As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.
For instance, in a recent conversation, a few of my coworkers stated they didnât have renters insurance. This puts them among the 59% of renters who donât have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.
Granted, renting comes with fewer property responsibilities than owning. But donât assume you can skip insurance for your home simply because youâre leasing it. Go without it and youâll expose yourself to some major risks.
See why opting for a policy is protection you canât live without, and learn how renters insurance can help smooth over the following five major renting crises.
1. Damaged Belongings
If youâre asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?
If the relatively small cost of a renters insurance premiumâtypically between $15 and $25 per monthâseems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.
âImagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,â he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, youâre completely on the hook for all those costs.
Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.
Months later, there was an electrical surge in the building. âIt took out everything she owned that was plugged in, including the TV, computer, and several other items,â Espenschied explains. These items were permanently damaged and unusable.
Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.
Donât put yourself in the same positionâget a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.
2. The Temporary Loss of a Habitable Home
Some disastersâsuch as fires, flooding, and electrical issuesâcan require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you canât live in your rental.
But if youâre out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.
But thereâs good news: âMost renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while itâs repaired,â says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.
Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.
3. Stolen Belongings
Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.
âIt even covers your belongings when theyâre not physically in your home,â Fitzgerald says. âSo if you take your laptop with you to the local coffee shop or on vacation and itâs stolen, your policy could help cover the costs of getting it repaired or replaced.â Renters insurance will usually be the policy that covers theft of personal items from your car too.
If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important stepâfiling a renters insurance loss claim will usually require a police report of the theft.
4. Personal Liability for Legal Damages
The most important protection your renters insurance provides, however, might be personal liability protection.
âIf your dog bites someone or a food delivery person slips and falls, you’re covered,â says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. âThe carrier will even hire and pay for an attorney to defend any resulting lawsuit.â
This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub âoverflows and leaks into the neighborâs unit below, causing damage to their personal property and cost to repair the building.â You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.
The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.
Make sure you understand your coverage. âEvery policy is different, so talk to an agent and read your policy terms,â Giulianti warns.
5. An Eviction for Violating Your Lease Agreement
Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlordâs property insurance coverage does not extend to your personal belongings.
If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a âcomply or quitâ notice and possibly begin eviction proceedings.
If you donât currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.
âMost renters can get a policy for around $20 per month,â Fitzgerald says. âThatâs a small price to pay when you think about the fact that if you donât have renters insurance, youâll be forced to cover the cost of replacing any and all items damaged.â
Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If youâre ready to buy a home, learn more about the ins and outs of home mortgages in Credit.comâs Mortgage Loan Learning Center. And to be financially prepared for anything, itâs also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.
The post Skipping Renters Insurance? Why Thatâs a Bigger Risk Than Youâd Think appeared first on Credit.com.
The post Budgeting For Beginners: A FREE Five Day Quick Start Course appeared first on Penny Pinchin' Mom.
If you feel stress about money, worry about paying your bills or are just tired of trying to find a way to rob Peter to pay Paul, you aren’t alone. Â In fact, I get it.
I really get it.
I tried to figure it all out on my own and failed miserably. That lead me to declare bankruptcy. Â While it wasn’t my finest moment, it had to happen to lead me to the place I am today.
Sometimes, our biggest mistakes force us to learn the most. Â For me, thinking that I could just try to wash my hands of my financial problems was mine. Â I did not take the time to figure out the right way to get control over my money and stay out of debt. Bankruptcy was the easy solution – but the wrong one.
Before filing, I had tried it all. Â I organized my bills to pay them on time. I worked with debt consolidation companies to try to lower my payments. I put spending freezes in place, just to blow that a few days later.
Nothing I had done was working.
So, I did what I thought was right. I contacted an attorney and filed.
As I said, that wasn’t the answer for me. Â I never took the time to get to the root of why I was looking at money the way I did. Â I did not want to face my own demons head-on. Â And that lead me to build up more debt…..even after bankruptcy.
Once my bankruptcy was behind me, I married my husband. Â We both knew that I wanted to stay home and raise our children. Â We thought that we would be OK when I quit my job, after all, my husband had a good income.
Boy. Â Were we wrong.
After our daughter was born,Â reality set in. Â The truth is, we did not really know where we were spending our money and continued to live the same lifestyle, even though our income had dropped.
Our finances were a mess.
Then, one night, after a rare dinner out with friends, the light bulb came on. Â Both of us realized that we could make some changes.
From that moment on, things were different. Â We both had revelations:
- We figured out we had to have a budget.
- We learned why we were spending.
- We worked together to create an actionable plan.
- We were on the same team and found new ways to save more money than ever before.
- We had a financial plan in place.
For us, it was our REBOOT moment. Â When we took control of our finances, it was like we started living again. Â When we stopped trying to hard to fight it and allowed ourselves to be vulnerable to change, it happened.
This is true for anyone who wants to learn how to budget. Â You have to allow yourself to be open to the change. Â You need to be willing to try something new. Â After all, what you are currently doing isn’t working, is it? Â What more have you got to lose?
That’s where the Free Five Day Money Management CourseÂ can help. This is a simple course that anyone can take – no matter your financial situation.
You will learn:
- How to understand your own attitude towards money
- Really see where you spend every penny you make
- Create a workable budget
- Develop a plan to dig yourself out from debt
- Finally feel in control of your finances
Like I said above, this is free. Â I will not charge you a dime to take the course. Your first lesson will arrive in your inbox tomorrow morning, so you can wake up and be ready to jump in and learn.
Best of all, I’m here with you.
You aren’t alone.
Sign up now and take control of your finances. What have you got to lose?
The post Budgeting For Beginners: A FREE Five Day Quick Start Course appeared first on Penny Pinchin' Mom.
If the stock market crashed again, would you respond by investing more? Is day trading your sport of choice? Do you smirk at the idea of keeping money in a savings account instead of investing it?
If you answered yes to these questions, youâre probably an investor with a high risk tolerance.
Hold up, Evel Knievel.
Itâs fine to embrace a âno-risk, no-rewardâ philosophy. But some investments are so high-risk that they arenât worth the rewards.
10 Risky Investments That Could Lead to Huge Losses
Weâre not saying no one should ever consider investing in any of the following. But even if youâre a personal finance daredevil, these investments should give you serious pause.
Sure, if things go well, youâd make money â lots of it. But if things go south, the potential losses are huge. In some cases, you could lose your entire investment.
1. Penny Stocks
Thereâs usually a good reason penny stocks are so cheap. Often they have zero history of earning a profit. Or theyâve run into trouble and have been delisted by a major stock exchange.
Penny stocks usually trade infrequently, meaning you could have trouble selling your shares if you want to get out. And because the issuing company is small, a single piece of good or bad news can make or break it.
Fraud is also rampant in the penny stock world. One common tactic is the âpump and dump.â Scammers create false hype, often using investing websites and newsletters, to pump up the price. Then they dump their shares on unknowing investors.
You and I probably arenât rich or connected enough to invest in an IPO, or initial public offering, at its actual offering price. Thatâs usually reserved for company insiders and investors with deep pockets.
Instead, weâre more likely to be swayed by the hype that a popular company gets when it goes public and the shares start trading on the stock market. Then, weâre at risk of paying overinflated prices because we think weâre buying the next Amazon.
But donât assume that a company is profitable just because its CEO is ringing the opening bell on Wall Street. Many companies that go public have yet to make money.
The average first-day returns of a newly public company have consistently been between 10% to 20% since the 1990s, according to a 2019 report by investment firm UBS. But after five years, about 60% of IPOs had negative total returns.
Proponents of bitcoin believe the cryptocurrency will eventually become a widespread way to pay for things. But its usage now as an actual way to pay for things remains extremely limited.
For now, bitcoin remains a speculative investment. People invest in it primarily because they think other investors will continue to drive up the price, not because they see value in it.
All that speculation creates wild price fluctuations. In December 2017, bitcoin peaked at nearly $20,000 per coin, then plummeted in 2018 to well below $4,000. That volatility makes bitcoin useless as a currency, as Bankrateâs James Royal writes.
Unless you can afford to part ways with a huge percentage of your investment, bitcoin is best avoided.
4. Anything You Buy on Margin
Margining gives you more money to invest, which sounds like a win. You borrow money from your broker using the stocks you own as collateral. Of course, you have to pay your broker back, plus interest.
If it goes well, you amplify your returns. But when margining goes badly, it can end really, really badly.
Suppose you buy $5,000 of stock and it drops 50%. Normally, youâd lose $2,500.
But if youâd put down $2,500 of your own money to buy the stock and used margin for the other 50%? Youâd be left with $0 because youâd have to use the remaining $2,500 to pay back your broker.
That 50% drop has wiped out 100% of your investment â and thatâs before we account for interest.
5. Leveraged ETFs
Buying a leveraged ETF is like margaining on steroids.
Like regular exchange-traded funds, or ETFs, leveraged ETFs give you a bundle of investments designed to mirror a stock index. But leveraged ETFs seek to earn two or three times the benchmark index by using a bunch of complicated financing maneuvers that give you greater exposure.
Essentially, a leveraged ETF that aims for twice the benchmark indexâs returns (known as a 2x leveraged ETF) is letting you invest $2 for every $1 youâve actually invested.
We wonât bore you with the nitty-gritty, but the risk here is similar to buying stocks on margin: It can lead to big profits but it can also magnify your losses.
But hereâs whatâs especially tricky about leveraged ETFs: Theyâre required to rebalance every day to reflect the makeup of the underlying index. That means you canât sit back and enjoy the long-haul growth. Every day, youâre essentially investing in a different product.
For this reason, leveraged ETFs are only appropriate for day traders â specifically, day traders with very deep pockets who can stomach huge losses.
A lot of people collect cars, stamps, art, even Pokemon cards as a hobby. But some collectors hope their hobby will turn into a profitable investment.
Itâs OK to spend a reasonable amount of money curating that collection if you enjoy it. But if your plans are contingent on selling the collection for a profit someday, youâre taking a big risk.
Collectibles are illiquid assets. Thatâs a jargony way of saying theyâre often hard to sell.
If you need to cash out, you may not be able to find a buyer. Or you may need to sell at a steep discount. Itâs also hard to figure out the actual value of collectibles. After all, thereâs no New York Stock Exchange for Pokemon cards. And if you do sell, youâll pay 28% tax on the gains. Stocks held long-term, on the other hand, are taxed at 15% for most middle-income earners.
Plus, thereâs also the risk of losing your entire investment if your collection is physically destroyed.
7. Junk Bonds
If you have a low credit score, youâll pay a high interest rate when you borrow money because banks think thereâs a good chance you wonât pay them back. With corporations, it works the same way.
Companies issue bonds when they need to take on debt. The higher their risk of defaulting, the more interest they pay to those who invest in bonds. Junk bonds are the riskiest of bonds.
If you own bonds in a company that ends up declaring bankruptcy, you could lose your entire investment. Secured creditors â the ones whose claim is backed by actual property, like a bank that holds a mortgage â get paid back 100% in bankruptcy court before bondholders get anything.
8. Shares of a Bankrupt Company
Bondholders may be left empty-handed when a corporation declares bankruptcy. But guess whoâs dead last in terms of priority for who gets paid? Common shareholders.
Secured creditors, bondholders and owners of preferred stock (itâs kind of like a stock/bond hybrid) all get paid in full before shareholders get a dime.
Typically when a company files for bankruptcy, its stock prices crash. Yet recently, eager investors have flocked in to buy those ultracheap shares and temporarily driven up the prices. (Ahem, ahem: Hertz.)
That post-bankruptcy filing surge is usually a temporary case of FOMO. Remember: The likelihood that those shares will eventually be worth $0 is high.
You may be planning on turning a quick profit during the run-up, but the spike in share prices is usually short-lived. If you donât get the timing exactly right here, you could lose big when the uptick reverses.
9. Gold and Silver
If youâre worried about the stock market or high inflation, you may be tempted to invest in gold or silver.
Both precious metals are often thought of as hedges against a bear market because theyâve held their value throughout history. Plus in uncertain times, many investors seek out tangible assets, i.e., stuff you can touch.
Having a small amount invested in gold and silver can help you diversify your portfolio. But anything above 5% to 10% is risky.
Both gold and silver are highly volatile. Gold is much rarer, so discovery of a new source can bring down its price. Silver is even more volatile than gold because the value of its supply is much smaller. That means small price changes have a bigger impact. Both metals tend to underperform the S&P 500 in the long term.
The riskiest way to invest in gold and silver is by buying the physical metals because theyâre difficult to store and sell. A less risky way to invest is by purchasing a gold or silver ETF that contains a variety of assets, such as mining company stocks and physical metals.
10. Options Trading
Options give you the right to buy or sell a stock at a certain price before a certain date. The right to buy is a call. You buy a call when you think a stock price will rise. The right to sell is a put. You buy a put when you think a stock price will drop.
What makes options trading unique is that thereâs one clear winner and one clear loser. With most investments, you can sell for a profit to an investor who also goes on to sell at a profit. Hypothetically, this can continue forever.
But suppose you buy a call or a put. If your bet was correct, you exercise the option. You get to buy a winning stock at a bargain price, or you get to offload a tanking stock at a premium price. If you lose, youâre out the entire amount you paid for the option.
Options trading gets even riskier, though, when youâre the one selling the call or put. When you win, you pocket the entire amount you were paid.
But if you end up on the losing side: You could have to pay that high price for the stock that just crashed or sell a soaring stock at a deep discount.
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What Are the Signs That an Investment Is Too Risky?
The 10 things we just described certainly arenât the only risky investments out there. So letâs review some common themes. Consider any of these traits a red flag when youâre making an investment decision.
- Theyâre confusing. Are you perplexed by bitcoin and options trading? So is pretty much everyone else.If you donât understand how something works, itâs a sign you shouldnât invest in it.
- Theyâre volatile. Dramatic price swings may be exciting compared with the tried-and-true approach of investing across the stock market. But investing is downright dangerous when everything hinges on getting the timing just right.
- The price is way too low. Just because an investment is cheap doesnât mean itâs a good value.
- The price is way too high. Before you invest in the latest hype, ask yourself if the investment actually delivers value. Or are the high prices based on speculation?
The bottom line: If you can afford to put a small amount of money in high-risk investments just for the thrill of it, fine â as long as you can deal with losing it all.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to DearPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Since the National Consumer Assistance Plan went into effect in 2017, public records must meet strict requirements in order to appear on consumer credit reports. Civil judgments and tax liens do not meet these new requirements, so they were removed from credit reports. At this point, the only derogatory public record that should appear on your credit report is bankruptcy. If a tax lien or civil judgment still appears on your credit report, you should dispute that record with the credit reporting agencies.
How Much Do Public Records Affect Credit Scores?
Bankruptcy can cause a FICO score to drop by 200 points or more. A filing may lower credit scores for seven to 10 years and be difficult to remove from a credit report unless any information is inaccurate.
The decision to exclude other public records slightly increased FICO scores for many consumers and resulted in increases of 20 to 40 points in some cases.
Bankruptcies and Your Credit Report
Bankruptcies are the one public record that are still included on your credit report. In most cases, they will remain on your report for seven to 10 years.
You can dispute an inaccurate report of bankruptcy or one being reported beyond the statute of limitations. Review your report for any inaccuracies and contact the credit bureaus to dispute inaccuracies if need be. If a credit bureau claims to have court verification of a bankruptcy, you should send a procedural letter to determine how they verified the public record on credit report. Follow up with the courts to determine whether the bankruptcy was actually verified.
âªÂ Learn more about when and why you should file bankruptcy and how doing so will affect your credit.
Civil Judgments and Your Credit Report
Civil judgments result when a creditor sues you for an outstanding debt and wins. That creditor then has more avenues for pursuing payment: they may now satisfy delinquent or outstanding debt through wage garnishment or by seizing funds from checking or savings accounts.
Judgments are no longer factored into credit scores, though they are still public record and can still impact your ability to qualify for credit or loans. Lenders may still check to see whether any outstanding judgments against a potential borrower exist. You should pay legitimate judgments and dispute inaccurate judgments to ensure these do not affect your finances unduly.
âªÂ Learn more about how to deal with civil judgments.
If a civil judgment is still on your credit report, file a dispute with the appropriate credit reporting agencies to have it removed.
Tax Liens and Your Credit Report
Tax liens are filed by the IRS when you donât pay your taxes. A lien is automatically filed when you owe more than $10,000. When the IRS files a tax lien against you, it essentially gives the agency first dibs on any payment you receive from selling or liquidating your assets to pay your debts.
While tax liens are no longer reported on credit reports, they can significantly impact your financial situation in ways that indirectly affect your credit score.
âªÂ Learn more about tax liens.
If a tax lien is being reported on your credit report, file a dispute.
How to Deal with Derogatory Public Records
Although judgments and tax liens are no longer filed on credit reports or factored into credit scores, these penalties can undermine your financial standing. If a derogatory public record is filed against youâ you should monitor the effects on your credit and ensure that information pertaining to your filing is accurate.
Check your reports regularly to ensure they are fair, accurate and up-to-date. You can watch for changes by getting your free Credit Report Card and credit score monitoring from Credit.com.
âªSign up now!
The post What Does Having a Derogatory Public Record on My Credit Report Mean appeared first on Credit.com.