The Penny Hoarder

How a Sou-Sou Helped This Woman Save Money to Start a Business
Understand the Type of Homeowners Insurance You Need
This is What Every Millennial Should do Before Buying a House
5 Steps to Claim Your Ex's Social Security After Divorce

How a Sou-Sou Helped This Woman Save Money to Start a Business

Posted: 12 Apr 2021 11:00 AM PDT

Editor's note: This post was originally published in 2016.

Saving has always been a challenge for me. While I continuously applied the pay-yourself-first principle to my finances, I struggled to stick to my budget.

So when I wanted to start a cake-decorating business, I needed another way to cover my startup costs. I preferred not to take out a loan because of interest charges.

A co-worker suggested starting a sou-sou.

What's that? you're wondering. Well, read on.

What's a Sou-Sou?

A sou-sou is a simple savings plan.

The West African tradition, which is also popular in the Caribbean, requires a group of people to contribute a fixed amount of money either weekly, bi-weekly or monthly to a group account, with one member responsible for collecting the cash.

The group holds a random draw to determine the order in which each person will receive their lump sum payment. However, once each person receives their cash, they still have to contribute until everyone gets paid.

A sou-sou could run for six months or up to a year — it all depends on how many people are in on it. Sou-sous continue until everyone receives a payout at least once.

How I Used a Sou-Sou to Start a Business

Here's how I started a sou-sou to help me make enough money to get my cake-decorating business off the ground.

Determine How Much Cash You Need to Start Your Business

I created an inventory of supplies I'd need, then calculated the total cost of buying them. This helped me make sure I'd be able to get started once I received my payout.

Next, I shopped around to find the best prices — then asked vendors about a discount for buying in bulk. It never hurts to ask! It helped me save 20% of the original cost when I eventually bought everything.

Find Cash in Your Budget and Earn Extra Money

I needed to free up some money to go toward my sou-sou, so I decided to eliminate one bill from my monthly budget.

I compared my cable and internet bills to see which was costing me more, and then canceled my $50 per month cable service.

To earn extra cash, I sold cakes at community events at a reduced price.

Consider how you could earn a few extra dollars a month for your business. Consider this list of 43 ways to save money fast.

Form a Group

Everyone in my department had previously been involved in a successful sou-sou, and since we were all working toward financial goals, it was easy for the team to get on board.

A total of 10 colleagues joined the sou-sou, but you can start one with any number of people. Ask co-workers, relatives and fellow church or gym members if they want in.

Choose a Cash Collector

We nominated my supervisor as cash collector and placed our money in a locked box in her office. Two people had to be present when money was deposited or paid out.

Since we all earned monthly salaries, we decided on a deadline for everyone to pay up.

My supervisor was also in the sou-sou. If the person collecting the cash isn't in on it, they're sometimes paid a percentage by each member. If my supervisor hadn't been a member, she would have received 5% of our earnings for managing the sou-sou.

Decide on a Reasonable Contribution

We considered our final objectives and unanimously decided on a realistic amount each person would pay.

With 10 members, we decided to each contribute $100 per month — meaning we'd each get a $1,000 payout.

A few members were unable to contribute the full amount, so they joined with another member to each contribute $50 per month. When their payout time came, each person received $500 — a 50% payout.

I decided to double my contributions and pay $200 a month, meaning I'd get two $1,000 payouts to help me fund my business.

Propose Accountability

We suggested each person in the group be accountable to another member to make sure they spent their money on fulfilling their goals.

For example, I chose an accountability partner who would make sure I invested my $1,000 in my business.

If I didn't, I'd have to pay my partner 20% of my payout — a huge amount we chose to help motivate me.

How My Sou-Sou Worked Out

Our sou-sou began in January and I received my payout in May. Since I doubled my contributions, I received another payout in November, which I also put toward my business.

The group initiative was a huge part of my motivation, and everyone agreed that having the support of other members of the sou-sou was crucial to our success.

My choice to use a sou-sou rather than take out a loan paid off. I didn't owe the bank any money, and I saved $200 I would have paid in interest charges.

With the assistance of friends or family, saving money to start a business is possible. Making $100 or $200 contributions may not seem like much, but with time, it could be enough to get your business off the ground or help expand it without a loan.

Kerry Mc Donald is a contributor to The Penny Hoarder.

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.

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Understand the Type of Homeowners Insurance You Need

Posted: 12 Apr 2021 09:00 AM PDT

Home is where the heart is. Often, it is also where the heartache is when disaster strikes. Long before something goes wrong, you need to ask "How much homeowners insurance do I need?"

Homeowners insurance protects your home and possessions against a variety of perils including damage or theft, and also natural disasters such as flood, hurricanes, fires and earthquakes.

"Homeowner's coverage provides financial protection, that's really what it's all about," said Mark Friedlander, director of corporate communications at Insurance Information Institute in New York.

Mortgage companies require a certain amount of coverage, but unlike car insurance, there aren't any state mandates requiring people to have it.

"If you don't have a mortgage, you are not obligated to buy homeowners coverage and we think that's a critical error that people make because unless you have a lot of money set aside, you're going to have financial hit and you're not going to be protected," Friedlander explained.

Even if you do the minimum to satisfy your mortgage company, it often isn't enough. Friedlander said most people make the mistake of not having enough insurance to adequately protect themselves and their families.

So how much homeowners insurance do you need?

Home Insurance Basics

If you're doing the smart thing and asking yourself, how much homeowners insurance do I need, it's best if you understand some of the basics of the policies.

Policies generally cover:

Damage to the interior or exterior of your house from a covered disaster. The types of disasters are listed in the policy. Usually if the specific event is not listed, it is probably not covered.
Contents of your home if damaged or destroyed in a covered event or if they are stolen.
Personal liability for damage or injuries caused by you, a family member, or pet.
Housing and other expenses while your home is repaired or rebuilt after a covered event.

Within each policy, there are basically three levels of coverage. This becomes important after a covered event when you begin to repair or rebuild.

Actual Cash Value: This covers the house (structure) plus the value of belongings inside with a deduction for depreciation. You will get paid for what the items are currently worth, not necessarily what you paid for them. This is the least expensive coverage.
Replacement Cost: This covers the house plus the value of belongings without depreciation. This coverage would allow you to rebuild or repair up to the original value of the home and policy coverage limits.
Guaranteed or Extended Replacement Value/Cost: This is the most expensive but most comprehensive of coverages and provides the best financial protection for you. It covers the cost to repair or rebuild even if more than the policy limit, usually with a ceiling of 20 to 25%. In addition to this, many policies have additional coverage you can buy that will cover the cost to comply with current building codes that may not have been around when the house was initially built.

"A lot of times, actual cash value policies are for homes that don't qualify for replacement cost policies. They are not in as good of shape or have an older roof or something like that," said Craig Peterson, an agency owner for American Family Insurance in Overland Park, Kansas. He usually recommends no less than replacement cost policies to his clients.

As important as it is to know what types of coverage you have and what situations are covered, it is as important to know what is not covered at all or may be covered with additional restrictions or different deductibles.

Different policies cover different perils for different types of structures like a condo, renter's policy, etc. The policies have designinations from HO-0 to HO-8.

There are also differences when it comes to paying things like additional living expenses, hotels, meals, etc., if your home is uninhabitable.

For more information about the basics of home insurance polices and what they cover, What Home Insurance Actually Covers (and Where You're on Your Own) can answer many of your questions.

How Much Homeowners Insurance Do I Need?

So how much home insurance coverage do you need to buy? There are many factors to consider.

Basically, you need to look at what your house would cost to rebuild, the likelihood of certain types of disasters in your area, the value of your possessions and your liability exposure.

"You are preparing for the worst case scenario, not for a minor claim. You need to be prepared for a catastrophic loss," Friedlander said. "That's possible whether it's hurricanes, tornadoes, wildfires. In virtually any part of the country you are living somewhere where you could sustain a catastrophic loss and lose your entire home."

A village is flooded from a hurricane in this aerial photo.

Rebuilding Cost

After a disaster, you want to make sure you can cover the costs of repairs or rebuilding.

The cost to rebuild your house is not the same as your home's market value. In most cases, the land your house sits on will still be there after a catastrophe, so you do not need to insure that value.

"What we typically see is a majority of homeowners are underinsured," Friedlander said. "Unfortunately, many of the homeowners purchase insurance protection to satisfy their mortgage lender but they confuse the real estate value of their home with what it would cost to rebuild it."

So don't focus on what you paid for the house, it's market value, how much you owe on your mortgage or the property tax assessment.

"Most companies use a replacement cost calculator where we plug in the square footage, bedrooms, bathrooms, all the features we can about the house," Peterson explained. "It gives us a valuation based on the cost to rebuild and we base the coverage on that."

Consider what type of coverage you want (actual cost, replacement cost, or guaranteed replacement cost) when you are shopping for policies.

Friedlander said actual cash value saves some money on premiums, but warns you will get less in the event of a major loss. Replacement cost coverage is about 10% more in premiums but you will get about 30 to 50% more when you file a claim.

Peterson said it is important to make sure when you're shopping for insurance that unique things that happen in your area are covered. Depending where you live, you might need additional coverage for earthquakes, hurricanes, tornadoes, wildfires, sinkholes, etc., that are not generally part of coverage.

Value of Possessions

To know how much coverage you need, you need to know what you own. Placing a value on your possessions is important.

"The important thing is to do a home inventory and kind of assess what your valuables are and determine what the value of everything is so that you're at the right level of protection." Friedlander said.

Go room by room and consider taking photos or videos. Make sure to include things like:

Kitchenware
Furniture
Clothing
Electronics
Expensive valuables
Camping and sports equipment

You do not need to include your cars in this property inventory because vehicles are not covered by homeowners policies even if they are parked in the garage.

"Most of the time the personal property coverage is a straight percentage of the dwelling coverage, typically, 70 to 75%," Peterson said, adding that is usually enough to cover contents.

On most policies, there is often a limit on pricier items like jewelry, art, furs, silver, or electronics. So if a fire destroys your house and you lose $10,000 worth of jewelry, your policy might only cover $1,000 of that.

To make sure all of your items are covered, Peterson recommended a separate personal articles policy to protect those pricey items.

Liability Coverage

The liability section of your homeowners policy covers bodily injury or damage that policyholders or their family members (including pets) cause to others.

If your dog bites your neighbor and sues you for medical care, this part of policy could cover you. If your child throws a ball and it accidentally breaks the neighbor's window, this part of the policy could cover you. If your friend falls at your house on a chipped floor and sues you, this part of the policy could cover you.

Liability coverage will also pay for the cost of defending yourself in court and any court awards up to the limit of the policy.

"The risk of not having enough liability coverage is that you're going to be on the hook for anything beyond your coverage," Peterson warned.

He said dog bites are his most common liability claims and he sees people all the time who do not believe they need it because they think nobody would ever sue them.

"We find that a lot with insurance. People don't want to pay for things until they have a problem and then they wish they had. People are nice until something happens."

The Insurance Information Institute recommends at least $300,000 in coverage but many policies only include $100,000. The more assets you have, the more coverage you need.

If you have more in assets than you have liability coverage for in your homeowners policy, you might consider an umbrella policy which extends your coverage to an amount you decide.

To determine how much liability coverage you need, add up the value of your assets, including your home. Make sure to include the following assets when figuring liability:

Vehicles
Investments
Future wages
Personal belongings
Money in bank accounts
Real estate besides primary residence

Peterson said if you have something that could pose a risk to others like a pool or trampoline on your property, you need to be especially aware of the amount of liability coverage you have.

You don't need to figure out everything alone. A good insurance agent should be able guide you through the process of answering the question of how much homeowners insurance do I need.

"We always recommend meeting with your insurance professional once a year. We call it an insurance checkup," Friedlander said. "Review all your coverages and make sure you are protected."

Not having enough coverage can be a big mistake.

"People think that things can never happen to them and then they wish after the fact that they had taken a little more time and maybe gone for some of the coverages that they decided not to take," Peterson said. "The biggest mistake people make is they try to save money on their policy iInstead of making sure that they're covered properly."

Tiffani Sherman is a Florida-based freelance reporter with more than 25 years of experience writing about finance, health, travel and other topics.

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This is What Every Millennial Should do Before Buying a House

Posted: 12 Apr 2021 08:30 AM PDT

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Owning a home is no small feat — especially after the financial apocalypse and dismal job market millennials have persevered through. Twice.

And yet, despite all odds, millennials are now the biggest group of homeowners in the United States, according to 2020 research by the National Association of Realtors.

How did they do it? Well, everyone follows a different path to homeownership — but there is one thing most home-owning millennials have in common: a good credit score.

Without a good credit score, getting approved for a mortgage is going to be tough. And getting a decent interest rate is going to be even harder — meaning a homeowner could be paying tens of thousands of dollars more for their home than someone with excellent credit. Yikes.

That unnecessary debt is avoidable, though, and it will cost you nothing to start improving your credit score.

In two minutes, you can sign up for a free Credit Sesame account and get personalized tips on how to improve your score. You'll also be able to see any of your debt-carrying accounts, plus any marks or errors holding you back (it's more common than you'd think).

So for millennials ready to take the next big step in their life and stake a claim on a piece of property, make sure your credit is on track. Credit Sesame can help you bump it up — making homeownership more attainable.

Can you see a white picket fence in your near future? Then take 90 seconds to sign up for a free Credit Sesame account. The sooner you get started, the closer you'll be to your goal of a good credit score — and homeownership.

Kari Faber is a staff writer at The Penny Hoarder. She's a first-time millennial homeowner, somehow!

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5 Steps to Claim Your Ex's Social Security After Divorce

Posted: 12 Apr 2021 07:00 AM PDT

Love and marriage don't always last forever. But if your matrimony lasted 10 years or more, the financial benefits can last a lifetime. That's because you may be able to take Social Security based on your ex-spouse's benefits instead of your own, even if you divorced decades ago.

The philosophy is that both spouses often contribute economically during the marriage, even if only one person was employed. The Social Security rules protect those who spent most of their working years raising a family or playing a supportive role to their spouse and may have no retirement savings of their own.

The Rules for Social Security After Divorce

The maximum benefit you can get based on the record of a spouse — whether you're currently married or divorced — is 50% of their full retirement age benefit. Full retirement age is the age at which you qualify for 100% of your benefit. It's 66 or 67, depending on when you were born.

If your ex-spouse dies before you, you'll typically be eligible to receive survivors benefits of 100% of the monthly payment they were receiving, just as you could if your current spouse died.

People with a long employment record will typically qualify for a bigger benefit based on their own earnings instead of a spouse's. Social Security will give you the bigger benefit, but not both.

If you do qualify for more money thanks to your ex-spouse, they'll technically give you whatever benefit you earned based on your record. Then, they'll use your ex's record to make up the difference.

Seeking to get revenge on an ex-spouse by claiming their Social Security? Move on. Your decision won't affect their benefits in any way, nor will it impact their current spouse if they've remarried. If they've been married multiple times, all their exes are allowed to claim on their record.

Occasionally, a divorce settlement will state that one spouse can't collect Social Security based on the other person's record. Such stipulations are utter nonsense. The Social Security Administration says they're "worthless and never enforced."

How to Get Your Ex's Social Security in 5 Easy Steps

Since your Social Security checks won't affect your ex in any way, the only reason to try to claim their benefits is if you think you can get more money. If you suspect their record will maximize your Social Security, follow these five steps.

1. Make Sure You Can Answer 'Yes' to These Questions

To qualify for an ex's Social Security benefits, you need to be able to answer "yes" to these four questions.

Were you married for 10 years or more? If your marriage lasted less than 10 years, you won't qualify for an ex's benefits. Common-law marriages don't count. You also need to have been divorced at least two years before you can start getting checks based on your former spouse's history, unless they've already started receiving benefits.

Are you at least 62? This is the minimum age for starting Social Security retirement benefits, no matter whose record you're using. However, you can qualify regardless of your age if you're caring for your ex's child who is under 16 or disabled. If your ex-spouse is deceased, you can qualify for survivors benefits at age 60, or age 50 if you're disabled.
Are you still unmarried? If you're currently married, you can only claim on your record or your current spouse's record. You'll only be eligible 50% of their full benefit as well. And if you've been married and divorced multiple times? Social Security will use whichever ex-spouse's record gives you the biggest benefit. Remember, though: Only marriages that lasted 10 years or more will count.

Is your ex eligible for benefits? In addition to the minimum age of 62, Social Security requires at least 40 work credits, which amounts to 10 years of full-time work, to start benefits. If your ex doesn't meet these criteria, there's no benefit for you to claim. Note that they don't need to be receiving benefits. They just need to be eligible.

2. Gather Your Ex's Information

You're going to need some information to prove to Social Security that you're eligible for your ex's benefits. Be prepared to provide your marriage license and your divorce decree.

Social Security will also need to locate their record. This will be easiest if you still have their Social Security number. If you no longer have it, Social Security may be able to find their record if you can provide their date of birth, where they were born and the names of their parents.

3. Resist the Urge to Tell Them

Remember: Your decision to seek more Social Security on your ex's record does not affect them in any way. So there's absolutely no reason to contact them about it. You don't need their consent to get benefits based on their record. Social Security will not contact them about your application.

4. Ask Social Security Whose Record Gets You the Best Benefit

Now take that information you gathered about your ex to Social Security so you can figure out whose record will give you the biggest benefit. You can call them at 800-772-1213 or visit your local office. An appointment isn't required, but scheduling one can cut down on your waiting time.

5. Delay as Long as Possible (but Not Too Long)

The earlier you take benefits, the lower your monthly checks will be, no matter whose record you claim on. The 50% you can qualify for from their history is the maximum you'll get if you wait until your full retirement age of 66 or 67. For every year you claim before then, you'll permanently reduce your benefits by 6.66%. If you claim at 62, you'd only qualify for 32.5% of their benefit.

Don't wait too long, though. When you take benefits on your own record, you get an extra 8% for every year you delay past your full retirement age until your benefits max out at 70. But when you're getting spousal benefits, you don't earn delayed retirement credits. You won't get extra money for waiting past your full retirement age, so there's no point in delaying any further.

A final note: In the past, a common Social Security strategy was to claim based on a current or former spouse's record as early as possible, then switch over to your own bigger benefit later on. But the rules changed under a 2015 law called the Bipartisan Budget Act. Now this is only an option if you were born Jan. 2, 1954, or earlier.

Robin Hartill is a certified financial planner and a senior writer at The Penny Hoarder. She writes the Dear Penny personal finance advice column. Send your tricky money questions to AskPenny@thepennyhoarder.com.

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Food And Recipe Fusion

Monday, April 12, 2021