door, some better than others, but most have an idea of what they want. I would say that some of the main things to discuss with your architect would be; budget, site plan, list of wants/needs.

If you have these items than you have a good start. Most people come in with a floor plan that almost meets their needs but needs some modifications. This is helpful in some cases and a hindrance in others. I like to have a clean slate and mold the client ideas into the house that they really want.

Before going to talk with an architect do a little research to get an idea of what an architect can do for you. There are many blogs, including mine, that can give you many ideas of what can be expected. From just doing some floor plans and elevations, to helping pick out the site, to finding a contractor, to construction observation and everything in between, there are many services that we as architects can provide.

9. What do you charge to do house plans?

This is the biggest question people ask me. All that depends on the level of services that the client chooses. The more services that the architect provides the less headaches the client has.

—

Thank you Steve for the insightful interview! I hope that helps someone in their quest in building their first home and finding the right architect for the job.

Source: goodfinancialcents.com

Apache is functioning normally

May 4, 2023 by Brett Tams

The following is an excerpt from the book The Five Years Before You Retire by Emily Guy Birken.

There are many different types of financial planners and advisors—and only some of the titles that various financial advisors can use are regulated. Meeting someone who calls himself a financial planner could mean you’ve shaken hands with an insurance agent, a stockbroker, an investment advisor, or a Certified Financial Planner (CFP).

If that’s not confusing enough, different types of advisors are paid in different ways, which can seriously affect your bottom line. Even those with a good understanding of the financial can be excused for feeling a little overwhelmed.

With all of this in mind, finding a trustworthy financial advisor can seem like an impossible task. But going it alone is not a good strategy for handling your retirement. Partnering with a financial advisor who is well versed in all of the rules, regulations, options, and opportunities facing you makes much more sense than trying to educate yourself from the ground up.

So how do you determine exactly whom to trust with your financial decisions? While the process of interviewing potential advisors might take some time and effort on your part, it is much less overwhelming than either finding you’ve placed your trust in someone you shouldn’t have or trying to make all of your complex retirement decisions without any help.

The following checklist of interview questions can help you find the advisor who will be your ally in creating a retirement you’ll love:

1. What is your background and experience?

In general, you will want to see that your prospective advisor already has several years of experience under her belt and has worked through various market ups and downs. Finding out just what your advisor was doing over the past several years can help you to know if her strategies and risk tolerances fit well with yours.

2. Please explain what licenses and certifications you hold.

This question will help you to understand exactly what type of advisor you are meeting with. As I mentioned above, it’s entirely possible that your advisor has multiple licenses and certifications, which means that they may be governed by several regulatory agencies.

3. How are you compensated?

If you only ask one question during your interview of potential advisors, make it this one. Understanding precisely how any one advisor will be paid will allow you to compare her with others that you interview. In addition, asking this question can really head off potential scammers, since someone who sees you as a mark will not want you to know how she is paid.

4. What is your investment philosophy? What strategies do you use?

These are good questions to ask even if you are not sure of your own investment philosophy and strategies. Your potential advisor should be able to explain what he considers to be important in investing, and based upon his answer, you might find yourself nodding your head or thinking it’s time to move on to another candidate. If any aspect of the advisor’s answer to this question is unclear, ask for clarification. Better to feel foolish asking questions than feel foolish by losing your shirt.

5. Describe your ideal client.

If you’ve found the right advisor, you’ll hear a description that sounds remarkably like you. If you are unlike every other client among your advisor’s customers, it’s unlikely he’ll be able to serve your needs well.

6. What is your area of expertise?

Some advisors focus on investments to help new workers start to build their nest egg, others help their clients with college planning, and still others earn their bread-and-butter on planning for the transition to retirement. While a soon-to-be retiree working with an advisor who is more geared toward helping young professionals start saving for retirement is not as big a mismatch as going to your dentist for a broken arm, there is no need to settle for an advisor who doesn’t specialize in your needs.

7. Can you show me some sample portfolios?

Your advisor should be able to give you some very specific ideas of what to expect from his work. Sample portfolios will help you to understand exactly how your advisor will recommend that you allocate assets and handle volatility.

If your advisor balks at giving you some samples and instead tries to reassure you that he makes X% for his clients each year, thank him for his time and lose his business card. Reassurances may sound good, but you want to see the specific dollars and cents of what he has been doing. Past performance does not guarantee future results (a phrase that I feel all investors should have embroidered on a pillow), but seeing how an advisor has specifically handled various portfolios can help you determine if you will work well together.

8. Please tell me what you see as my financial goals and objectives.

This one is kind of a trick question, since your advisor will already have asked you what you hope to accomplish and should theoretically be able to repeat back what you’ve already said. However, it’s an important question to ask because your advisor can take many cues about your financial goals from other aspects of your conversation, and should be able to help clarify your objectives. Many new clients are not able to state their objectives in clear terms, as their goals can often be somewhat amorphous as they think through their hopes for retirement. Having your prospective advisor tell you what he has heard regarding those goals and objectives can not only tell you how well he was listening, but it can also help you to better understand exactly what it is you want if you have not been able to articulate it yourself.

Putting It All Together

Getting the advice of a professional is an important part of feeling confident about your choices. Since many of us feel intimidated by finances in general, however, it can be very easy to either try to go it alone for fear of looking stupid in front of an advisor, or take the advice of the first competent-sounding person who offers it. Neither of those options will put you on the path to a secure and enjoyable retirement—and neither one is necessary, no matter how timid you may feel about your understanding of finances. Taking the time to understand who your prospective advisors are, what they can do, and how they receive compensation is just as vital as interviewing a potential nanny would be.

Using these interview questions, you should be able to find an advisor who will help you make the most of your finances.

Source: goodfinancialcents.com

Apache is functioning normally

May 4, 2023 by Brett Tams

How Rising Rates Affect Bank Stock

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Rising interest rates can be good or bad news for bank stocks — sometimes both at the same time. Banks can earn more money when they can charge more for loans, but borrowers may want fewer loans, which can depress profits. Also, banks must pay more when they borrow funds. Finally, banks’ portfolios of bonds usually decline in value when interest rates rise, which can harm the bank’s balance sheets and cause investors to shy away from them. Individual banks may do better or worse when rates rise, depending on their specific markets and business model.

To figure out how bank stocks could fit into your plans, consider working with a financial advisor.

Recent Bank Stock Performance

A little more than a year after the Federal Reserve began hiking interest rates on March 16, 2022, one broad-based measure of bank stocks showed how rates can negatively affect shares of banking companies. The S&P Banks Select Industry Index, which tracks shares of 94 banks and other financial services institutions with market caps that range from less than $1 billion to $382 billion, was down 28.86% in the year ending March 30, 2023. While this was a challenging period for stocks in general, the S&P 500 Index of 500 large firms in diverse industries was down a more modest 9.29% for the same period.

This poor showing by bank stocks during a year of rate hikes contrasts with a positive annualized return of 11.51% for the previous three years. That period includes two years of stable interest rates and relatively good price performance before the rate hikes started.

This general trend is in addition to the singular failures of two large institutions, Silicon Valley Bank and Signature Bank, which were shut down by regulators during March 2022. These banks were victims of runs by depositors who rushed to withdraw funds after concerns about the banks’ stability arose.

How Interest Rates Affect Bank Stocks

The interplay between bank stocks and interest rates is not perfectly straightforward, however. Higher rates can both benefit and imperil banks. Here are some major factors affecting how bank stocks respond to interest rates:

Higher lending profits. Banks make money by lending money and their profit margins may rise when they can charge more to borrowers, which naturally helps buoy banks shares.
Less loan demand. When loans costs more, borrowers are less interested in borrowing, which can depress bank shares. Also, rate hikes tend to depress overall economic activity, which can further reduce loan demand.
Higher borrowing costs. Banks don’t just lend money. They also borrow from various sources, including the Federal Reserve, which manages overall rates by increasing the rate it charges to member banks for borrowing from it. Depositors, too, want higher rates on savings accounts and certificates of deposits, so banks have to pay more to remain competitive.
Bond portfolios. Banks can’t lend out all the money they have. They must hang onto some of their total capital as a reserve. These reserves are typically invested in bonds, which tend to decline in value when rates rise – especially if those bonds are hold-to-maturity fixed-income securities. If the value of these reserves declines enough, it can make banks vulnerable to customer withdrawals, trigger regulatory scrutiny and, potentially, being shut down. Investors who see declining reserves often unload bank stocks, causing prices to fall. The problems at Silicon Valley Bank, Signature bank and First Republic, for example, were caused in part by steep declines in the value of their portfolios of bonds, which limited their ability to raise money to pay off depositors when bank runs gathered momentum.

Interest rates aren’t the only economic factors that affect banks. For instance, central banks tend to increase rates when economies are strong, because strong economies tend to bring about inflation. Loan demand tends to be strong when the economy is, so for a while at least when rates rise some banks may enjoy continued good demand for their relatively high-priced loans.

Also, much depends on the circumstances of individual banks. For example, Silicon Valley Bank failed while nearly all other banks survived the challenging economic climate, in part, because it had as customers a higher-than-average percentage of venture capitalists. At the same time shares in the more-diversified JPMorgan Chase & Co., the nation’s largest bank, were down only about 4% during the year after the rate hikes started. That’s much less than the S&P bank index and better than the overall stock market performance.

The Bottom Line

Banks and interest rates have a complex relationship that includes the opportunity to earn more profit from lending when rates rise, but only if they can overcome the obstacle of higher borrowing costs for their own funds. The round of rate hikes that began in March 2023, along with other influences, has led to a steep decline in the value of the typical bank stock. This suggests that most banks, in the eyes of investors, are not being helped by higher interest rates. However, broad characterizations of the impact of rising rates on bank stocks may be inaccurate in the case of individual stocks.

Investing Tips

To better understand how investing in banks and financial services companies can play a role in your portfolio, consider talking to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Interest rates affect far more than bank stocks. The SmartAsset guide to interest rates shows how rate trends impact many aspects of your personal financial life, from the cost of a new mortgage to the return on your savings account.

Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.

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Source: smartasset.com

Apache is functioning normally

May 4, 2023 by Brett Tams

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Is Facebook the IPO of a generation? The much-anticipated initial public offering of the world’s most popular social networking site, Facebook, took place this morning on the NASDAQ. With it, the dreams and technologies of the millenial generation have taken root as a core part not only of American society – but of its formal economy.

Already, Facebook bears the distinction of having the largest market valuation of any US company at IPO at $104.1 Bn. That’s no small feat for a company that didn’t even exist eight years ago. The offering, which was originally priced at $38 per share, has “popped” to over $42/share as of the time of writing, creating over $16 Bn in value for the company. That could grow to $18.4 Bn, making it also the largest initial share offering in US history.

But all these big numbers aside, the Facebook IPO is also the hallmark of the new economy. Facebook doesn’t make anything, and its users aren’t even buying any products or servics (with the exception of some gaming functions), but most people still believe it has great value. The power of connectedness – and the technologies that enable us to share and display information across our network – has now taken root.

That, some analysts say, explains in part the $1 Bn Facebook paid for photo-sharing startup, Instagram last month: Sure, Facebook could’ve created a competitor, but Instagram was already growing to be hugely popular – and it’s a bit harder to convince an existing social network to migrate. It also helps explain the company’s big gains in advertising revenue (and its price to earnings value). It’s the network itself, that has value. Advertisers can use it to pinpoint people based on preferences in a more targeted fashion. It’s also a place where people are more tuned in; people care more about their friends’ lives than tv, and the power of social networking holds values for individuals and companies, alike. Ever heard of the term “going viral”?

In the end, we’re all part of social networks, whether we use applications like Facebook, or not. But it took a Harvard student in his dorm room to harness that power for the market.

What’s your take? Is Facebook the IPO of a generation? Will you “like” the social network by investing in its stock?

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May 4, 2023 by Brett Tams

How Rising Rates Affect Bank Stock

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Rising interest rates can be good or bad news for bank stocks — sometimes both at the same time. Banks can earn more money when they can charge more for loans, but borrowers may want fewer loans, which can depress profits. Also, banks must pay more when they borrow funds. Finally, banks’ portfolios of bonds usually decline in value when interest rates rise, which can harm the bank’s balance sheets and cause investors to shy away from them. Individual banks may do better or worse when rates rise, depending on their specific markets and business model.

To figure out how bank stocks could fit into your plans, consider working with a financial advisor.

Recent Bank Stock Performance

A little more than a year after the Federal Reserve began hiking interest rates on March 16, 2022, one broad-based measure of bank stocks showed how rates can negatively affect shares of banking companies. The S&P Banks Select Industry Index, which tracks shares of 94 banks and other financial services institutions with market caps that range from less than $1 billion to $382 billion, was down 28.86% in the year ending March 30, 2023. While this was a challenging period for stocks in general, the S&P 500 Index of 500 large firms in diverse industries was down a more modest 9.29% for the same period.

This poor showing by bank stocks during a year of rate hikes contrasts with a positive annualized return of 11.51% for the previous three years. That period includes two years of stable interest rates and relatively good price performance before the rate hikes started.

This general trend is in addition to the singular failures of two large institutions, Silicon Valley Bank and Signature Bank, which were shut down by regulators during March 2022. These banks were victims of runs by depositors who rushed to withdraw funds after concerns about the banks’ stability arose.

How Interest Rates Affect Bank Stocks

The interplay between bank stocks and interest rates is not perfectly straightforward, however. Higher rates can both benefit and imperil banks. Here are some major factors affecting how bank stocks respond to interest rates:

Higher lending profits. Banks make money by lending money and their profit margins may rise when they can charge more to borrowers, which naturally helps buoy banks shares.
Less loan demand. When loans costs more, borrowers are less interested in borrowing, which can depress bank shares. Also, rate hikes tend to depress overall economic activity, which can further reduce loan demand.
Higher borrowing costs. Banks don’t just lend money. They also borrow from various sources, including the Federal Reserve, which manages overall rates by increasing the rate it charges to member banks for borrowing from it. Depositors, too, want higher rates on savings accounts and certificates of deposits, so banks have to pay more to remain competitive.
Bond portfolios. Banks can’t lend out all the money they have. They must hang onto some of their total capital as a reserve. These reserves are typically invested in bonds, which tend to decline in value when rates rise – especially if those bonds are hold-to-maturity fixed-income securities. If the value of these reserves declines enough, it can make banks vulnerable to customer withdrawals, trigger regulatory scrutiny and, potentially, being shut down. Investors who see declining reserves often unload bank stocks, causing prices to fall. The problems at Silicon Valley Bank, Signature bank and First Republic, for example, were caused in part by steep declines in the value of their portfolios of bonds, which limited their ability to raise money to pay off depositors when bank runs gathered momentum.

Interest rates aren’t the only economic factors that affect banks. For instance, central banks tend to increase rates when economies are strong, because strong economies tend to bring about inflation. Loan demand tends to be strong when the economy is, so for a while at least when rates rise some banks may enjoy continued good demand for their relatively high-priced loans.

Also, much depends on the circumstances of individual banks. For example, Silicon Valley Bank failed while nearly all other banks survived the challenging economic climate, in part, because it had as customers a higher-than-average percentage of venture capitalists. At the same time shares in the more-diversified JPMorgan Chase & Co., the nation’s largest bank, were down only about 4% during the year after the rate hikes started. That’s much less than the S&P bank index and better than the overall stock market performance.

The Bottom Line

Banks and interest rates have a complex relationship that includes the opportunity to earn more profit from lending when rates rise, but only if they can overcome the obstacle of higher borrowing costs for their own funds. The round of rate hikes that began in March 2023, along with other influences, has led to a steep decline in the value of the typical bank stock. This suggests that most banks, in the eyes of investors, are not being helped by higher interest rates. However, broad characterizations of the impact of rising rates on bank stocks may be inaccurate in the case of individual stocks.

Investing Tips

To better understand how investing in banks and financial services companies can play a role in your portfolio, consider talking to a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Interest rates affect far more than bank stocks. The SmartAsset guide to interest rates shows how rate trends impact many aspects of your personal financial life, from the cost of a new mortgage to the return on your savings account.

Mark Henricks
Mark Henricks has reported on personal finance, investing, retirement, entrepreneurship and other topics for more than 30 years. His freelance byline has appeared on CNBC.com and in The Wall Street Journal, The New York Times, The Washington Post, Kiplinger’s Personal Finance and other leading publications. Mark has written books including, “Not Just A Living: The Complete Guide to Creating a Business That Gives You A Life.” His favorite reporting is the kind that helps ordinary people increase their personal wealth and life satisfaction. A graduate of the University of Texas journalism program, he lives in Austin, Texas. In his spare time he enjoys reading, volunteering, performing in an acoustic music duo, whitewater kayaking, wilderness backpacking and competing in triathlons.

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Source: smartasset.com

Apache is functioning normally

May 4, 2023 by Brett Tams

The rise of cryptocurrencies has led to a significant shift in the financial landscape. As crypto gains popularity, many financial institutions are adapting to this change by offering specialized banking services to accommodate crypto transactions.

This article explores the best crypto-friendly banks, explaining why they are considered top choices in the ever-evolving crypto space.

15 Best Crypto-Friendly Banks

Here are the top crypto-friendly banks and banking services providers, each offering a unique set of services tailored to the needs of cryptocurrency enthusiasts.

1. Cash App

Among its many features, Cash App allows users to buy Bitcoin and instantly withdraw funds to personal wallets.

Partnerships with banks such as Sutton Bank and Lincoln Savings Bank enable Cash App to provide banking services. This collaboration between Cash App and crypto-friendly banks ensures that customers have a convenient and secure way to manage their crypto transactions.

Sutton Bank also issues the Fold Visa® Prepaid Card, which allows you to earn Bitcoin on every purchase.

See also: How Does Cash App Work?

2. Revolut

Revolut is a UK-based fintech company that was founded in 2020. It has quickly become a major banking player in the UK, Europe, and the US, as well as a top crypto-friendly bank. Their user-friendly mobile app lets customers easily buy cryptocurrencies like Bitcoin and manage their digital assets. The app also features automatic buy orders that activate based on certain market conditions, making the crypto investment process even smoother.

What sets Revolut apart from competitors is the variety of crypto-related services they offer. Customers can stake select crypto assets, make off-chain transactions between users, and pay bills using crypto through automatic conversion to fiat currency.

With over 50 cryptocurrencies on the platform and plans to expand, Revolut is dedicated to staying ahead in the digital currency world. Although there are transaction fees for crypto payments, users can reduce these fees with account upgrades. Revolut’s upcoming launch of its native coin, RevCoin, highlights their commitment to providing a diverse and dynamic crypto banking experience for their growing customer base.

3. Quontic

Quontic is the first online bank to offer a rewards checking account that allows you to earn Bitcoin. With its innovative Bitcoin Rewards Checking account, users can easily integrate crypto into their everyday banking experience. Quontic only supports Bitcoin. However, its unique offering makes it a top choice for those looking to capitalize on the increasing prominence of digital currencies.

The Bitcoin Rewards Checking account offered by Quontic stands out due to its 1.50% rewards on all Point of Sale (POS) transactions made with the associated debit card. These rewards are paid out in Bitcoin, allowing users to accumulate the popular cryptocurrency as they make everyday purchases. Furthermore, the account acts as a secure wallet for users to store their Bitcoin, providing a seamless banking experience for crypto enthusiasts.

This FDIC-insured bank account requires a minimum opening deposit of $500 and is not available in Hawaii and North Carolina.

4. SoFi

SoFi is an innovative financial institution that has embraced the crypto revolution. Through its SoFi Invest platform, customers can trade crypto and access educational resources to learn about digital currencies.

With just a $10 minimum investment, users can start trading Bitcoin, Ethereum, Dogecoin, Cardano, and over 20 other coins on a platform available 24/7. Users can trade cryptocurrencies alongside stocks, fractional shares, and ETFs within the SoFi app, making it an all-in-one investment platform.

SoFi takes security seriously and offers a range of tools to protect your crypto holdings from theft. These include two-factor authentication, SSL encryption, partnering with trusted exchanges like Coinbase for transactions, and not sharing personal information with trading partners or custodians. This ensures that your investments are safe and secure on the platform.

The SoFi app also provides a wealth of educational resources, such as their Crypto Guide for Beginners, Crypto Glossary, and Guide to Crypto Staking, to help you make informed investment decisions. Keep in mind that due to its volatility, crypto carries a higher degree of risk compared to traditional investments.

Crypto trading on SoFi Invest is subject to a 1.25% markup on crypto transactions, which is added to the market price from the exchange. While there are no plans to allow transfers between SoFi Invest accounts and external wallets at this time, the platform’s focus on security and convenience makes it an attractive option for those interested in trading crypto.

5. Vast Bank

Vast Bank has made history as the first full-service national bank to provide customers with the ability to buy, sell, and hold cryptocurrencies. Through an intuitive mobile banking app, users can access both a checking account with a competitive 2.65% annual percentage yield (APY) and a dedicated crypto account.

As a nationally chartered and federally regulated U.S. bank, Vast Bank ensures a high level of security and reliability for its customers. By using the Vast Crypto Banking app, users can easily deposit USD into their checking account, purchase cryptocurrencies, and safely store their crypto alongside their fiat funds.

This crypto bank currently supports a wide range of popular cryptocurrencies. Among them are Bitcoin (BTC), Ethereum (ETH), Filecoin (FIL), Cosmos (ATOM), Chainlink (LINK), Cardano (ADA), Litecoin (LTC), Aave (AAVE), Bitcoin Cash (BCH), Orchid (OXT), Tezos (XTZ), and Algorand (ALGO).

Vast Bank offers the convenience and safety of traditional banking, such as FDIC insurance for checking accounts, a debit card with access to 56,000 free ATMs worldwide, account transfers, bill pay, and mobile deposits. However, it is important to note that digital assets held in the crypto account are not insured by any government entities, including FDIC or SIPC.

6. Wirex

Wirex is a standout in the world of crypto-friendly banks, offering users a seamless banking experience that supports both fiat currencies and cryptocurrencies. Available in 130 countries and boasting over 3.5 million users worldwide, Wirex provides a multi-currency account and a Visa card for convenient fiat payments.

One of the main attractions of Wirex is its generous savings interest rates, which reach up to 6% for cryptocurrencies such as BTC, ETH, and LTC. For those who prefer to save in fiat currencies like USD, AUD, HKD, or DAI, an impressive 12% interest rate is available. Additionally, users can earn an extra 4% interest when saving in WXT, Wirex’s native token.

Built on both Ethereum and Stellar blockchains, WXT offers exceptional performance and versatility within the decentralized finance (DeFi) sector. Wirex rewards its users with up to 4% WXT cashback each time they use their card for in-store or online purchases. The multicurrency card allows for hassle-free payments when traveling abroad, automatically converting to the local currency with no exchange fees, and offering savings of up to 3% on international transactions.

Beyond being a Bitcoin-friendly bank, Wirex offers a wallet app that supports over 100 coins and includes DeFi and NFT capabilities. This combination of features makes Wirex an excellent choice for those seeking a comprehensive and crypto-friendly banking experience.

7. Ally Bank

Ally Bank is an online bank that has embraced the crypto revolution, offering an array of services to support digital assets. Some notable features from Ally’s website include:

Crypto trusts: Ally offers private trusts that invest in and track the price of specific cryptocurrencies, allowing customers to indirectly trade them as they would a stock.
Bitcoin futures: Ally provides access to exchange-traded funds (ETFs) that invest in the purchase of bitcoin futures contracts. This allows customers to gain exposure by speculating on the future price of Bitcoin without directly owning it.
Crypto stocks: Ally enables customers to invest in publicly traded companies that buy and hold cryptocurrency. Buying shares of these stocks provide indirect exposure to crypto.

Ally Bank’s crypto trading services on the Ally Invest platform, integration with popular cryptocurrency exchanges, and digital asset storage and management make it a top choice for crypto enthusiasts seeking a crypto-friendly bank.

8. BankProv

BankProv is a forward-thinking US financial institution that provides a range of services, including business banking, cash management, personal banking, and cryptocurrency offerings. Embracing modern technologies, this crypto bank utilizes API banking, the ProvXchange network, and specializes in lending.

Its support for various digital assets ensures that customers can access a diverse range of investment options, making it a strong contender among crypto banks. Customers can enjoy real-time transactions through the ProvXchange network, while the API integration allows for seamless interaction with various platforms and software solutions.

BankProv provides crypto-backed loans and credit lines for organizations secured by Bitcoin or Ether, as well as equipment and infrastructure loans for crypto mining operations. Additionally, Bitcoin ATM operators can take advantage of secure cash vault services, expedited money transfers, and other perks tailored to businesses operating within the crypto sector.

9. Juno

Established in 2019, Juno is a fintech company offering a digital banking platform with hybrid accounts for managing both cash and cryptocurrencies. Despite not being a traditional bank, Juno’s exceptional services make it a top contender for cryptocurrency investments.

Juno enables users to purchase a range of popular cryptocurrencies without fees, and provides two types of checking accounts: Basic and Metal. The Basic account is free with a $5,000 daily funding limit, while the Metal account, free with monthly qualifying deposits of $250 or more, offers a $25,000 daily limit and up to six times higher savings.

Bonus rewards are a highlight of Juno’s offerings, with users earning up to 5% on cash deposits and yearly cashback for payments with cash or crypto. The JCOIN Loyalty Program allows customers to earn tokens and redeem them for exclusive discounts and cashback boosts. New users can benefit from a welcome offer, which includes bonuses for initial deposits, trades, and referrals.

Free cash withdrawals are available at Allpoint and MoneyPass® ATMs, with additional out-of-network withdrawals for both account types. Juno’s mobile banking app is compatible with iOS and Android, supporting Apple Pay, Google Pay, Samsung Pay, and debit cards. The platform also offers the unique feature of converting paychecks into crypto through partnerships with over 500 payroll providers, allowing users to automate their investments seamlessly.

10. Monzo

Monzo is an innovative online-only bank that has gained popularity in the UK for its modern approach to banking. More recently, Monzo has expanded its services to accept applications from US customers, broadening its reach in the financial market.

With a Monzo account, customers can manage all their bank accounts, including non-Monzo accounts, on a single dashboard through the Monzo app. While the bank itself does not support crypto trading, users can still invest their Monzo account funds into cryptocurrencies through crypto exchanges like Coinbase and Crypto.com. This feature provides Monzo users with indirect exposure to cryptocurrency while still enjoying the convenience and security of a modern bank.

11. Axos Bank

Axos Bank, a crypto-friendly institution, started providing its commercial banking clients with TassatPay access in May 2022. TassatPay is a private, permissioned blockchain-based digital payments platform that enables 24/7 real-time payment capabilities and has processed over $400 billion in transactions. This platform is endorsed by a primary bank regulator.

Axos also offers exposure to various crypto-related exchange-traded funds (ETFs). These include the Bitwise 10 Crypto Index Fund (BITW), Bitwise Crypto Industry Innovation ETF (BITQ), ProShares Bitcoin Strategy ETF (BITO), and ProShares Short Bitcoin Strategy ETF (BITI), among others.

12. Standard Chartered Bank

Standard Chartered Bank has demonstrated a strong interest in cryptocurrencies and blockchain technology, regularly conducting research and sharing insights on digital currencies. Recognizing the growing demand in the market, Standard Chartered is launching a crypto exchange and brokerage service to provide its customers with access to digital assets.

The bank’s direct crypto trading and investment services are still in development. However, their commitment to staying informed about the latest trends in the digital currency market and taking steps to launch new services indicates their growing involvement in the crypto space.

13. USAA

USAA, a financial institution dedicated to serving current and former military personnel and their families, provides a range of tailored financial products and services. Among these offerings is an integration with Coinbase, a leading cryptocurrency exchange.

Through this partnership, USAA customers can conveniently link their Coinbase accounts to their USAA portal, enabling them to easily monitor their digital asset balances and track transactions. This feature streamlines the process of staying informed about one’s cryptocurrency holdings and activity, offering an added layer of convenience for USAA members.

14. Fidor

Fidor is a pioneering online bank headquartered in Munich, Germany. It offers innovative banking services designed to support digital assets. Its integration with popular cryptocurrency exchanges and crypto wallet services makes it an ideal choice for those looking for a crypto-friendly bank. Additionally, Fidor provides support for ICO and token sales, giving customers access to new and emerging cryptocurrencies.

15. PayPal

Although PayPal is not a bank, it offers various banking services and has expanded its support for cryptocurrency in recent years. PayPal enables users to buy, sell, and hold cryptocurrencies such as Bitcoin, Ethereum, and Litecoin.

By partnering with Paxos Trust Company, a regulated provider of cryptocurrency products and services, PayPal ensures a secure and compliant experience for its customers. While it does not offer the full range of services that traditional banks do, PayPal’s support for crypto makes it an appealing choice for those who want to manage their cryptocurrencies alongside other financial transactions.

Bottom Line

The increasing popularity of cryptocurrency has led to a growing number of crypto-friendly banks, offering a range of services to accommodate the unique needs of digital asset users. These banks provide an array of services, from crypto trading and custody to debit cards and loans backed by crypto.

As the crypto industry continues to evolve, it’s crucial to stay informed and choose the best crypto-friendly bank to suit your needs. With so many crypto-friendly banks available, you can now manage your crypto alongside traditional banking services, providing a seamless and efficient way to navigate the world of cryptocurrencies.

Frequently Asked Questions

What makes a bank crypto-friendly?

A crypto-friendly bank is one that supports and facilitates cryptocurrency transactions, storage, and trading. These banks typically offer a range of services tailored to the needs of digital asset users, such as integration with popular crypto platforms, crypto-backed loans, and the ability to spend crypto using a debit card.

Can I store my cryptocurrencies in a traditional bank account?

While some banks offer crypto-friendly services, cryptocurrencies are typically stored in digital wallets rather than traditional bank accounts. However, many crypto-friendly banks provide integration with popular crypto wallets and exchanges, allowing you to manage your crypto alongside your fiat currency.

Are crypto-friendly banks safe and secure?

Many crypto-friendly banks are FDIC-insured and follow strict regulatory requirements to ensure the security of your assets. It’s essential to research each bank’s security measures, such as two-factor authentication, encryption, and secure storage of crypto before choosing a crypto-friendly bank.

How do I choose the best crypto-friendly bank for my needs?

To choose the best crypto-friendly bank for your needs, consider the range of services offered, the bank’s reputation, and any fees associated with their services. You may also want to look for banks that provide educational resources, customer support, and a user-friendly platform for managing your crypto.

Can I use a debit card to spend my cryptocurrencies?

Some crypto-friendly banks and financial service providers offer debit cards that allow you to spend your crypto just like traditional fiat currency. These cards typically convert your cryptocurrencies to the local currency at the point of sale, making it convenient to use crypto for everyday transactions.

Do crypto-friendly banks offer loans and credit products?

Some crypto-friendly banks offer crypto-backed loans and lines of credit. These products allow you to leverage your crypto without selling it, providing greater financial flexibility for crypto users.

Source: crediful.com

Apache is functioning normally

May 4, 2023 by Brett Tams

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Finding the best renters insurance policy is what most renters want but aren’t interested in spending a lot of time weighing all the different options.

Worse, a lot of renters don’t know much about it, or think it’s important.

But if you rent the home you live in, whether it’s a house, a condo, or an apartment, renters insurance is no less important than homeowner’s insurance is to a homeowner.

Renters often assume if they experience any losses due to disasters, such as fire and theft, they’ll be covered under the landlord’s insurance. That’s almost never true!

The landlord’s property insurance will cover destruction of the building, but not the contents that are within it. And since virtually all of the contents in a rental property belong to you, the renter, you will be completely out of luck if disaster strikes.

Best Renters Insurance Companies

It would be impossible to say which company offers the lowest premiums on renters insurance. That’s because the quotes you’ll get will be different, based on your personal needs and profile, other insurance policies you might bundle with the renter’s policy, your geographic location, and the type of property you live in.

There’s a wide variation in the premiums for renters insurance between companies competing in the same market. That means it pays to shop!

And while some companies seem to provide additional coverages, it’s hard to know if what they were giving were actual extras, or if they were simply giving more detailed quotes. It’s possible that similar types of coverage are available with all five companies.

What is Renters Insurance?

Renters insurance is a specific type of coverage that insures the possessions that are stored in your rental property. Exactly which possessions are covered depends upon the type of renters insurance you have. Whether you want to protect your prized jewels, new laptop, big screen TV, or a number of other items that are near and dear to your heart, a good renters insurance policy is probably well within your reach.

Renters insurance helps you with replacing stolen or damaged property, but also with protecting yourself from liability on your property and providing you with a backup plan in the event that your home itself is damaged. Let’s take a closer look at those below.

What Renters Insurance Covers

There are three standard provisions that will be found in nearly all renter’s insurance policies:

Personal Property

Similar to a homeowners policy, renters insurance covers the contents of the home you are renting. That includes furniture, electronic equipment, clothing, appliances, and personal effects. You will typically take a policy that will cover anywhere from $10,000 to $100,000 in personal property, though it can be higher.

To determine how much personal property coverage you need, you should take an inventory of everything you have. List the inventory, and then get retail prices on the cost to replace each. It’s tedious, but that’s the only way to really know how much coverage you’ll need.

It’s usually best to take photos, particularly of high-value items. That will make it easier if you need to make a claim with the insurance company.

Personal Liability

Personal liability coverage will protect you if an accident or injury happens to someone else who’s in your home. This can be someone slipping and falling in the home, being bitten by a family pet, or other types of injuries.

It could include visitors, repair people, or even the landlord if the cause of the injuries is determined to be your fault.

Personal liability coverage will protect you and your assets from lawsuits brought against you by injured parties who are holding you responsible.

Additional living expenses

This is coverage that pays in the event you lose the use of the rental premises. For example, if the property is destroyed or damaged by a fire, the insurance policy will pay for reasonable relocation expenses, such as reimbursement for a hotel stay, meals, and other expenses related to the temporary lodging situation.

Non-standard Renters Insurance Provisions

The following may be offered as part of a standard package with some insurance companies, but are additional provisions with others.

Off-premises coverage

This is coverage for possessions beyond the rental property itself. For example, it could include possessions stored in the common area of the basement of your apartment, that are subject to either damage, destruction, or theft. It can also extend to personal items stolen from your vehicle, if those items would normally be covered under your rental policy. This might be a laptop computer, as long as it’s specifically covered under your renter’s policy.

Some renter’s insurance may also include a provision to cover lost luggage, which might be lost by an airline.

Specific coverage items

You should never assume a renters insurance policy covers every possession you own. Some have specific exclusions, and others will exclude an item if it is not specifically listed.

Common specific coverages include home computers, jewelry and furs, business personal property, and firearms. If you have these items, be sure to check to make sure they’re included in your coverage. If not, you may have to get special coverage for each category individually.

Some policies do specifically include all four of these categories. State Farm is an example (see policy quote below). But never assume they’re automatically covered in your policy.

What Renters Insurance Doesn’t Cover

In the broadest sense, renters insurance doesn’t cover any hazard that is not specifically listed in the policy.

Got that? That’s the general rule, but there are certain specifics you should be aware of.

For example, just as is the case with homeowners insurance policies, renters insurance doesn’t usually cover losses due to floods and earthquakes. Those are considered a special category of hazard, specifically requiring either flood insurance or earthquake insurance.

While a renters policy may cover damages sustained as a result of a burst water pipe, you won’t be covered if your home is destroyed as a result of a river that floods your neighborhood.

If you live in an area that’s subject to natural disasters, you should look into getting a policy specifically for that hazard.

When is Renters Insurance Needed?

When required by a landlord – Large apartment complexes typically require you have renters insurance, but so do a lot of individual landlords. It’s likely they have this requirement to protect themselves from tenants filing suits to get compensation for possessions lost due to fire or some other hazard. The requirement is written into the lease.

When you want your possessions protected – Even if your landlord doesn’t require you to have renters insurance, you should have at least a small policy to protect your possessions. Though your stuff may not seem to be worth much, it could easily cost several thousand dollars to replace it, should most or all of it be destroyed or stolen.

College students – Whether you live in a dorm or off-campus, renters insurance is worth having. You probably have at least a laptop, clothing, and some entertainment equipment that would need to be replaced upon loss. You can usually get an inexpensive rider added to your parent’s policy to cover your dorm room.

Retirees who rent – Like college students, retirees may assume that what they have isn’t of much value, particularly if much of it is more than a few years old. But once again, the cost to replace your possessions could be many thousands of dollars. Renters insurance would provide you with the cash for the replacements.

Anyone who rents their home – You might assume if your rental is short-term you don’t need renters insurance. Or, if you’re renting a house, you may assume you’re covered under your landlord’s homeowner’s policy. Both assumptions are wrong.

Renters insurance is necessary anytime you’re in a rental situation.

How Much Renters Insurance Do You Need?

As I wrote earlier, you need to do an inventory of your possessions to determine how much coverage you’ll need to replace everything you have that could be lost. You might also have to get additional coverage for gray-area possessions, like business property, computer equipment, or jewelry and furs.

Liability coverage requirements are harder to estimate. $100,000 should probably be a minimum. But you should also adjust for factors such as how frequently you have visitors or people coming and going to and from your home, as well as any maintenance considerations. For example, if you live in an area where snow and ice are common, and you’re responsible for keeping walkways and stairwells clear, you may need more coverage.

As to the additional living expense portion, try to come up with a reasonable estimate of how much it will cost to live in a hotel for maybe 30 days, while repairs are being done to your rental property. If it’s a severe situation, you might need several months. But the cost of that coverage could be high.

Replacement cost versus actual cash value

This might be the most important single factor in choosing a renters insurance policy. It will determine how much you’ll receive on a claim, so you need to know which provision your insurance company is using.

Under a replacement cost provision, the insurance company will pay a sufficient amount to replace the lost items based on retail cost.

Under actual cash value, the insurance company will reimburse you for the depreciated value of the item. Let’s say you paid $1,000 for a flatscreen TV five years ago, and it’s destroyed in a fire. The insurance company may decide the value of the TV is just $200, based on its age. That’s the amount you will be reimbursed for.

Now actual cash value policies are less expensive than replacement cost policies. But as you can imagine, they’ll also pay you a lot less if you file a claim.

Unless you’re in the habit of buying your possessions at flea markets and garage sales at deep discounts, you’ll be much better off with a replacement cost policy. It may cost more for the premium, but it will do its job better when disaster hits.

How Much Does Renters Insurance Cost?

According to the Minnesota Department of Commerce renters insurance averages between $15 and $30 per month.

How much renters insurance costs depend on the usual factors that affect all insurance policies. These can include the amount of coverage you want, the deductible you’re willing to accept, your history of claims, and even how you plan to use the property.

But where renters insurance is concerned there are more specific considerations. For example, the number and type of pets you have can be a factor. Certain breeds known to be more aggressive will result in a higher premium. So will a wood-burning fireplace. The number of occupants might also figure in. Presumably, the higher the number, the more likely a claim will be paid out.

A higher premium might also be charged if you’re running a business out of the residence. In fact, certain types of businesses might require you get a commercial policy, rather than a standard rental policy.

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One of the biggest single factors is property location.

Urban locations typically cost more than rural ones, due to the closer proximity of buildings and the likelihood of fire. If the property is located in a high-crime area, it can also increase the premium. So can a location in an area that’s more prone to natural disasters, such as tornadoes and hurricanes.

The type of construction of the building is also important. For example, a building made of brick, rather than wood, would have a lower premium. The age of the building might also be a factor, since newer buildings generally have better fire protection features, like smoke alarms and sprinkler systems.

Here’s a table put out by the Insurance Information Institute that shows the average cost of both homeowner’s and renter’s insurance from 2006 to 2015. Notice how inexpensive renters insurance is compared with homeowners? It is a common misconception that insurance is too expensive for renters.

In fact, it is affordable and well worth the cost for the peace of mind and protection you receive. In 2019 and beyond, you can expect the same kind of minimal changes and affordability to remain intact, as the table below suggests.

How to Lower the Cost of Renter’s Insurance

Whatever the situation with your renter’s insurance premium, there are ways that you can keep the cost down.

Don’t buy more coverage than you need – Take an inventory of the contents of your home, and make a reasonable estimate of the replacement value of what you have. If it’s only realistically worth $25,000, then you don’t need a $50,000 policy.

Security and protective systems – Residences that have smoke alarms, fire extinguishers, indoor sprinkler systems, deadbolt locks, and security systems will usually have lower premiums.

Bundle renters insurance with other coverages – If you have auto, life, or health insurance, consider bundling your renter’s insurance with one of these policies. It can result in small savings on the premium.

Claim-free history – Like all other types of insurance, your claim history will be a major factor in determining the premium. When it comes to renters insurance, companies normally look back at least five years. If you had no claims filed in that time, you’ll get the best premium rate.

Policy exclusions and limitations – You can specifically exclude any types of property that you don’t actually own. For example, if you don’t have much in the way of high-cost jewelry, you won’t need coverage for jewelry and furs. Also, you can save a good bit of money by increasing your deductible from $500 to $1,000, or even higher you have the liquid savings to cover the difference.

The insurance company you choose may be the single biggest factor in determining your premium. Some companies just want the business more in your particular location, and will discount premiums to get it. You’ll see how this works in the next section.

What to Watch Out for With Renters Insurance

There are a few situations that might cause your premium to be higher, or even cause the insurance company to deny your application.

High-risk renters

This could be the result of the location of the rental property or even certain risks associated with you as a tenant.

Location can be a factor if you’re living in a high crime area, or in an area that has seen an above-average number of fires and other hazards. A location may be considered high risk if it’s located too far away from fire hydrants or fire stations. Your premiums will be higher if you’re located in such a neighborhood, or you may find that an insurance company is unwilling to extend coverage at all.

You could be considered a high-risk renter if you made one or more claims against your policy within the past five years (this is a standard question on renters insurance applications, so be ready). Some insurance companies may not offer a policy at all if you have one.

Still another possibility that would make you a high-risk renter is if you run a business out of your home. While a work-from-home situation won’t usually be a problem, having the type of business where you have people coming and going from the residence could be an obstacle.

One prominent example is if you’re running a childcare business out of your home. A situation like that would probably require a business insurance policy, in addition to renters insurance.

Sub-letting the residence

This is where you are the primary tenant in the property, but you might then rent the property out to another party on a temporary basis. While renter’s policies do provide for roommates and other regular occupants, they generally frown on transient arrangements. This will pretty much preclude using a rental premise for AirBnB customers!

Dangerous or exotic pets

Since certain types of pets are statistically more likely to cause injury to people, the insurance company may either charge you a higher premium for these pets, or even refuse to issue the policy entirely.

This is a common occurrence with certain dog breeds. For example, most insurance companies will have a problem if you have a pitbull, a German Shepherd, or other dogs deemed to be aggressive.

You might also run into a problem with certain exotic pets. A good example might be an iguana or a 10-foot python. Both are considered to be potentially dangerous, and don’t fall within the definition of ordinary pets. You probably won’t be able to get a renters insurance policy at all if you have this type of pet.

Unusual possessions

The same can be true of jewelry, furs, artwork, or antiques. If you have items that have significant value, either individually or collectively, you may need a separate policy that specializes in that particular type of possession.

Never assumed that a high dollar value item is covered under your policy. Just because you have $50,000 in coverage doesn’t mean that a $10,000 diamond ring is covered!

Should You Get Renters Insurance?

Unless you’re the kind of person who travels light in life – like really light – you absolutely need renters insurance. That means anything more than the clothes on your back, and an overnight bag with toiletries. It can be furniture, computer equipment, photography equipment, family heirlooms, appliances – you name it. If it’s worth anything at all to you, to the point that you would need to replace it if were lost, then you need renters insurance. .narrow-sky-1-multi-648border:none !important;display:block !important;float:none !important;line-height:0px;margin-bottom:15px !important;margin-left:auto !important;margin-right:auto !important;margin-top:15px !important;max-width:100% !important;min-height:250px;min-width:250px;padding:0;text-align:center !important;

Never assume your personal possessions will be covered under your landlord’s homeowners insurance, or under any other policies you may have. Renters insurance is a very specific type of coverage, and there’s no substitute for having your own policy.

Source: goodfinancialcents.com

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May 4, 2023 by Brett Tams

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