This Week’s Money Map:

• Money Matters: My car purchase cost me a MILLION DOLLARS in the future!

• Insurance Insights: Car insurance rates are surging, but there are ways to save

• Loan Ranger: Why the Fed cut IS NOT translating into lower mortgage rates

• Budget Buster: Are you planning to use Klarna? We think you should reconsider

• Credit Card Corner: Southwest Companion Pass - it’s that time of year!

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Money Matters: My car purchase cost me a MILLION DOLLARS in the future!🫨

Compound returns are a powerful tool to grow your wealth.

Imagine this: You’re 25, and your sights are set on a brand-new $80,000 BMW. It’s sleek, it’s fast and it’s expensive. But what if you decided to go for a used $20,000 Honda Accord instead? That $60,000 difference might not seem like a lot now, but what if it could cost you over $1 million by age 65?

It’s all about compound returns. Have you ever read about Warren Buffet? In the book, The Psychology of Money, Morgan Housel explains that Buffet’s wealth is largely due to him investing consistently over a long period of time.

Here’s the deal: If you invested $60,000 in an S&P 500 index fund at 7.22% growth (the historical inflation-adjusted 30-year return), that money would grow year after year, all thanks to compounding returns. When you hit retirement age, that initial $60,000 could be worth over $1,000,000, inflation adjusted.

So before you splurge on the fancy car, consider what future you might prefer: a shiny depreciating asset like a BMW, or a much larger retirement fund. We aren’t saying you shouldn’t consider the BMW, but we want you to know the real purchase cost. Check out our compound interest calculator to see the kind of returns today’s investment can yield.

Insurance Insights: Car insurance rates are surging, but there are ways to save💵

CNN published an article stating that car insurance rates increased by 21% in the 12 months between March 2023 and 2024. The average household with two cars is paying approximately $3,000 for full coverage car insurance, up from about $2,000 three years ago. 

Why is this happening? Insurance companies are facing inflation, but that isn’t the whole story. Traffic accidents (severe accidents in particular) have increased. The industry is also seeing a rise in claims due to weather-related issues like flooding and hail.

Learn how to save today: MoneyGeek conducted two studies to help you find the cheapest full coverage and liability-only car insurance. Wouldn’t you rather put that extra money into an investment or a vacation?

The Loan Ranger: Why the Fed cut IS NOT translating into lower mortgage rates🏠

You’ve probably heard that the Fed cut interest rates by 0.5% recently, and you might be wondering, “Why aren’t mortgage rates dropping too?” Well, it’s not that simple. While the Fed’s cuts affect short-term rates like credit cards and home equity loans, mortgage rates march to the beat of a different drum.

Mortgage rates are tied more closely to the 10-year Treasury yield, which reacts to things like inflation and global markets. So even though the Fed made cuts, the average 30-year mortgage rate in October is hovering around 6.7%​, about half a percent higher than the low in September.

The good news? While the Fed’s moves might not lower your mortgage right away, they’re a sign of shifting economic winds that could bring better rates down the road. If you’re house hunting, keep an eye on those Treasury yields and consider locking in a rate if you see a dip.

Learn more: Our guide on comparing current mortgage interest rates provides a detailed breakdown of how the Federal Reserve's rate cuts influence mortgage rates.

Budget Buster: Are you planning to use Klarna? We think you should reconsider 🤦‍♀️

Klarna — the popular "Buy now, pay later" service — seems convenient at checkout, but short-term joy may lead to long-term financial stress. A Journal of Happiness Studies report shows that although borrowing to buy gives an immediate happiness boost, it often leads to stress during repayment. Similarly, research from the Journal of Consumer Research highlights that even small debts can create lasting anxiety.

While Klarna might make sense for essential purchases, it's often used for non-essentials, which can trigger this cycle of short-lived pleasure and prolonged debt stress.

Before hitting "buy now," consider how debt from services like Klarna can lead to long-term stress and anxiety. Learn more about how debt impacts your mental health here.

Credit Card Corner: Southwest Companion Pass - it’s that time of year!😎

It’s Companion Pass season again for Southwest Airlines! If you didn’t know, this is one of the best travel deals. The pass allows you to bring one travel companion for free on any Southwest flight you book (excluding taxes and fees). So if you booked a $650 roundtrip ticket, you could save $650 for a significant other, friend, or kid. Our team members have used this pass and earned THOUSANDS of dollars in free travel each year.

When to get it: Now is the time to start making moves to get the pass in January 2025. The pass is good for up to two years before it expires!

How to get it: There are two strategies. The first is flying 100 one-way Southwest flights. This is challenging for most consumers, but some business travelers can use this approach. The second (and best) way for most consumers is to earn 135,000 Southwest Rapid Rewards points through credit card spending and sign-up bonuses.

Here’s how to do it fast: Get two Southwest credit cards and meet the minimum spend ($1,000 to $4,000 depending on the card) after January 1, 2025. Be sure not to hit the credit card bonuses until this date. Southwest co-branded credit cards often offer large point bonuses to help you quickly reach the 135,000 qualifying points needed. Learn more about how to get the companion pass and the best Southwest credit card options.

Tiny nugget of financial wisdom for your day

“The first rule of compounding: never interrupt it unnecessarily.” - Charlie Munger

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The MoneyGeek Team

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