Should You Open a 5-Year CD in 2024?
By: Maurie Backman |
– First published on Dec. 24, 2023
Any time you’re looking to open a certificate of deposit — no matter the length of its term — you need to make sure you can afford to part with your money for that long. There can be steep penalties for cashing out a CD before it comes due. So if you’re not certain you’re comfortable keeping your money tied up, a savings account may be a better choice. That way, you can access your money whenever you need to.CDs come in a variety of terms, and for many banks, the longest amount of time you can open a CD is five years, or 60 months. You may be thinking of opening a five-year CD in 2024. But before you do, carefully consider the benefits and drawbacks.The upside of opening a five-year CDA CD will generally pay more interest than a savings account because you’re committing to keeping your money where it is for a preset period. You also get the benefit of a guaranteed interest rate. It’s for this reason that a five-year CD could especially make sense in 2024.Inflation has been cooling over the past year. And because of that, there’s talk of the Federal Reserve cutting rates in the new year. If the Fed goes this route, it could make personal loans less expensive to sign and credit card balances more manageable for those who owe money. But it could also result in lower interest rates across the board on savings accounts and CDs.That’s why you may want to lock in a five-year CD sooner rather than later. The generous rates banks are paying today are, frankly, not likely to last much longer. If you open a five-year CD in 2024, you can guarantee yourself a generous rate through 2029. By contrast, if you open a one-year CD in 2024, by 2025, you may find that rates are already much lower, making CDs less appealing on a whole.The downside of opening a five-year CDAs mentioned, there can be costly penalties for cashing out a CD before it matures. At Capital One, the penalty for an early withdrawal from a five-year CD is six months’ worth of interest. So let’s say you have a $10,000 CD paying 4% a year. That’s $400 in annual interest, but it also means that withdrawing your money early will cost you $200. And to be clear, you’ll face that penalty whether you cash out your CD two months early or two years early. Meanwhile, a lot can happen in five years. You could fall in love, get engaged, and end up having a wedding to pay for. You could get a new job that requires you to relocate and absorb the cost. Or, you could have a baby, find yourself overwhelmed by the expense of child care, and end up desperate to tap your CD to cover your tab at daycare.As such, you’ll want to be really careful about opening a CD with a five-year term. While doing so may be a good way to snag a generous interest rate on your money without running the risk of losing out on principal like you would by investing, you run another risk. So think things through before moving forward with a CD that has you tying up your money for 60 months.
Ranked: The Best Car Insurance Companies for Discounts
By: Ben Gran |
– First published on Dec. 23, 2023
The cost of auto insurance has skyrocketed in recent years, leaving many people scrambling to find discounts on car insurance. But how do you know which companies provide high-quality auto insurance at an affordable price? Not every car insurance company has the same reputation for trustworthy claims handling and friendly customer service. Sometimes the “cheapest” car insurance is not the best policy for your situation.What if you try to save money on car insurance by switching to a lower-priced company, but end up regretting it after you get in an accident? Fortunately, The Ascent has got your back. We’ve researched the auto insurance industry and scoured pricing data to find the best car insurance companies for discounts.Read on to see our list of the best options to help you save money on car insurance.1. NationwideHow cheap is Nationwide car insurance compared to the national average? Here’s a quick pricing breakdown:National average annual car insurance premium: $3,017Nationwide’s average annual premium: $2,697Why we chose Nationwide for our list of best cheap car insurance companies:Nationwide is one of the best insurance companies for bundling homeowners and auto insurance. You can combine coverages and save money overall. When you spend a bigger share of your monthly budget with one insurance company, it can often give you a better deal.Nationwide offers pay-per-mile car insurance. Do you work from home, or live in a walkable neighborhood? Are you not driving as often as you used to? Nationwide offers SmartMiles®, a special plan that lets you pay for car insurance based on the amount of miles you drive. The less you drive, the more you can save on car insurance.Nationwide has received a high ranking in auto insurance customer satisfaction by J.D. Power.Read our Nationwide review2. GeicoHow cheap is Geico car insurance compared to the national average? Here’s a quick pricing breakdown:National average annual car insurance premium: $3,017Geico’s average annual premium: $2,106Why we chose Geico for our list of best cheap car insurance companies:Geico is one of the absolute cheapest car insurance companies, promising to save you 15% or more on car insurance.Along with delighting TV audiences with its friendly Australian spokeslizard, Geico gets high marks for customer service and efficient claims handling.Geico offers special coverages like rideshare insurance for Uber and Lyft drivers, and an Auto Repair Xpress® program to get your car fixed faster after an accident.Read our Geico review3. USAAHow cheap is USAA car insurance compared to the national average? Here’s a quick pricing breakdown:National average annual car insurance premium: $3,017USAA average annual premium: $1,844Why we chose USAA for our list of best cheap car insurance companies:USAA car insurance is super affordable, with a lower average annual premium than any other company on our list. USAA members save an average of $707 per year on car insurance by switching to USAA from other insurers.USAA offers generous coverage and benefits, such as free accident forgiveness after five years. It also provides special policy discounts for good students and for military-specific situations like keeping a car on a military base.USAA car insurance gets exceptionally high customer satisfaction ratings; people just absolutely love this insurance company. Keep in mind that USAA car insurance is only available to members of the military, veterans, and their families.Read our USAA review4. State FarmHow cheap is State Farm car insurance compared to the national average? Here’s a quick pricing breakdown:National average annual car insurance premium: $3,017State Farm average annual premium: $2,770Why we chose State Farm for our list of best cheap car insurance companies:State Farm offers special discounts for drivers under age 25 who complete its Steer Clear® program. They also offer good student discounts of up to 25%. This makes State Farm a great choice for insuring teenage drivers.State Farm offers helpful optional coverages, including rideshare insurance, and travel expense coverage in case you’re in an accident more than 50 miles from home.State Farm’s nationwide network of insurance agents can provide helpful advice, local personalized service, and a wide range of insurance coverage for home, auto, life insurance, and more.Read our State Farm review5. Erie Auto InsuranceHow cheap is Erie Auto Insurance compared to the national average? Here’s a quick pricing breakdown:National average annual car insurance premium: $3,017Erie Auto Insurance average annual premium: $2,273Why we chose Erie Auto Insurance for our list of best cheap car insurance companies:ERIE Rate Lock® is a special feature that keeps your car insurance rates the same, year after year. Your rate will only change if you add or remove a driver or vehicle, or change the address where your car is parked.Erie Auto Insurance offers a multi-policy discount of up to 20%. Bundle and save!Special policy features are available, like free roadside assistance, and a diminishing deductible for every consecutive year you can go without making a claim.Read our Erie Auto Insurance reviewCheap car insurance doesn’t have to be lower-quality car insurance. It really is possible to save money on car insurance, while still receiving peace of mind and financial protection. The exact amount of premium that you have to pay will depend on where you live, your driving record, your vehicle, and other factors. But all the companies on this list can potentially help you save money. That’s why we chose them as the best car insurance companies for discounts.
Does Your Income Make You Upper Class, Middle Class, or Lower Class?
By: Christy Bieber |
– First published on Sept. 5, 2023
Incomes vary widely across the United States, with some people making many times the amount that others earn. If you’ve ever wondered how your personal finances stack up, and what “class” your income officially puts you in, here’s what you need to know.What income do you need to be upper, middle, or lower class?Based on 2021 data, here’s what you would need to earn in order to be in each class:Lower class: This is defined as the bottom 20% of earners. Those in the lower class have an income at or below $28,007.Lower middle class: This is defined as individuals in the 20th to 40th percentile of household income. Earnings among this group are between $28,008 and $55,000Middle class: The middle class is officially those whose earnings put them in the 40th to 60th percentile of household income. The income range is $55,001 to $89,744.Upper middle class: Anyone with earnings in the 60th to 80th percentile would be considered upper middle class. Those in the upper middle class have incomes between $89,745 and $149,131.Upper class: Finally, the upper class is the top 20% of earners and they have incomes of $149,132 or higher.Take a look at these numbers and see where you fall based on your own earnings. And remember, this is a snapshot in time — your earnings can change throughout your life, and so can your class designation.Will your success be determined by your income and class?It’s probably not a surprise that those in the upper classes or in the upper middle class do have a higher net worth than those in the lower class or the lower middle class. But the disparity is greater than you might think. While the median net worth of those with incomes of $149,132 or higher is $805,400, the median net worth of those in the lower class is just $12,000.Your income impacts how easy it is for you to build wealth. If you make more money, it is easier to save it and invest it in a brokerage account where it can work for you. If you make less money, then you may struggle even to cover the necessities out of your checking account, much less to buy valuable assets that help you grow richer over time.But that doesn’t mean people who don’t make a lot of money can’t be a financial success. A lot depends on what you do with the money you actually have, including how much you spend and how much you save.There are plenty of people who make over $100,000 a year who live paycheck to paycheck, and plenty of people with incomes that put them squarely in the lower or lower middle class who have diligently saved and grown quite wealthy over many years.Here’s how you can improve your standingDon’t be discouraged if you aren’t in the class you hope to be. For one thing, you have opportunities to increase your income by taking the following steps:Learning new job skills: You could obtain a certification, take part in a management training program at work, or take some classes to develop skills that may help you get promoted (such as computer training courses or public speaking classes), depending on your industry.Take on a side hustle: The average side hustle brings in $483 per month, which is a good amount of extra money that could make a meaningful difference in your income.Work some extra hours: If your company allows you to work overtime, take advantage of it, as many people are paid time and a half for overtime hours.Negotiate your salary: According to Pew Research, when workers negotiated for higher pay, 28% said they received the extra money they asked for and 38% indicated they were given more than originally offered but less than their ask. Whether you are getting a new job or staying at your current job but feel you’re underpaid, it doesn’t hurt to make a request for more money — especially if you can find salary data to back up the fact that others in your industry are paid more.And even if your earnings never put you in the top 20% of earners, you can still have a rich life and end up with the financial security you deserve — especially if you prioritize saving as much as you can for as long as you can.
My Brother Won a Car on The Price Is Right. Here’s What It Cost Him
By: Maurie Backman |
– First published on Dec. 6, 2023
When my brother got tickets to be in the audience of The Price Is Right, he figured it would simply be an entertaining way to spend a day off. He didn’t imagine his name would actually be called during the show’s opening round.But lo and behold, my brother was one of the first four contestants asked to come on down and participate in the iconic show that has you guessing at prices of various consumer goods. And as luck would have it, my brother was able to out-bid his competitors and move on for a chance at a new car — a car he won through savvy guessing, but also, a nice amount of luck.My brother was ecstatic to have won such an awesome and valuable prize. But that prize wound up being a bit of a mixed bag.Taking the money and runningMy brother won a Hyundai Elantra with an estimated value of $25,415. He was happy to have won the car, but there was a problem — he already had a vehicle and didn’t need a second one. And he certainly didn’t want to have to bear the cost of auto insurance for a vehicle to largely just sit in his driveway.Thankfully, my brother was able to work something out with the dealership. Instead of keeping the Elantra, he was able to use the roughly $25,000 credit he got to buy a used car from them and then sell it back for $21,000, which he took as cash. This route was worth it for him because sales tax and registration for a new Elantra would’ve been about $4,000. And now, my brother has a pile of cash he can add to his savings account instead of a car he doesn’t actually need.Gearing up for a giant tax billMy brother won two prizes on The Price Is Right — a grill package worth about $1,400 and the Hyundai Elantra. All told, it’s more than $26,000 in winnings.But now, my brother is going to be looking at a pretty hefty tax bill on his prizes. And it doesn’t matter that he took cash for the car. He’s looking at paying that tax either way.The exact amount will hinge on his total tax situation. What’ll probably happen is that my brother will receive a tax form from the game show summarizing the value of his winnings, and he’ll need to work with his accountant to figure out what it will cost him.As a very basic example, let’s say you win $20,000 on a game show and fall into the 24% tax bracket based on your income. You might, in that case, end up having to pay as much as $4,800 on your winnings. If that $20,000 is a cash prize, you could simply reserve some of it for your tax bill. But what if you win a $20,000 vacation package, or $20,000 in furniture? It’s not like you can send the IRS a dining room chair or a loveseat and call things even.So be very careful when you’re looking at taking home any sort of game show prize. You may even want to meet with an accountant before applying to be on a game show to get some advice.The good news is that my brother stands to gain something financially either way. But imagine you were to receive a $26,000 bonus from work. That’s a great thing. But you’ll likely end up losing a large chunk of that $26,000 when you account for the portion you owe the IRS.All told, my brother is grateful for his experience and now has a really fun story to tell. But if you’re planning to audition for a game show in the hopes of walking away with a huge amount of cash or a set of prizes, do know that winnings like that are considered taxable income. And it might take the input of a very seasoned accountant to help you reconcile your tax bill after coming away with that sort of haul.
Most Millionaires Say They’re Only Middle Class, Data Shows
By: Maurie Backman |
– First published on Dec. 22, 2023
There was a time — perhaps not so long ago — when having $1 million to your name automatically made you rich. But those days may be behind us.It’s fair to say that $1 million is a lot of money. But is it enough to be considered upper class? Many wealthy Americans say no.Recent data from Ameriprise finds that 60% of people with $1 million or more classify themselves as upper middle class, while 31% of folks in that boat simply say they’re middle class. Only 8% percent of Americans with $1 million or more call themselves wealthy.Meanwhile, among those with $25,000-$999,000, 25% say they’re upper middle class and 58% say they’re middle class. And 2% consider themselves wealthy. (To be fair, those 2% might represent people at the top end of that range more so than the bottom.)You may be curious as to whether your income and savings account balance puts you in the middle class versus upper middle class versus wealthy category. But the reality is, it probably doesn’t matter.Money doesn’t go as far todayYou may be wondering how someone with $1 million or more might say they’re not wealthy. But remember, money is relative to what it costs to live and function.Inflation has driven living costs up to a notable degree over the past couple of years. And home prices are also sky-high. So it’s easy to see why having $1 million may not seem like much when, in some parts of the country, it costs close to $1 million just to buy an average home.Why labels don’t mean anythingIt’s easy to make the argument today that having $1 million in assets only makes you middle class. But you could also argue that someone in that boat is upper class or wealthy. So rather than fixate on the category you fall into, instead, think about where you are financially and how well you feel you’re doing.Some of the questions you may want to ask yourself are:Do I have money in the bank for unexpected expenses and financial emergencies?Am I able to cover my expenses without stress or resorting to debt?Am I contributing to a retirement account for my future?Am I able to purchase the things that bring me happiness?If you can answer yes to these questions, then frankly, it doesn’t matter whether you’re middle class versus upper class versus some new class marketing gurus might soon make up. It really only matters that you’re able to manage your money well, and that you’re working toward the goals you’ve set for yourself.And if you can’t say yes to these questions, then it’s important to get help — whether your personal assets are worth $40,000 or $2 million. That could mean working with a financial advisor to get a better handle on your finances. It could also mean taking a deeper dive into your personal financial habits.If you’re someone who doesn’t pay attention to their spending, it shouldn’t come as a shock to be lacking in savings. So in that case, you’d want to find ways to better manage your money, whether by tracking your credit card balances more frequently or using tools that make it easier to budget.You may be inclined to try to label yourself based on the amount of money you have. But a better use of your time is to figure out if your personal finances are in a good place, and if not, take steps to improve your personal picture and outlook.