The Biggest Threat to Your Credit Score

If you've been in the hunt for a house or borrowed money on a loan or credit card in 2023, then high interest rates have likely frustrated you. On the contrary, if you entered 2023 with savings and no debt, this has likely been a fun, fun year to save money.The Federal Reserve's federal funds rate, which sets the pace for the savings rate offered by banks, has reached a range of 5.25% and 5.50%. Likewise, today's top-paying CDs have hit a range of 5% to 5.7%. Many of these CDs have short terms, like six months, which reflects the expectation that the Fed will start lowering rates in the near future. But, if you have extra savings, these short-term CDs could offer you a high rate that you might not find next year.However, before you start locking money up into CDs, it's best to take a step back and ask if it's the smartest place for your money. If you're saving for something that's still a year or so away, like a vacation, a short-term CD could give you a little extra. But for bigger goals, like saving for retirement, I hate to break it to you, but -- CDs just aren't going to cut it.Why high-paying CDs might not be worth itTruth is, for most Americans, earning 5% isn't going to change their personal finances significantly. In fact, it could work against them. Locking your money up for a guaranteed rate of return could mean missing out on opportunities to generate more wealth, like potential gains in the stock market.Hands down, stocks and funds offer investors greater upside potential. You don't even need to be risky: an ETF that tracks the S&P 500 could be sufficient to out-earn a CD. The S&P 500 has already appreciated by roughly 19% this year -- far more than what any 12-month CD could have earned.The stock market does have risks, but for investors with long time horizons, the S&P 500's worst days are often more than made up for with the good ones. All in all, the total return of the S&P 500 since 1928 is 9.7% (this includes reinvested dividends). Factoring in inflation, that percentage comes down to 6.5%, which is still higher than today's top-paying CDs, and even higher if we factor in inflation for CD rates.What a CD offers that the S&P 500 can'tOf course, it's difficult to depend on figures derived from annualized rates of return, as the S&P 500's yearly performances can vary significantly. For example, the S&P 500 dropped about 18% in 2022, while it had gained almost 29% the previous year in 2021. If you had started investing in 2021, you might still be feeling the pain from the bear market last year.This is where a CD derives its greatest perk. You're getting a guaranteed rate of return. When you lock into a 5% APY on a 12-month CD, you know you're earning 5% for 12 months, assuming you don't break your contract and wind up paying an early withdrawal penalty. It's not as lucrative as stocks and funds, but it's also not as gut-wrenching either.Additionally, many of today's CD rates are above the rate of inflation. Even though you have to factor in taxes on your CD earnings, many CDs can prevent your money from losing value, something stocks can target but can't guarantee.All of this is to say -- there's greater opportunity outside of CDs. But, inside them, there's more certainty. Reflect on what you want your savings to accomplish, but don't be afraid to say "no" to security if what you really need is a long-term investment. Today's CD rates compared to last year's may seem like a great deal. But when compared with a long-term investment, like stocks or ETFs, they could be a loss in opportunity costs.

Car accidents can be extremely expensive. In fact, according to the National Safety Council, the average economic costs of a fatal crash were close to $1.78 million, while the average costs associated with a disabling car accident were $155,000.Despite these huge potential costs, drivers aren't required to buy nearly that much insurance. In fact, depending on the state, drivers may be able to get away with having just $15,000 per person and $30,000 per incident in bodily injury liability coverage.With such low auto insurance limits, it's very possible a motorist could cause an accident and do much more damage than insurance will cover. The big question then is, what happens if a motorist causes an accident and is being sued for more than the insurance policy's maximum limits?Drivers could be sued personally for any extra losses insurance won't coverIf a driver is sued for more than the limits of their liability insurance policy, their auto insurer will only cover legal fees and damages up to the amount required based on the policy terms. So a driver who caused $155,000 in disabling injuries to someone and who had $15,000 in bodily injury liability coverage would see their insurer pay just $15,000 -- leaving $140,000 in uncompensated losses for the crash victims.These losses don't just go away, and in some cases, victims will decide to pursue a lawsuit against the at-fault driver personally. In other words, they will go to court and try to get a judgment that the driver would have to pay out of their own bank account. And, depending on the circumstances, courts could potentially enforce that judgment by ordering the at-fault driver's wages be garnished (a portion of them is taken) or by putting a lien on the at-fault driver's property (asserting an ownership claim to their home or other assets).Because of the risk to personal assets, having only the minimum auto insurance coverage is a huge risk.Be sure to buy the right auto insurance coverageDrivers should think very carefully about whether they will end up regretting purchasing only minimum coverage insurance. It's true that it is cheaper not to buy a ton of liability protection, but that's only if nothing goes wrong.Switching from a car insurance policy with a $10,000 per person and $20,000 per accident limit to a policy with a $250,000 per person and $500,000 per accident limit raises premiums by around $47 per month for a 40-year-old female SUV driver in Florida with a clean record purchasing coverage from a major insurer. That's a significant bump, but it's a lot less than getting stuck with a personal lawsuit that ends up costing tens or even hundreds of thousands or millions of dollars.Being sued personally after an accident and not having enough insurance could be a really devastating, frightening experience, and the only way to prevent this from happening is to have the right insurance in place before this occurs. Drivers should review their policies today to make sure they aren't at risk of huge losses if a crash occurs. Those who find they don't have enough coverage to protect their assets may want to act quickly by increasing their insurance coverage ASAP.

Auto insurance premiums averaged about $3,017 per year in 2023, up from $2,875 in 2022. And in all likelihood, they'll probably climb higher next year. That makes it crucial for drivers to shop around to ensure they're getting the best possible rate on their 2024 auto insurance.While a company's prior-year rates aren't always indicative of what they'll charge the next year or any given individual, it can still give drivers some idea of which companies they might like to include in their search. So with that in mind, here's a closer look at which top insurers offered some of the most affordable premiums in 2023.The eight companies with the best auto insurance rates in 2023The following eight companies had the lowest average annual premiums among large auto insurers in 2023, according to our data:USAA: $1,844*Geico: $2,104Erie Insurance: $2,273Travelers: $2,343Progressive: $2,587Nationwide: $2,697State Farm: $2,770Farmers: $2,825* USAA is only available to active-duty military members, veterans, and their family members.It's worth noting that these are averages from across the country based on several driver profiles, including drivers with accident histories and DUIs as well as young drivers. Those with clean records will likely be able to snag a policy for less than the rates listed above. And drivers with blemishes on their record will likely pay a bit more than the prices listed here.How to find the best auto insurance rates in 2024Auto insurers may be adjusting their rates for 2024, but the principles for finding the best coverage remain the same. The most important thing a driver can do is shop around and compare quotes before making any decisions.Each company weighs risk a little differently, which is why each one gives a driver a different quote. Some might penalize drivers more heavily for accidents, for example, while age may play a bigger factor in premiums with a different insurer. Insurers don't publicize how they come to their premiums, so getting a quote is the only way drivers can know which will offer them the best deal.Auto insurance discounts can help reduce premium costs, but more discounts doesn't always guarantee a lower rate. Still, if you have special circumstances, like being in the military or owning a hybrid vehicle, it doesn't hurt to look into companies that reward drivers for these factors.Those who are open to it should also consider enrolling in a driver monitoring program if their insurer offers one. This is an optional service many companies make available to customers who are willing to demonstrate their good driving habits. It usually comes with an upfront discount for enrolling.Finally, drivers can keep their premium costs down by raising their deductible. This means they'll have to pay more out of pocket in the event of a claim. But this might not be a big deal for those who are able to save up for the deductible in an emergency fund.It's possible that drivers could still pay more for car insurance in 2024 regardless, because of inflation. But it's still worth taking the steps above so drivers can be sure they're getting the most affordable rate. And if there aren't any great options right now, consider shopping around again in a few months to see if anything has changed.

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.

If you're stressed out about the number of holiday gifts you need to buy this year, you're no doubt in good company. And if you're short on funds, you may be wondering how on earth you're going to find something for everyone on your list without ending up with a massive pile of credit card debt.If you're a Costco member, though, you're in luck. The warehouse club giant has a host of products in store that make great Christmas gifts for under $30. Here are some worth checking out.1. Kirkland Signature Ladies' Cozy Fleece CrewneckIf you live in an area with cold winters, you can really never have too many warm sweatshirts. Costco is selling a Kirkland brand women's fleece top for $16.99. It's a longer length for added coverage and comes in a range of sizes and two colors -- oatmeal beige and purple. It's machine-washable for easy care and a great gift for that person in your life who always seems to be cold.2. Spyder Active Men's Long Sleeve ShirtWearing cotton during a workout can mean sweating up a storm only to have your shirt stay damp and cold until you're able to peel it off. That's just not a good feeling. So if there's someone special in your life with a tendency to hit the gym or go for a jog, this shirt makes a great gift. It's a moisture-wicking top that's perfect for an intense workout, and it features reflective shoulder detailing so that whoever wears it is more visible during those early morning or evening runs. It comes in blue, black, and gray in a variety of sizes for just $15.99.3. Fun With Mouse & Friends: 6 Picture Book Box SetIf you need a holiday gift for a book-loving toddler or preschooler, you should consider this set. It features fun classics such as If You Give a Moose a Muffin and If You Take a Mouse to School. At $26.99, you're only paying about $4.50 apiece for six hardcover books. The set also includes a bonus poster.4. Life Comfort Reversible Sherpa Fleece BlanketThrow blankets are a good gift for pretty much anyone. And Costco is selling a reversible sherpa fleece throw for $19.99. It's large enough to fit a queen- or king-sized bed and is machine-washable for easy care. Choose from mutli-colored, gray, or dark gray, depending on your recipient's taste.5. Cuisinart EasyPop Hot Air Popcorn MakerA big reason some people like going to the movies is getting to enjoy a bag of freshly popped popcorn. Now, your loved ones can experience that from the comfort of home -- and save the money they'd otherwise have to spend on a ticket. This popcorn maker produces up to 15 cups of popcorn -- enough to feed a crowd. And all of its removable parts are dishwasher-safe for easy cleanup. You can find this gadget for just $23.99.All of the items above are available on Costco.com, and the prices listed reflect what you'll pay online. But Costco often has lower prices at its warehouse club stores. So if money is tight this season, it could pay to brave the crowds and do your holiday shopping in person. You might end up spending even less on the gifts you're looking to buy.