How the Recession Has Changed American Spending

Perhaps you, too, have fallen victim to one of these money traps.

If you feel like there’s nothing left at the end of the month, you aren’t alone. A recent Pew study found that 46% of Americans spend more than they make every month. Nearly half!

So where’s all the extra money going?

Are We Overspending on Luxuries?

You’ve probably heard that many Americans get themselves into financial trouble because they spend too much money eating out or buying clothes. Like many popular anecdotal observations, there’s a grain of truth to it—many people complain about money but still wear the latest fashions. But does that belief hold up to scrutiny?

Fortunately, we can test this claim. The US Census Bureau continuously compiles something called the Consumer Expenditure Survey by asking a representative sample of Americans for detailed spending information. The Bureau of Labor Statistics then releases this data once each year. This survey enables consumers to compare spending over time and really see where money is going.

What Do Americans Spend Money On?

The survey for 2016 was released recently, and here’s what the numbers say: average household spending totaled $57,311 in 2016, a tidy 2.4% increase from 2015. But we can’t argue that Americans are living it up. On average, each household spent only $6,602 on entertainment, food away from home, and clothing in 2016. That’s about one-third of what we spent on housing last year, which was $18,886.

Transportation and health care were the other budget killers. The average American spent $9,049 on cars (buying them and taking care of them) and $4,612 on health care ($3,160 on health insurance premiums).

What about Housing Costs?

Housing costs continue to rise fast. Just two years ago, they were $17,798 per year on average. They’ve gone up almost $1,000 since then, or nearly 7%. Meanwhile, spending on clothes and transportation were both down in the past year—and gas spending was down sharply, thanks to lower oil prices.

“The data does show [that] housing is growing as a percent of total spending,” said Steve Henderson, a supervisory economist in the Office of Prices and Living Conditions at the Bureau of Labor Statistics.

In fact, 33% of family spending now goes toward housing. For years, both banks and government agencies warned against families spending more than 30% of their budget on housing. Now, that’s become normal—another reason US households are on edge about the future.

What Does the Typical Monthly Budget Look Like?

Here’s the typical monthly budget for US households. How does your budget compare?

Housing: 33% ($18,886)
Transportation: 16% ($9,049)
Food: 13% ($7,203)
Pensions and insurance: 11% ($6,831)
Health care: 8% ($4,612)
Other: 7% ($3,933)
Entertainment: 5% ($2,913)
Apparel and services: 3% ($1,803)

(Calculations based on BLS data. Does not equal 100 because of rounding).

How Do These Numbers Compare with Those of the Past?

In general, expenses like food and clothing are way down, while housing eats up far more of the family budget than before. There’s a fascinating chart at howmuch.net that shows these effects over a 75-year span, based on data collected by the Census Bureau.

For example, in 1961, Americans spent an average of $4,157 on clothing in today’s dollars. That’s down to $1,803 now. Americans spent nearly $10,000 on food in 1961. That’s $7,203 now. On the other hand, housing costs were about $12,000 in 1961, and they are almost $19,000 now, a 50% rise in inflation-adjusted costs. But it gets even worse when we consider what goes into housing costs.

What Counts as a Housing Expense?

When calculating housing costs for homeowners, only mortgage interest, taxes, insurance, and repairs are included by the BLS. However, the amount of a mortgage payment that is applied to mortgage principal is not. That’s because it’s not technically considered an expenditure, says Henderson. It’s considered an acquisition of an asset—in this case, equity in the home.

While this is accurate in the long term, families certainly don’t feel that asset at the end of the month. On a month-to-month basis, principal payments are still expenditures for the family and still impact the family budget. Also, as we discovered during the collapse of the last housing bubble, when you put money into housing, you are definitely not guaranteed to get it back.

How Much Do American Households Eat Out?

There are some other interesting short-term trends in the survey data. The most obvious is this: as the recession slowly loosens its grip, American consumers are starting to eat out more. Consumer spending on food away from home jumped 8% last year and another 5% this year, while food at home inched up only 1% both years.

The rise in health care costs during the past six years is rather stunning, too. In 2011, the Consumer Expenditure Survey pegged healthcare spending at $3,313. In 2016, though, it went up to $4,612. That’s a 39% increase in only half a decade. For comparison, during that same span, spending on entertainment went up only 13%. Over the same stretch, overall spending was up 15%. Apparently, movies are out and health care premiums are in.

So What Does This All Mean?

These findings show that the US economy is now driven by consumer spending, which accounts for about two-thirds of all economic activity—but even as incomes and spending pick up a little, that money isn’t going to food or entertainment. It’s getting sucked up by healthcare and housing. And that’s a big reason the post-recession economic recovery seems to be moving along at a snail’s pace.

So the next time someone suggests Americans are struggling because they waste money on frivolous things, ask them about the Census Bureau data.

“I can’t say whether people are wasting money on clothing or entertainment,” Henderson says. “But housing gobbles up the biggest share, and . . . it squeezes out money you have for other things.”

What Can You Do?

Households in the US continue to face challenges. If housing and health care costs keep rising like this, US consumers may be in for some economic trouble in the future. If you’re concerned about our current trajectory, there are a few things you can do—including spending wisely, getting out of debt or avoiding debt, setting aside some savings each month, and keeping an eye on your credit. You can check your credit report for free at Credit.com.

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Avoid Home Service Scams with These 7 Tips

questions-for-contractors-communicate

Regular maintenance retains your home’s value and keeps you and your property safe. When you need home service and aren’t confident you can do it yourself, it can save time and frustration to call in a professional.

Most contractors are honest, but hiring the wrong one leaves you vulnerable to shoddy workmanship or even fraud. According to an estimate by the Federal Trade Commission, Americans lost approximately $1.5 billion in 2012 alone to home improvement fraud.

We spoke with professional contractors to find out how to spot home service scams a mile away. Use these seven tips to avoid home service scams.

1. Check Online Reviews

Great online reviews don’t guarantee a good experience, and a lack of reviews doesn’t mean a contractor is unethical. But checking online can help you get a sense of what people liked and disliked about a contractor. 

Larry Patterson, owner of Glass Doctor, recommends you pay attention to how companies with a strong online presence handle negative feedback. “These are established businesses [that] have something to lose. Read some of their poor reviews and see what is said and how the company responds.”

Many people are only inspired to leave reviews when they’ve had a strong positive or negative experience. But even if your service was unremarkable, you can help the business and future customers by writing a review when the job is done.

2. Reject High-Pressure Sales Tactics

Home maintenance professionals and salespeople sometimes employ high-pressure sales tactics, offering a price they claim is good for one day only. This strategy is designed to push property owners into an agreement before they have a chance to consider other offers.

“Many window replacement companies press their salespeople to sell on the first visit,” Patterson says. “For major purchases, always wait until the next day to make a decision. The ‘super-duper only available today’ deal will still be available in a couple of days.” 

3. Check Their Credentials

Many states require contractors to be fully licensed and insured to do business. If they aren’t, they may be flying under the radar and providing substandard work. Legitimate businesses will comply with state regulation.

Jeremy Anderson, general manager at Aire Serv, advised consumers to check that contractors are licensed and insured with their state. If contractors can’t provide the right paperwork and credentials, you should keep looking.

4. Look Out for Drive-By Scams

According to a congressional report on scams targeting senior citizens, home service fraud commonly occurs door-to-door. Con artists will drive through neighborhoods offering their services after a weather-related disaster, after a rash of break-ins, or as the seasons change. But once you’ve paid, they’ll provide unsatisfactory work or no work at all.

“Hire only professional contractors for cleanup and repair needs. Avoid any ‘drive-by contractors’ that may try to scam you after big storms,” urges Rainbow International president Mark Welstead. “It’s best to hire a reputable restoration company.”

5. Don’t Pay in Full Up-Front

While diagnostic and home visit fees do occur in the service industry, you should be wary of any contractor that demands payment in full ahead of time. According to the same congressional report, scammers will deliver poor work or abscond with your money after you’ve paid.

6. Pay with a Credit Card 

If a contractor only accepts cash, you should consider this a red flag—it’s too easy for them to pocket your cash with no consequences. Doug Rogers, president of Mr. Appliance, states that credit cards are the best way to protect yourself.

“It is a good idea to consider paying with a credit card so that you have some protection against attempted scammers, who want money first and plan to leave,” says Rogers. “Many credit card companies will help go to bat for you should you find yourself in the position of needing to dispute a charge amount.”

7. Use Your Best Judgment

If you’ve worked with quality contractors before, you know how it feels to receive quality, ethical service.

“At the end of the day, choose a reputable company that is transparent in its pricing, communicates properly with you, and stands behind its products and workmanship,” says Russ Jundt, founder and VP of Conserva Irrigation.

Protect your home and assets with these seven tips. By knowing what to look for, you can stop fraud in its tracks and avoid potential pitfalls.

Another way to protect your finances and save money is to shop smartly. For any home improvement project, be sure to carefully consider your options and take a few extra financial steps to avoid overspending. Peruse Credit.com’s Personal Finance Learning Center for more money-saving tips.

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How to Host Thanksgiving without Going Over Budget

thanksgiving1

Thanksgiving is a time to cherish family and friends and to enjoy all your favorite foods, drinks, and desserts! You want to make this day special for all your loved ones, but don’t forget your budget. Debt can easily pile up during the holidays. Between the cost of food, beverages, decorations, and dessert, your wallet may not end up being too thankful. Luckily, there are ways to make your Thanksgiving dinner memorable and budget friendly!

Here are four ways to host a Thanksgiving dinner without gobbling down your funds.

1. Start Early

Don’t overwhelm yourself by shopping for Thanksgiving at the last minute. This can throw off your budget—not to mention the store will be hectic. There’s a good chance popular Thanksgiving foods and ingredients will be marked up if you shop right before the holiday, so you should purchase nonperishable items as early as possible. Starting early will give you the time you need to hunt down the best holiday deals.

Consider making a list of what you need and then search for deals to save you money. But before you rush out to use those coupons, take inventory of what you already have. You might be surprised what’s been hiding in that cluttered pantry or packed freezer.

In addition, when buying alcohol, consider asking your store for its deals on buying cases. Purchasing a case can save you money in the long run and can come in handy for a future party or holiday gift. Finally, take a stab at do-it-yourself recipes instead of just buying items. This can help save you money even though it may be more time-consuming.

2. Ask for Help

Food can be expensive, and food prices have gone up in recent years. You were kind enough to host Thanksgiving, so don’t be afraid to ask your attendees to help out. Ask friends and family to bring specific items so that you can save both time and money and also avoid stress. You may even want to consider making it a potluck dinner. Ask your guests to bring an appetizer, side dish, dessert, or even their favorite bottle of wine or beer. This can bring new tastes to the table, lessen your expenses, and keep you within your budget. 

3. Limit the Number of Dishes—or Don’t

The number of dishes you serve depends on the number of guests you’ll be feeding. By limiting the number of dishes, your grocery bill will be much lower. Consider ditching sides that haven’t wowed guests in the past and offer your guests fewer dishes in bigger quantities. This way you can buy ingredients in bulk, stay within your budget, and still have enough to feed all your guests.

On the other hand, increasing the number of side dishes can mean purchasing less turkey, which can also save you money. If you go this route, consider purchasing sides that won’t break the bank. A few canned or frozen sides can go a long way.

4. Rethink Your Décor

Your home décor can provide a nice atmosphere for your Thanksgiving dinner. Of course, you want your table to look the part, but at what price? Holiday decorations can be expensive and can take away from other areas of your Thanksgiving budget. Try to get crafty with your decorations. Find things like fall leaves, hay, and gourds to use as holiday props. You may also want to visit the dollar store to find other budget-friendly decorations.

If you do want to splurge on something and don’t have enough place settings for your guests, consider buying simple white dinner plates and a set of nice silverware. These have an elegant, timeless look and can be used for future holiday parties at your home.

If you follow these tips and you still find yourself struggling, you may need to make sure your budget’s really working for you. Consider rethinking your budget before your next event, or consider a high-rewards credit card to help your next event run smoothly. Don’t forget, you can check your credit score for free at Credit.com before you sign up.

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The Ultimate Holiday Debt Survival Guide for 2017

Here are six personality types that can keep you from financial success and how to spot them.

Millions of Americans have an overwhelming amount of debt, and during the holidays, many consumers spend more than they have. Don’t fall victim to overspending and accruing debt this holiday season. You can still love and celebrate the holiday season without overspending on holiday gifts, food, decorations, lights, and entertaining. After all, the holidays are a time to gather with friends and family and to be grateful for what you have!

We compiled the ultimate holiday survival guide to get you through this season of giving without going into debt. Here are five tips to help you spend wisely and protect your finances.

1. Create a Holiday Budget

You might be tired of hearing about budgeting, but if you’re serious about not overspending this holiday season, you should make a holiday budget. It’s important to be realistic—don’t make guesses if you can avoid it. Look back on how much you spent last year to guide you as you create your budget, and see where you could cut back.

The key to staying on budget is proper organization so you can have a holiday season that’s free of financial stress. When it comes to gift giving, be sure to make a list and check it twice. Don’t feel pressured to give to friends or extended family if your budget doesn’t allow it.

2. Use Cash

It can be discouraging to start off the New Year already behind on the eight ball in money matters. To avoid a financial hangover in January, you may want to consider using cash or a debit card for your holiday purchases—instead of a credit card. By having cash on hand when holiday shopping, you will be less likely to go over budget. You’ll be forced to spend only what you have available as opposed to a large credit line.

If you do plan to use a credit card, remember that you’ll have to pay interest on your purchases if you don’t pay the entire balance in full. Be sure to add due dates to your calendar for each of your credit cards and schedule a reminder on your phone. Overdue payments can hurt your credit score and push you further into debt with late fees.

Additionally, learn to prioritize your bills. Pay off the card with the highest interest rate first—otherwise you’ll pay more over time. You should also consider dropping any retail credit cards after you’ve paid them off. These tend to have the highest interest rates and limited benefits.

3. Plan Ahead

Last-minute shopping is stressful, and it can also be costly. If you’re in a rush, you’re more likely to forget about your budget and instead grab what is most convenient. Taking the time to research the best deals, sales, and prices can save you time and money. Try spreading your holiday gift purchases throughout the year, in place of doing it all in December.

4. Get Creative

If your budget doesn’t allow you to buy for everyone you would like to this year, a great alternative is a holiday grab bag. With a grab bag, everyone buys a few small gifts to wrap and throw into a bag or a box, then each participant randomly picks one gift at a time until all the gifts are gone. Anyone who would like to participate should agree to a price that fits into everyone’s budget and how many gifts each person should buy. This is not only frugal but also fun!

If you’d rather stick to traditional gift giving, get creative with it. Try making do-it-yourself projects or crafts—a homemade gift is much more sentimental than a store-bought one anyway. For your children’s teachers or coaches you would like to include in your holiday list, consider gift cards, home-baked goodies, or both combined. Gifts don’t need to be lavish to show someone you appreciate them.

5. Implement Damage Control 

If it’s too late and you’ve already overspent this holiday season or are already in deep credit card debt, don’t panic. There are ways to recover and do damage control after the holiday season is over.

The most important thing of all is committing to paying off your debt. It might be easier to simply continue your regular spending habits and pay the minimum balance when you remember. But giving debt priority, even when it’s an insignificant amount, will do wonders in helping you maintain good financial health.

With all the new items you’ve received during the holiday season, you might have some older things you can sell. Clothes, electronics, and even books could earn you a little extra cash to help pay off your debt. Amazon, eBay, and your local consignment shops or thrift stores are fantastic venues for selling your unwanted stuff.

Take a look at your budget and make sure you set aside enough money each paycheck to make at least double the minimum payment. But if you can manage it, you should aim to pay much more than that. Fine-tune your budget to see where you can cut back so you can make more substantial payments to your credit cards. The sooner you’re out of debt, the sooner you can start putting that money where it really matters.

Don’t let your finances take a major hit this season. Follow these tips to avoid overspending, and keep an eye out for other common holiday pitfalls. By building more frugal shopping habits, you can also improve your credit score. If you’re curious about how your credit’s faring now, take a free look at your credit score through Credit.com.

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Get Ahead on Your Holiday Shopping with November’s Best Buys

Here are three tips for how to talk to your spouse about money problems over the holidays.

With Black Friday and Cyber Monday just a few weeks away, you may have instituted a shopping moratorium until then. The post-Thanksgiving sales will be undoubtedly great, but sales are going to pop up throughout November, particularly for large appliances, video gaming, and apparel.

Take a look at some of this year’s best November deals.

1. Large Appliances

Appliances often go on sale in September and October when new models are released. However, according to data from deal site Slickdeals, some of the best appliance sales of 2016 were actually in November—at stores like Sears and Lowe’s. This year, impressive promotions will make a comeback.

Current Deals

Sears: Up to $35% off appliances through 11/4.

ApplianceConnection.com: Sliding scale discounts based on the amount spent, starting at $20 off purchases over $1199.99, through 11/2.

GE Appliance: Up to 27% off certain dishwasher collections and up to 45% off washers through 11/6.

Forum Home Appliances: Up to 43% off current best-selling products through 11/30.

Best Buy: Free delivery on major appliance orders of $399 or more through 12/30.

2. Tablets

If someone on your list needs a tablet—even if that someone is you—you may be thinking Black Friday and Cyber Monday, but there could be some surprise sales before then. To get the best price, set deal alerts on various deal sites for the item you’re looking for. Once a deal is available, you’ll be notified.

Current Deals

Best Buy: Up to $100 off certain Galaxy tablets and up to $15 off select tablet cases.

HP: $10 off purchases of $60 or more with code GREET17 through 11/2.

3. Clothing

Apparel deals are plentiful this November. We’ll see sales all month long, and they’ll ramp up around Cyber Monday, with deeper discounts and fewer restrictions. Like last year, there will be discounts from many popular stores like Nordstrom and Macy’s.

Current Deals

Miracle Body: 50% off all orders—though there are some restrictions—with code MB50 through 11/2.

Necessary Clothing: 20% off any order with code FB20 through 11/4.

Macy’s: 25% off your next order when you sign up for an account on the Macy’s app through 11/11.

Nordstrom: Up to 30% off any Nordstrom gift card at Raise.com.

Gap: Up to 75% off purchases during the Great Big Fall Sale through 11/6.

Kohl’s: 15% off your next order of $100 or more with code CATCH15OFF.

Kate Spade: 15% off your next purchase through 11/5.

4. TVs

If you’re in the market for a TV, wait until Black Friday or Cyber Monday—the prices are traditionally the lowest then. Typically, retailers won’t post specific sales until very close to Black Friday, but if last year is any indication, there will be spectacular discounts. And you may even find 4K TVs for the price of 1080p TVs.

Current Deals

Best Buy: Up to 45% off select smart TVs and other TVs through 11/5.

Vizio: Up to $500 off at the Fall Big Screen Sale while supplies last.

5. Gaming

Now is a great time to stock up on video games, consoles, and accessories. Last year, the Nintendo 3DS Super Mario Edition was available at Toys“R”Us for only $100, and at Target, the 500GB Xbox One S Battlefield 1 Bundle was just $250 and came with a $40 Target gift card. In games, Walmart offered the Guitar Hero Live bundle for only $25. We anticipate similar deals this year, especially closer to Black Friday and Cyber Monday.

Current Deals

Target.com: Buy two video games and get a third free through 11/4.

Gamestop: 16% off pre-owned games with code CAG16.

Gamesdeal: 44% off Mafia 3 for the PC with code GD4off.

Keep an Eye Out for Apple Deals

In late September, Apple introduced the iPhone 8 and iPhone 8 Plus. And while Apple is not known for its deals, there may be sales on the 8 after the new X comes out early this month. We also expect to see deals on the Apple Watch Series 2, with the impending introduction of Series 3.

What Not to Buy in November

Furniture

The savings in this category are at their highest in December and January, due to the impending shipment of new models in February.

Holiday Decor

If you can hold off until next month, do. Stores like Hobby Lobby, Kmart, and Macy’s will be anxious to clear space and the discounts will get better and better throughout December, peaking right after the holidays.

As you gear up for Black Friday, Cyber Monday, and other holiday sales, prepare your finances and your wallet properly. Consider applying for a cash back credit card, and establish some fiscal guidelines before you shop. For more tips and tricks, stop by our Personal Finance Learning Center.

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Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

Young Couple Moving In To New Home Together

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 didn’t have renters insurance. This puts them among the 59% of renters who don’t 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 don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re 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 premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re 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. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” 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.

Don’t put yourself in the same position—get 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 disasters—such as fires, flooding, and electrical issues—can 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 can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” 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.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” 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 step—filing 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.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” 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. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

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 “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” 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. “Every policy is different, so talk to an agent and read your policy terms,” 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 landlord’s 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 “comply or quit” notice and possibly begin eviction proceedings.

If you don’t 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.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

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 you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s 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.

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Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

Young Couple Moving In To New Home Together

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 didn’t have renters insurance. This puts them among the 59% of renters who don’t 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 don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re 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 premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re 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. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” 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.

Don’t put yourself in the same position—get 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 disasters—such as fires, flooding, and electrical issues—can 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 can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” 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.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” 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 step—filing 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.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” 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. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

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 “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” 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. “Every policy is different, so talk to an agent and read your policy terms,” 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 landlord’s 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 “comply or quit” notice and possibly begin eviction proceedings.

If you don’t 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.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

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 you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s 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.

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7 Ways to Support Charities, Even If You’re Broke

4 Ways to Avoid Charity Scams

When college student Kara Skinner was short on cash, she started the blog Lover’s Quarrel, reviewing romance novels and including affiliate links in her posts. Thanks to her posts, she earned $60 from those links. But instead of splurging on pizza and a night out with friends, Kara decided to use her money in a different way: she donated it.

“I read I Am Malala and was so inspired,” Kara says. “Not everyone can get an education like I can because of where they live or their gender.”

Since launching her blog, Kara has donated to organizations like the Malala Fund and the Arbor Day Foundation. Because she uses her earnings from her website, she never has to dip into her bank account to contribute to charities.

Kara isn’t alone in her outlook: millennials are extremely generous when it comes to nonprofit causes. In fact, the majority of this age group donate to charity—an especially notable feat when you consider that debt is the biggest money-related stressor millennials face.

7 Ways to Donate to Charity

While that charitable mindset is admirable, finding the extra money to donate can be difficult. Between bills and debt payments, there’s often very little left over to give away.

However, a lack of money doesn’t have to hold you back from helping your community. You can make a big difference by doing one or more of the following things, without hurting your monthly budget.

1. Sign Up for AmazonSmile

If you shop on Amazon, you can help nonprofit organizations just by making routine purchases. Once a charity signs up with AmazonSmile, Amazon customers can select that organization to receive donations.

To take part in the program, visit Smile.Amazon.com instead of Amazon.com, and do all of your shopping from the new link. After you check out, the AmazonSmile Foundation will donate 0.5% of the purchase price of eligible products to the charity you choose.

That number might not sound like much, but it can add up over time. If you spent $1,000 on the site on regular purchases like toilet paper, laundry detergent, and other essentials, AmazonSmile would donate $5 to your selected charity.

2. Sign Up for Rebate and Reward Apps

If you’re short on cash, you can earn extra money to donate just by signing up for rebate and reward apps. Sign up for apps such as Ibotta and Checkout 51 and turn your receipts into cash.

These apps offer rebates for shopping at select stores or purchasing specific brands. After you’re done shopping, take a photo of your receipt with the app of your choice. Money will be deposited into your account.

Those rebates could add up to a hefty amount of cash. In fact, some people rack up hundreds with rebate and reward apps. With that money, you can make a sizeable donation without digging into your savings.

3. Donate Blood, Plasma, or Bone Marrow

If you’re a healthy adult, you can make a lifesaving donation. Those with severe illnesses or who have been in accidents often need blood, plasma, or bone marrow donations to recover. However, thousands of people cannot find a match, and there are sometimes donor shortages.

Donating your blood, plasma, or bone marrow can be a lifesaving act of charity in itself. In many cases, centers will pay you to donate plasma, allowing you to help someone in need while you earn extra cash to donate. When it comes to bone marrow, however, you’re not likely to be paid for donating—but you can still help save someone’s life.

To find a collection center near you, visit the American Red Cross, Donating Plasma, or Be the Match.

4. Cut Your Hair

Do you get compliments on your long, beautiful hair? You can use those lovely locks to help someone else going through a rough situation.

Children and adults with alopecia or those undergoing chemotherapy can experience hair loss. They often turn to wigs to cover their scalps and feel more confident. Human-hair wigs are the best you can buy; they look the most natural and can be washed and styled like regular hair.

However, human-hair wigs can cost thousands, and they are often unaffordable for many families. Several organizations try to ease the burden by collecting human hair to make wigs for both adults and children.

Locks of Love, Pantene’s Beautiful Lengths program, and Wigs for Kids all accept hair for wigs. While each organization has its own requirements, in general, you must meet the following guidelines to donate your hair:

  • Your hair must be securely fastened in a ponytail.
  • If your hair is in a ponytail, the tail must be at least 8 to 12 inches long to be useable.
  • Your hair cannot be bleached or highlighted. In most cases, dyed hair that does not have any bleached sections is acceptable.

5. Donate Gently Used Clothing or Household Items

If you have old clothes, furniture, or household items lying around, you might be able to help someone in need.

You can donate items to organizations such as Goodwill, which can sell those items in thrift stores and use the proceeds to fund other programs—such as employment training and job placement services—for people in your community.

Use Goodwill’s locator tool to find a donation site near you.

6. Use Side Income to Fund Donations

If you’re like Kara and don’t have much money to donate with your current budget, you can start a side hustle to make extra cash. Side hustles allow you to work as much as you want, when you want. If you want to make a donation around the holidays, you can take on seasonal work to get the money.

Because it’s extra income, you won’t miss it after you give it away. And you won’t fall behind on your rent or student loan payments, either.

7. Collect Spare Change

Even your piggy bank can be turned into a source of donations. At the end of each day, empty your pockets and bag and deposit any loose change into a jar.

You can also boost your donations by looking for forgotten change on sidewalks or streets. One blogger collected $27 just by looking around at car washes, in gutters, and in parking lots.

Once your change jar is full, take it to the bank to turn it into cash before donating it to a charity of your choice.

Donating to Charity

When you’re broke, it’s hard to scrounge up the money to help others. But if you’re determined to help your community, thinking creatively can help you make a tangible difference. Try accounting for donations in your monthly budget to make it a regular part of your spending habits or try looking for credit cards that make it easy to give to charity. By taking on extra work or sacrificing your time, you can help change someone’s life.

Image: istock

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13 Ways to Give to Charity without Breaking Your Budget

Affinity credit card programs offer a way to support the causes and charities near and dear to your heart. Here are some of the leading options.

Giving to charity doesn’t require a lot of disposable income. If you want to make the world a better place, you can still contribute without cutting a big check.

Here are 13 ways to give to charity on a budget.

1. Donate Your Time

Many charitable organizations survive through the efforts of volunteers. Volunteering is a worthy way to contribute to your community and can be just as valuable as cash donations.

“Donate your time,” says Karen Hoxmeier, founder of MyBargainBuddy.com. “Homeless shelters, soup kitchens, senior centers, hospice facilities, big brother/big sister programs, and animal rescues all need people to help out by being physically present and volunteering their time.”

2. Donate Your Skills

If you have a special skill—such as writing, cooking, or photography—consider offering your services pro bono. Many charities, nonprofits, and advocacy groups have specialized needs but can’t afford dedicated staff.

3. Give Blood

Donating blood to organizations like the Red Cross is free, doesn’t take much time, and might even land you a cookie. More importantly, your donation could help save someone’s life—approximately 10,000 units of plasma are needed daily in the US.

4. Donate Your Stuff

Many charities and nonprofits accept donated goods, including clothes, shoes, furniture, and cars. If you have some stuff to get rid of, consider giving it to a good cause rather than throwing it out.

5. Organize a Drive

If you have the time and enthusiasm but not the money, consider organizing a drive to gather donations for an organization. “Organize a food drive at your work, at your child’s school, or in your neighborhood,” says Hoxmeier. “It just takes one person to get the ball rolling and head up [a] food collection/drop-off.”

6. Raise Funds

You can raise funds for charity in many ways—by organizing a local collection, sharing your favorite causes on social media, or participating in a sponsored walk. If you have a network of caring people and some hustle, you can raise a hefty donation.

7. Shop at the Right Places

In the age of corporate social responsibility, many businesses donate part of their proceeds to charities. For instance, AmazonSmile will donate 0.5% of your eligible purchases to a charitable organization of your choice, and Whole Foods gives you the option to donate your five-cent reusable bag credits to a local organization. Check with the merchants you shop at regularly to see if they offer opportunities to donate to an organization as part of your purchase.

8. Employer Gift Matching

Some employers offer matching gifts, meaning they will match some or all of your charitable donations. Check to see if your employer offers this policy and potentially double your donation. If your company doesn’t currently offer this benefit, talk to your HR department about how to encourage the company to implement a matching gift program.

9. Donate Your Tax Refund

By the time you receive a tax refund, it can feel like found money. If you receive a tax refund next year, consider donating some or all of it. Some of your donations may even be tax deductible for next year!

10. Ask for Gift Donations

If your friends and loved ones often ask you for birthday or holiday gift ideas, you can ask them to donate to a favorite charity instead. Many charities make it easy to set up a campaign to gather birthday donations for their organization.

11. Become an Organ Donor

Around 21 people in the US die every day needing donor organs. You won’t need your organs once you pass away, and becoming a donor is free. Simply register with the National Donate Life Registry and designate your donor status on your license or state ID.

12. Donate Your Credit Card Rewards

Rewards credit cards will often let you donate your cash back, points, or miles directly to charity. Even if that isn’t an option, you may be able to redeem your rewards for cash back and simply donate those funds once they land in your account.

“Most credit card companies allow you to do this directly from their website. Simply log in to your account, go to the section to manage your rewards and look for a charity link,” says Hoxmeier.

13. Get a Charity-Focused Credit Card

Some credit cards are specifically designed for charitable giving. Check out our list of charity-focused credit cards to find one that works well for you.

Giving back to your community is important, but so is sticking to your budget. Luckily, the two don’t have to be mutually exclusive. Start by trying out these thirteen frugal ways to give to charity. Then visit our Personal Finance Learning Center for more tips on managing your personal finances.

Image: Tassii 

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6 Common Mistakes Side Hustlers Make—and How to Avoid Them

It's possible to purchase the items you love from Anthropologie without breaking the bank.

Andre Spicer, a business professor, was delighted when his 5-year-old daughter expressed interest in an entrepreneurial endeavor. He couldn’t have foreseen the outcome, though: a firsthand lesson in side hustle mistakes and a nearly $200 fine, according to a July article in the Telegraph.

Spicer and his daughter decided on a lemonade stand and set up shop on a busy sidewalk near their London home. They quickly attracted customers and sold out.

Unfortunately, the father-daughter duo also attracted the attention of local law enforcement.

An officer approached and “read a lengthy legal statement—the gist of which was that because my daughter didn’t have a trading permit, she would be fined £150,” Spicer wrote, an amount equal to about $200. His daughter burst into tears and repeatedly asked, “Have I done a bad thing?”

This experience is a cautionary tale for side hustlers and other small-business owners, proving that it’s all too easy to run afoul of the law when you try to launch a side business.

6 Common Legal Mistakes Side Hustlers Should Sidestep

Ignorance of local business laws and legal requirements could result in hefty fines and fees. These needless costs can set you back or permanently damage your side business.

You probably can’t afford to make such mistakes with a fledgling side hustle. Here’s a look at common ways your side hustle could break the law—and how to make sure it doesn’t.

1. Failing to Get Proper Business Licenses and Permits

Let’s start with the example of Spicer and his daughter. They were fined for operating a business without proper permits. Business laws in the US differ from those in the UK, but ignoring them could land you in similar trouble.

Here are just a few of the permits and licenses you might need to offer services or products.

  • Local business licenses: Most cities or counties require business licenses and will levy fees or force you to suspend operations if they discover an unlicensed business. Your local Small Business Administration (SBA) office should be able to help you sort through the local rules and figure out how to get a business license.
  • Occupation-specific licenses: There may be regulations for the specific kind of business you own. For example, you’ll likely need a specific license for a side business preparing or selling food or providing home-based child care.
  • Federal business licenses and permits: The SBA provides a list of federal business licenses and permits you might need, such as liquor licenses.
  • Doing business as: If the customer-facing name you use for a business differs from its legal name, you’ll have to file the former as your doing business as (DBA) name. You can do so by filing a DBA application with your local government office, which usually includes a fee.

Though some requirements are obvious, side hustlers often won’t find out about lesser-known permit requirements unless they check local commercial regulations regularly and thoroughly.

2. Violating Local Zoning Laws or Your Lease

Many side hustles and startups are homegrown. But when you start a commercial enterprise in your home, you can run into legal red tape.

Taking the time to ensure your business is properly zoned will prevent costly fees or a shutdown of your new business. Check the following documents for rules and restrictions on doing business out of your home.

  • Local ordinances and zoning laws: Your city or county might restrict businesses from operating in certain residential areas, and some local laws might allow only certain kinds of home businesses. You can find and review those rules at your city or county clerk’s office, on municipal government websites, or at your local library.
  • Your lease agreement: If you have a landlord, be sure that your business operates within the terms of your contract. Many leases have clauses that forbid subletting or short-term renting, for example, which could kill an Airbnb side hustle.
  • Your homeowners association (HOA): If your home or condo is in a neighborhood governed by an HOA, check out its rulebook (often called a Declaration of Covenants, Conditions, and Restrictions) for any rules concerning home businesses.

The above regulations might also limit how or when you can operate your business. For instance, an on-the-side carpenter who works in the evening might violate quiet hours or noise ordinances. A sign advertising an in-home hair salon could be considered an eyesore by an HOA.

You don’t automatically have to accept a “no” you get from the city, your landlord, or your HOA, though. Check for a way to appeal the rule and to ask for a variance or exception.

3. Infringing on Your Employment Agreements

You probably don’t want your side business to get you fired from your day job, right? Avoid this outcome with a full review of your employer’s rules and the hiring documents you signed, including the company’s employee handbook and policies, your employment contract, and any nondisclosure or noncompete agreements. Watch for language that clarifies whether your business would violate any of your contract clauses. If these documents don’t offer clear answers, ask a human resources manager.

Even if your company allows side businesses, you should proceed with caution. Avoid conflict between your employment and side hustle with these tips.

  • Work on your own time and on your own property: Don’t work on your side hustle on company time. And don’t use company property to work on your side hustle, either, whether it’s a company-owned laptop, email address, or software service account login.
  • Don’t use your employer’s intellectual property: Never use employer-owned proprietary knowledge, trade secrets, contact lists, or other materials for your side business.
  • Differentiate your side business from your employer: You shouldn’t be competing with your employer. If your business is similar, try to serve a separate target market, and make sure your products or services are sufficiently unique.

Better yet, build a business that’s completely different from your day job. You’ll avoid these legal issues and prevent side hustle burnout.

4. Skipping Business Liability Insurance

Protecting your business from legal issues includes insuring yourself against lawsuits and other legal actions people might take against you. Business liability insurance covers judgments as well as the costs of defending lawsuits.

Take the example of Student Loan Hero writer Kat Tretina, who built her own pet-sitting business on the side. She’d heard horror stories about sitters being held responsible for a pet damaging furniture or for a burglary after losing a key, so she knew getting her own policy was a must.

Many sharing economy–based companies such as Rover, Uber, and Airbnb include insurance as part of their services. Owners starting up on their own, however, will need to find and purchase their own business liability insurance.

5. Mishandling Business Taxes

When you start a new business, it’s crucial to set out with the end in mind—specifically, the end of the fiscal year, when you’ll have to file taxes for your side business.

Complicated business tax codes make it easy to file an erroneous return or fail to claim an important deduction. Either mistake can cost your business money or draw the scrutiny of the IRS.

Forestall unexpected tax bills or penalties and fees from missed tax payments by following some business tax best practices.

  • Set aside money for taxes or pay taxes quarterly: By setting aside money and paying on time, you’ll avoid late fees, penalties, and sky-high tax bills that you can’t afford come April.
  • Keep all receipts for business purchases: This will make it easy to calculate and write off your side hustle costs—and cover your bases in case of an audit.
  • Separate business funds and purchases from your personal finances: Keeping separate accounts for your business will help ensure you don’t mix up any expenses.
  • Create a specific place and time to work on your business: Having a set number of hours per week and square footage you dedicate to your business will make it easier to track and deduct business costs when you file taxes.
  • Pay others appropriately: Say you have a friend who runs your books for you. Is she your employee or a contractor? You’ll need to know the difference to calculate taxes you owe and file appropriate income tax forms.
  • Choose the right business structure: Do you run a sole proprietorship, general partnership, or limited liability company? You need to know, because how you set up your side business will affect how you pay and file taxes.

6. Trying to DIY When You Need Professional Help

The above tips offer some great guidelines to get a side business up and running without too many legal hang-ups. But at the end of the day, they can’t replace professional legal and tax advice.

Local business laws and regulations can vary widely, as can your personal business plans, structures, and management systems. You can and should read up on commercial regulations and tax codes, but the best way to know for sure that your side hustle complies with all legal and tax concerns is to hire a professional.

An hour with a lawyer or accountant is a worthwhile investment to shore up your business practices and ensure your operation is on the right side of the law. When in doubt, hire a professional to clarify any fuzzy areas. Your growing business—even if it’s just a lemonade stand—could depend on it.

Starting a side hustle takes some planning, but it can really pay off if it’s done right. For help finding loans and getting your business off the ground, take a look at Credit.com’s Small Business Loan marketplace.

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