What are some common financial problems and how can you avoid
them?
Americans today are in bad financial shape. Here are some common
financial problems and ways you can avoid them altogether.
It is easy to admit that most Americans find themselves in bad
financial shape and have no idea how they even arrived at that
state. Some may think to themselves, "I'm educated. I went to
college. I know how to take care of my own money." I can tell
you right now that just because you have a degree under your
belt or just because you have a good-paying job, that does not
make you any less vulnerable to the financial instability that
people eventually wrestle with. Here are the key financial
problems that plague Americans today and ways you can avoid them
altogether.
Credit Cards
Say "No" to credit cards. From the millisecond you turn
eighteen, credit card companies will start preying on you to
take their "low interest" cards and start buying all of those
incredible things you have only dreamed of, like a surround
sound system or the newest computer. To this day, I get at least
four or five credit card offers in my mailbox daily. Credit card
companies are such an easy trap to fall into because, even if
you don't have a job, you will get approved. Unless you pay your
credit card bill off every single month and accumulate no
interest (and surprisingly very few people do), tear up all the
offers you have and cut up all of your credit cards. They are
not cards of "free money." They have something called revolving
interest which means that every single day, interest accumulates
ON TOP OF interest. It is a deep ravine to climb out of, so
steer clear of them.
Emergency Funds
Most people live paycheck to paycheck and have no "extra" money
to speak of. What this means is that when an emergency arises,
they will either take out a loan or use their credit card, both
of which require paying interest and sometimes years to pay off.
Stop buying that expensive mocha every single morning and
instead put that towards accumulating an emergency fund, so you
never have to fall back on plastic.
Life Insurance
Whether or not you have group insurance at work, get your family
some life insurance. You might ask yourself why bother if you
only pay a couple of bucks a month for that group insurance
policy they offer at work. Unless you signed a guarantee when
they hired you saying they would NEVER lay you off or NEVER fire
you, that job is not secure. When they lay you off, they will
not give you your life insurance to take with you, no matter how
nice they are. By getting your own personal policy for your
family, you are securing yourself and your family. If something
were to happen to you or your spouse and you relied on their
income and had no life insurance, your family would be entering
a tunnel of financial misery. Ask your financial advisor to
recommend how much coverage you and your family will need and
get it. Also, do not be scammed into buying a cash value policy.
You will get more coverage at a lower cost if you go with a
level term policy.
Financial Planning
How long did you spend planning your last family vacation?
Probably a couple of weeks or at least a couple of days. Now,
how long have you spent planning your financial future,
including your retirement and your children's education funds?
Most people find it too scary to sit down and create a financial
plan. Hire a financial advisor to help you hash out a financial
plan. There are companies out there that don't charge hundreds
of dollars an hour to get this done for you, if you look around.
This person will act as your financial coach to ensure you stay
on track.
Retirement and Education Funds
Some people think of their retirement as this far-off event and
tell themselves they "have time" to start saving. No, you don't.
Retirement will be here before you know it and there is no
better time to start saving than now. By holding off on
investing for your future, you are only cutting down on all
those years where your efforts and money will be compounded and
working for you. The same goes for education funds for your
kids. If you begin investing for them as soon as they are born,
you will not have to put as much away monthly as you would if
you waited until they were 9 or 10 years old. Speak to your
financial advisor to get you started on these funds.
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