All posts by Patrick

What Is Financial Literacy And Why Is It Important?

In everyday life, we all face different financial issues and, we have to make decisions against each of these issues that affect our quality of life.

Issues such as where do I keep my money so that its value is maintained over time?

How do I allocate my limited income to unlimited demands to get the most out of it?

How do I plan to achieve my goals?

How can I manage my income and expenses so that I can save?

How do I manage my expenses?

Should I save my money at the bank or invest in the stock market, gold, and housing?

To answer all these questions and many other questions, one needs financial literacy knowledge. In the following, I want to introduce you to the concept of financial literacy and explain to you why knowing financial literacy is necessary for everyone.

What Is Financial Literacy?

Financial literacy is the intersection of financial management, credit, debt, and the knowledge needed to make responsible financial decisions, that is, decisions that affect our daily lives financially. Financial literacy includes understanding how a checking account works, using a credit card, and how to avoid debt.

This post contains affiliate links. Please please read my Disclaimer for more information.

In general, financial literacy affects the issues that a typical family pays attention to when trying to balance the budget, buying a home, financing children’s education, and earning an income in retirement.

The level of financial literacy varies by level of education and income level, but evidence shows that highly educated, high-income consumers can also have as many financial problems as people with lower education and lower incomes. The only difference is that the latter group will probably be more resistant to learning.

Financially Literate Person:

Having literacy helps you to strengthen your abilities and skills in the face of many situations. The financially literate person gains new insights into their behavior and performance. In the following, we examine the characteristics of people with financial literacy from 6 main areas of financial literacy.

• Earn money:

• Recognize your abilities and guide them to earn money.
• Can offer his / her abilities to others.
• Can review and compare different job options and choose the best option.
• Recognizes the true value of the services it provides to others and the products it produces.
• Familiar with the principles of taxation and the need to pay it.
• Knows the difference between net and gross income.

• Spend:

• Knows his emotions and has the ability to manage purchases.
• Distinguish between wants and needs: Recognizes wants and needs and can prioritize between them.
• In bargaining situations, he has the ability to bargain and can buy what he needs at a lower cost.
• He can know his resources, including money and non-cash assets, and understand its limitations so that he can make the best decision to spend these resources.

• Money management:

• It can balance its income and expenses and budget for itself.
• Knows goal setting methods and can plan to achieve his / her goals.
• Knows decision-making methods and can use them to make the most appropriate choices.

• Savings and investment:

• He knows what it takes to save and why he should save.
• He can wait and postpone his wishes.
• He is familiar with the function of the bank and can have a proper evaluation and comparison of different banks.
• Knows the different options for keeping money and can choose the best option.
• Familiar with various banking services such as checks and their rules.
• He knows that the value of money decreases due to inflation over time and seeks appropriate options to maintain this value.
• It can identify different risks and select the less risky option.

• Risk management and insurance:

• He knows when it comes to financial planning, in addition to paying attention to raising money, he must also think of ways to protect it.
• It can identify various risks and look for ways to reduce them.
• Knows the types of insurance and has the ability to identify the right insurance for you.

• Credit and debt management:

• Has the ability to recognize the benefits and disadvantages of using debt.
• Recognizes the importance of building trust and strives for it.
• Has a good understanding of the effects of not paying your debts on time.
• He knows that using debt comes with a cost, and he has the ability to calculate the cost of that debt.

Why Is Financial Literacy Important?

The importance of financial literacy is because it introduces us to the basic concepts of finance so that we can make informed decisions in real life. With this knowledge, we can better manage our money, make more informed decisions, and maintain healthy spending and budgeting habit that leads to financial well-being over time.

This knowledge becomes more important to us when faced with various financial challenges. When we say that a person is financially literate, we mean that an understanding of financial concepts is essential.

Who Needs More Financial Literacy?

Some people think that financial literacy only belongs to a certain class, for example, it is thought that people who are poor and from the lower classes of society need this knowledge more.

If each of us has unlimited demands with any amount of income and coordinating these demands with the resources at our disposal is one of our daily concerns and we must choose one of the various options.

For example, to which of my wishes should I allocate the number of resources (money, time, etc.) I have? How do I achieve my financial goals? Or how can I manage the wealth that my parents inherited for me so that it does not reach zero?

How do I teach my child to realize that he is spending his money on valuables? And thousands of other questions that show that financial literacy is needed for all members of society and is related to the issues of our daily lives, so it is not related to a specific group and we all need to be familiar with financial literacy.

Conclusion

Financial literacy shows itself more at the time of retirement. People with high financial literacy save twice more than people with insufficient financial literacy. In other words, people with less financial literacy pay more for their wrong decisions. The group also did not invest, struggling with debt and poor understanding of loan terms.

In this article, we examined the characteristics of wealthy literate people and then explained the importance of financial literacy and for whom this issue is more important. We hope you find this article useful.

“If you have any feedback about why is financial literacy so important that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

How do you plan for your retirement? One of the concerns of retirement is financial security and welfare. A guiding issue rooted in the shape and lifestyle of today’s economy. It is a well-known saying that making money cannot make people rich; because it is how spoiling that makes people rich. Today we look at the income, expenses, and financial plan that will secure the economic future in retirement.

Financial Management.

Financial management, in simple terms, is the set of tasks that a retiree can use to strike the right balance of income (low pension) and expenses (daily expenses, including food expenses), given the inflation of the economy. There is a need for financial management in all human beings and in all societies, but it is very important in retirement, when incomes are very low and in some cases very low below the poverty line in society.

We acknowledge that poor economic conditions, inflation, inflation, and other issues, including low wages and retirement benefits, have a profound effect on our financial approaches to life, but we must not give in to the situation. We believe that in any situation if proper planning and management are applied in our lives. We can have a life forward. In this article, we are going to talk to you about financial management in retirement.

This post contains affiliate links. Please please read my Disclaimer for more information.

We must first know how to manage the meager pensions so that in addition to not reducing the welfare of life, we can also plan the minimum for investment. In this way, we need to know what an asset is and what is a cost, and what is the difference between the two? Assets are all movable and immovable property that can be returned to us profitably and we can count on its future income. Expenses are all movable and immovable property that only needs to be paid for, without the slightest return on money.

Every time we receive money, we need to know how much of it we should spend on assets and how much we should spend on expenses. This is why, unfortunately, most esteemed retirees, at the time of receiving the retirement order, and upon receiving the retirement bonus, instead of dedicating the relevant bonus to the provision of assets, spend it on their dreams and thoughts for which they have been waiting for years. They spend and after a while, the situation will become difficult for them.

You should be able to specify your list of expenses and financial priorities during your retirement.

Financial priorities can be divided into the following categories:

• Short term

• Long time

For example, a day trip a month can be a short-term goal, and buying a car can be a long-term goal for you. Once it has fully identified and segmented its goals, it will no longer be captivated by other non-priority demands. And most importantly, when you go to the store to buy, be sure to have a shopping list and avoid buying other items that you see there.

So What Happens In The Meantime?

In the end, you either spend more money or spend part of your shopping list and make other purchases. But if you have financial management and know the priorities, you know that your purchase is a priority. And this will make you not spend the extra money and reach your goal. On the other hand, if we think only of distant times, we lose the present and joy of life.
Saving does not mean not enjoying life today. We need to manage our surplus income and save as much money as possible; because one day we will have to not eat at all. Now we have to eat less and wear economics to be able to sustain life. People who waste will one day suffer from financial and even mental and physical problems. You have to eat well, dress well, have fun, help, and live a good world; but he did not waste and saved the surplus income for tomorrow after deducting expenses.

They say that whenever you are going to talk about or for a certain class and age, it is better to talk to them first to find out what their experiences are; then deal with this issue. If you asked any retiree what he would do if he could go back in time; He will answer that I must have been planning for today and thinking about today.

Most of them say that I never thought I would reach this age. Unfortunately, some people live with the thought of who is alive and who is dead until tomorrow?! This is not the right-thinking. If we all think we will be alive now, one day we will not reach a dead end. So we need to plan for retirement today. Interestingly, about 40% of retirees emphasize the need for financial planning.

The most dangerous time to plan your retirement finances is when you are retired and just thinking about what to do. The bottom line is that anyone who starts working at any age should start saving when they receive their first income. You need to know that if you want your retirement and disability to be an opportunity to relax and unwind, think about savings and financial planning for those days from the very first earnings.

Savings should not be just money; they should also be an investment in a field of work. In fact, we have to plant a seed to irrigate it at the same time as our several years of work so that it becomes a big tree, and when we are retired and can no longer do anything, we rest under the shade of that big tree of our thinking and deep thinking.

Here Are 7 Important Steps To Save Money For Retirement:

1. Start today

Saving is very difficult when all your current income is spent on living expenses, but because the value of your capital increases over time, it is better to start saving as soon as possible. If you start saving today, you will need less money to save in the future because the value of your money will decrease over time. Create a separate bank account for savings and save all savings in it.

2. Budget

Many people equate budgeting with spending less and not enjoying life, but the truth is that budgeting will have a positive impact on your life and help you manage your money. To begin budgeting and planning for your money, you must first set clear goals. Budgeting is like a plan that guides you to spend your money on your goals.

3. Reduce your expenses

To cut costs, start with a small amount so that you do not feel overwhelmed. By doing simple things like saving money while shopping, you can greatly reduce your monthly expenses without compromising your quality of life. Making small habits on a daily basis can have a big impact on your long-term savings plan, so try to improve your financial habits every day by setting long-term goals.

4. Manage your debts

The first step in managing debt is to change the behaviors that have led to the imposition of debts on you. Many people are forced to borrow because of hasty decisions or unwanted problems, and if they do not manage their money properly, they get into debt. There are simple ways to avoid this problem: for example, avoid taking out high-interest loans, do not borrow money to buy unnecessary equipment, plan ahead for emergencies, and consult experienced and experienced people for important financial decisions, and so on. When you have an unexpected problem, think about managing your money to improve your financial situation.

5. Invest

Investing will bring you many benefits. Many people prefer to lend their money to banks and receive a fixed return at the end of each year, but if the investment is made in principle, you will be able to multiply the value of your money in a few years. There are several ways to invest, the least risky of which is the stock market. The most important thing for investing is to avoid risky investments and get information about the principles and rules of investing before taking any action in this regard.

6- Insure yourself with life insurance

Life insurance and investing is one of the ways to invest in retirement. If you insure yourself (and even your spouse) for life, in addition to being covered by special health care from the first day of insurance (more services than government insurance, such as social security), your premium will be refunded. Sizes and even allocate profits to it. Eventually, after twenty or thirty years, you will have a considerable amount of money. To better understand life and investment insurance, be sure to read this article.

7. Do not touch your savings account

The last and most important step is not to withdraw money from your savings account under any circumstances. The amount you have saved in your account for your retirement and any other use of that money will waste all your efforts to save that amount so far. In addition, the less you save from your savings account, the more you will lose money in the future. So if you have a financial problem, try other ways such as increasing income to solve your problems.

Conclusion

In order to spend your retirement in comfort and not think about your expenses every day, you need to think about saving your money for the future from now on. At the time of retirement, it is not possible to rely entirely on the meager pension and benefits received from insurance. The best way to not worry about the hassle of retirement is to start planning today and save some money for the future.

“If you have any feedback about managing income during retirement that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

What Is Investing?

Investment is the sacrifice of any kind of value now in the hope of gaining more value in the future, although the size or quality of this value is usually not exactly known.

In other words, we are ignoring the value of something at the moment to gain more value for it in the future. For example, with the cash with which we can buy consumer goods, we buy the shares of a company, in the hope that the value of its shares will increase and we will make a profit in the future.

Why Should We Invest?

The fact that our purchasing ability decreases over time. It seems foolish to think that if we save our money and put it together to become rich one day.

In today’s economic conditions and the fluctuation of prices and the constant rise in prices of everything, saving money is not profitable at all and it must be invested to protect the value of money against inflation, but even in countries where inflation is not high. Investing is one of the most important things that people do with their money. This shows the importance of investing in financial markets.

This post contains affiliate links. Please please read my Disclaimer for more information.

There are many options for investing in cash, from buying gold and coins and currency and real estate to buying valuable goods like cars. But this savings model is useful for those who have a lot of income and can buy the goods they want before prices suddenly rise.

But these days it is not at all economical to save money by buying gold and coins or property, because prices rise faster than incomes, and until the money to buy a coin is collected, the value of each gram of gold, and therefore the price of the coin, is higher than before. The same goes for buying a car and property.

That is, the money with which one could buy a gold coin until yesterday is not available now; this shows that the value of our assets is also decreasing day by day. So it may be best to look at other investment options that do not require a lot of capital.

Why Should You Start Investing Right Now?

Contrary to popular belief, you do not need several hundred million dollars to start investing. There is no predetermined amount to invest in, and anyone with any amount of money can start investing right now. Your most important asset in the investment market is not your money, but your time.

Some people prefer to save their money in bank accounts with predetermined interest instead of investing, but the fact is that the return on investment is greater than the profit on bank accounts and your money grows at a higher rate. The secret of the return on investment lies in its incremental return.

Increasing interest means that your profits increase in proportion to your capital each year. The most important principle for investing is to start early. The sooner you invest, the higher your interest rate and the more your investment will grow.

What Is The Investing Essentials?

The goals of economic investments are not the same. It could be an employee who earns some extra salary each month or a retired employee who has just retired and will lose her money value if she leaves the money in the bank. One may even be an employee of a large, high-income company, or even a factory owner, but he or she is always worried about what would happen if his or her company or factory went bankrupt.

Some people want to invest their money where they get a monthly profit and spend that money on daily expenses or rent. Some want to invest money for their children’s future so that they can cover their child’s college or marriage expenses years later by increasing it and making a profit.

So the first question we need to ask ourselves before we start investing is what do we want from the capital market?

How Much Can I Risk In Investing?

One of the most important factors that an investor should be aware of before starting an investment is the degree of risk-taking. Some people prefer to have a monthly profit, but they are comfortable with the principle of their capital and are sure that nothing will be deducted from it. This group probably prefers to deposit in the bank and is satisfied with the annual profit of the bank.

Others are willing to risk their money if they know that the result of this risk can be a good and acceptable profit. There is a rule in the investment world that says the higher the risk, the greater the potential return and loss.

How Much Money Should I Invest?

Of course, it is not wise for a person to invest all his capital in a market because the recession may go to that market and he may lose part or even all of his assets. It is not possible to say exactly in which market the investor will invest what percentage of his capital.

So if one thinks that the exchange rate will increase over a period, one thinks that the profit is in this market and converts all one’s capital into currency, the exchange rate may suddenly fall and this investor will suffer a loss.

The Importance Of Investing In The Growth And Development Of The Country:

If you want to invest to increase your income and capital, there are several options before you.

The importance of investing in different countries is such that many countries are taking steps to increase capital and economic prosperity.

For example, many countries grant citizenship to people who intend to immigrate, provided that the purpose of their immigration is to invest in that country.

There are different people who for different reasons want to get a second passport. Statistics show that 89% of people are interested in this issue.

There are currently more than 24 countries in the world that issue passports to individuals in exchange for investments, and these investments are made in housing or government shares.

Certainly, these policies will cause a large amount of currency and capital to enter the country and will bring significant economic growth to that country. Of course, people will want to have a second passport from another country in a situation where they see that country at a favorable level in terms of economic and welfare conditions.

One of these cases is the withdrawal of capital from banks and stock exchanges and its conversion and maintenance in the form of foreign currencies, coins, and gold, which causes many manufacturing and service companies to lose their growth and development. The order will damage the country’s economy.

Perhaps controlling the prevailing economic climate in society can play a positive role in reducing these flows.

Conclusion.

We are living in a situation where it is not economically viable to leave a few hundred dollars unused, and it is better to invest even the low amount of money in one of the financial markets. But before we do that, we need to define our tasks and see what we want from our investment and what we expect from our financial market. Gain an understanding of the financial markets and the ups and downs of their profits and losses and choose the most appropriate ones. But if we do not have the patience to get involved with the news, rising and falling prices, and stress, the investment fund is the best option.

“If you have any feedback about investing essentials you need to know in 2020, that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

The global situation with Covid-19 has changed many things in our lives – how we live, how we earn money, and how we spend them. The pandemic has had a huge impact on the economy all around the world, and although we may not notice it yet, but these changes will show up later.

Taking all of this into account, we need to be prepared for any turn of events. One of the things that will help us financially is improving our credit score. We heavily depend on our credit score whether we want to apply for a credit card or get a loan or a mortgage.

In this article, I’m going to offer you a few tips that will help you increase your credit score fast. So let’s get started!

Mind Your Credit Utilization Rate.

The credit utilization rate is the percentage of your credit limit that you have used during the month. Not only each credit card has this rate, but also every person has an overall credit utilization rate in their credit history. The key to improving your credit score is to keep this rate as low as possible. That’s great if you could keep it at 30%, but if you manage to reduce it to 10%, then your overall credit score will improve instantly.

This post contains affiliate links. Please please read my Disclaimer for more information.

Here are a few details you need to keep in mind though. First of all, try to keep low not only one of your credit cards, but also your overall credit utilization rate. Secondly, call your creditor to find out when they send your credit reports to the credit company. This will allow you to pay off the credit by that date that will improve your credit history. You’ll learn more about it in the next tip.

Break Your Payment In Half.

The credit reporting companies see our credit history not the way we see it. The thing is they receive the reports from creditors only once a month (and the date is different for different companies). So let’s assume that the limit on your credit card is $1,000. You use it to pay for everything, so by the end of the month, you achieve your limit. But even if you paid it off a few days later, your credit information may have been sent to your credit reporting company already. So what will they see? They will see that you’ve used 100% of your balance and haven’t paid it off yet.

Let’s say, you have a rewards credit card, so in order to get the rewards, you need to use it as much as possible. Luckily, there is a trick that may help you improve your credit utilization rate and still get the rewards. All you need to do is to break all your payments into two parts. And in case, you have a big purchase coming up, be ready to pay it off as soon as possible.

Keep Your Credit History Clean.

Collection accounts – no matter whether they are paid off or not – are a huge threat to your credit score that will play an important role in the case, you apply for new credit or loan. In case, you have an unpaid collection account, make sure to pay it off as soon as possible. But if you have a paid-off collection account, you need to contact your creditor and ask them to remove this information from your credit history.

Any mention of debts or late payments in your credit reports can be used against you. It would be perfect if you could pay off your credit on time to avoid any negative consequences, but even if you have a record of late payments, try to have it excluded from your credit report history to avoid any difficulties in the future.

Raise Credit Limit On Your Card.

If you have a higher limit on your credit card, let’s say $5000, but still, spend the same amount as before, your credit utilization rate will decrease automatically that – as we have learned before – can have a positive impact on your overall credit history.

There are two ways how you can do that – you can simply ask for it or apply for a new credit card. Now, the second way has a couple of pitfalls you need to know about. First, applying for a new card makes your creditors do a more close review of your credit history. And if it`s not perfect, you can be rejected for a new credit card. Also, if you open a few new accounts in a short period of time, it may get suspicious and harm your credit history.

All in all, be very careful using this tip. Even if you manage to raise your credit limit, there is still a risk of getting carried away and spend more than you can pay off.

Get A Friend’s Help.

If you have tried everything else, but still couldn’t improve the situation, maybe it’s time to ask a friend for help. For this tip, you will need a very good friend who has a perfect or next to perfect credit history and a low credit utilization rate.

If you have a friend like this, ask them to add you as an authorized user to their credit card. If they decide to help you, their credit account will appear on your credit report as well. And as long as they proceed with their payments on time, it will improve your own credit report too.

The only difficulty you may face here is that you will need someone who really trusts you because technically they’ll need to give you access to their account and allow you to spend money in their name which can be a very sensitive matter. But if it works, you will improve your credit situation a great deal.

Final Word.

Keeping your credit score high is not a difficult task and demands mainly just consistency and some common sense. Basically, to do well on credit reports, you need to do two primary things: do the payments on time and keep your balance low.

If the situation doesn’t improve, give one of the tips I’ve shared above a try, and I’m sure very soon you will see your credit score improving.

“If you have any feedback about 5 ways to increase your credit score fast that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

With the current events and chaos about the COVID-19 and economic downturn, many American families are struggling to make ends meet. There could not have been a better time for people to evaluate their family’s cash flow and find more ways to increase their cash flow during this devastating moment in our country’s history. Personal Cashflow management is a boring thing to do for many people. Do you agree with me?

The Importance Of Personal Cash Flow.

Most people cannot get ahead financially because every month, they have bills to pay. They have phone bills, tax bills, electric bills, gas bills, credit card bills, food bills, and so forth. Every month, most people pay everyone else first and pay themselves last, if they have anything left over. Hence, most people violate the golden rule of personal finance, which is, “Pay yourself first.”

The primary reason most people have money problems is, they were never educated in the science of cash flow management. Many Americans were educated on how to read, write, drive cars, and swim, but they weren’t taught how to manage their cash flow. Without this education, they wind up having money problems, then work harder believing that more money will solve the problem.

This post contains affiliate links. Please please read my Disclaimer for more information.

To save towards your goals, you need to have enough money available with you for investments, and for that too, cash flow understanding is a must. If there’s not enough money then either you have to rework your goals or have to generate enough surplus by following a budgeting technique and both involve personal cash flow understanding. Proper cash flow management begins with knowing the difference between an asset and a liability.

Ways To Improve Personal Cash Flow.

1. Cash Inflow – This refers to cash that flows from another party to your assets
   1. The income you earn from your job, your side hustles like tuition, a weekend job
   2. Cash flow from your savings deposit, stocks, bonds, business, and properties
   3. Reimbursements from your employers, friends to who you lend money.
   4. Gifts received as cash.
2. Cash Outflow – This refers to cash that flows from your assets to another party’s accounts.
   1. Your spending on your family, yourself.
   2. The money you lent to friends and family.
3. Net Cash Flow – This refers to the aggregate of your cash inflow minus cash outflow. If your net cash flow is positive, it’s a good situation to be in. If your net cash flow is negative, there are some personal money management problems there that you need to resolve.

How To Reduce And Eliminate Your Personal Debt.

You should pay off credit card debts, car loans, college loans, and any other loans you might have so the only debt you have left is your home mortgage. Why do we make an exception for home mortgages? Because buying a home is so expensive that most people find it impossible to own a home without first getting a long-term loan from a financial institution.

Your home is also an investment over the long term, so there is good justification for owning rather than renting for so many years. But all other debt besides your home mortgage is manageable – and should be managed aggressively.

Your first priority should be to eliminate debt so you can start your investment program with a clean slate. Your second priority should be to build up a small reserve of cash to fall back on in case of an emergency. Once those two priorities have been met, you’re ready to begin investing in earnest for early retirement.

Live Below Your Means.

Learning to live below your means is crucial if you want to increase your cash. To achieve financial independence you need to build capital, and the only way to do that (without help from an outside source) is to make more than you spend.
The gap between making and spending has to be big enough that you can put a significant amount of money aside every month, year in and year out, for the sole purpose of investing.

One way to increase the make-spend gap is to increase your salary – which is why we suggest you invest in yourself first. The other is to alter your spending habits until you are living well below your means. To achieve financial independence, most people need to tackle the problem from both ends – making more and spending less.

This two-pronged approach gives you the best chance of widening the gap dramatically enough to make a real difference. We’ve already discussed the importance of investing in yourself first, so let’s move on to the other side of the equation, spending less.

Make A Long-Term Investment Plan.

Set a long-term financial goal for where you want to be in 5 years and a smaller, short-term financial goal for where you want to be in 12 months. (The smaller financial goal is a stepping stone along the way to your 5-year goal.) Set goals that are realistic and attainable.

When making a long-term investment plan it helps to be able to clearly state your goal so there is no confusion about where you are heading. For example: “I want to retire in 15 years and have a nest egg of $1.5 million in order to generate $60,000 in income annually.”

To be able to put together a goal statement like this you need to work backward, in essence, and complete three steps:
1. Estimate your yearly income needs once you retire.
2. Calculate your nest egg based on these yearly income needs.
3. Put together a detailed plan outlining how many years it will take to save up your nest egg and how much you’ll need to invest each year.

If you have been actively working for a while now, you may already have an initial sense of the number of years until your target retirement date, but completing this step will help you refine that understanding. By the end of it, you’ll have a much better grasp of how much you’ll need to invest each year to accomplish your goal in the desired number of years.

Increasing Your Cash Flow Is A Decision.

Pay yourself first. Put aside a set percentage from each paycheck or each payment you receive from other sources. Deposit that money into an investment savings account. Once your money goes into the account, and never take it out until you are ready to invest it.

Automating your payments makes it far more likely you won’t skip out on a payment to yourself. It forces your hand in a way, which isn’t all bad when you consider how many other things in life are calling out for you to spend money on them.
The siren call of spending is a little easier to resist if you tie yourself to the mast like Odysseus and give yourself no other choice but to stay the course.

That said, be sure to leave yourself a little buffer when you select your monthly investment amount so you aren’t pushing right up against the limits of what you can handle financially.
Better to select a smaller amount you know you can manage month in and month out than to push too hard and find yourself strapped for cash in any given month.

Consistency is your goal, not stress, and financial hardship. Let your monthly contribution to your future be a positive aspect of your life, something you can feel good about, rather than a negative burden that puts a strain on your existence. You have to start building a realistic budget and cut down on your spending to manage your cash flow and liabilities. It may seem simple, but paying closer attention to your finances could be what will drive you to new hope for a financially free life.

“If you have any feedback about how to increase the cash flow that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

In the past decade, much had been said about wealth and being wealthy, but very few people had been able to acquire wealth and live a life of financial freedom. We know that with the current projection as of 2020, about 1,700 millionaires are made every minute in the United States.

One might be wondering if there’s a wealth formula for building wealth, and why are so many Americans still struggling financially? We will be looking at the understanding of how money works and the wealth formula.

The Wealth Formula.

Money doesn’t grow on trees. You must work for it. If you want to build wealth, there is a formula for you to build on; Money, + Time, +/- Rate of Return, – Inflation,– Tax = Wealth. It doesn’t take a genius to get rich. Nor are exceptional talents required. You don’t need to be lucky. And you certainly don’t need to be privileged. You do, however, have to make getting rich a priority in your life—and be willing to focus the majority of your time and energy on doing what it takes to build real wealth. Let’s breakdown the variables on the wealth formula above;

1. Money – Money is a medium of exchange in the form of coins and banknotes, and if you have a job, your employer pays you with it but, the difference between being wealthy or being financially free will depend on what you do with your money after you are paid.

2. + Time – Money grows over time. That’s why time is one of the most significant variables in the wealth formula. A return on investment for over ten years is going to be more than the return of the same investment if it is kept for just five years. Procrastination is the enemy of saving. When many people are young, they think they have a lot of time to save.

Then they get married, have kids, and buy a house. With a mortgage and new expenses, money becomes tight. They tell themselves they will start saving later. What if they had just put aside $100 or $200 a month when they were young? They could have accumulated significant assets today.

3. +/- Rate Of Return – The rate of return is the return on investment over a period, and it could be profit or loss. It is a percentage of the amount. If the return of investment is positive that means there is again over investment, and if the return is negative that means there is a loss over investment.

4. – Inflation – It is a quantitative measure of the rate at which the average price of goods and services in an economy increases over some period. For example, the price of a car in 1990 is less than the price of a vehicle in 2020. We can see that the purchasing power of our dollar or money decreases over a period when we look at things that we could buy with the same amount of money over time.

5. – Tax – It is an amount of money paid to the government that is based on your income or the cost of goods or services you have bought. Taxes take a big chunk of your money. Any saving and investment strategy must consider the tax impact on it. What is your current tax rate? What will the tax rate be in the future? Will taxes rise or fall?

Each time you are thinking about your worth and building wealth, you must not forget the wealth formula because most millionaires and successful people use this formula in different investment vehicles to build their wealth over time.

This post contains affiliate links. Please please read my Disclaimer for more information.

Are You A Saver Or A Spender?

Where is the money? A good number of people always seem to have money problems. Most of the time, they are short of funds. Warren Buffet advises, “Do not save what is left over after spending, spend what is left after saving”.
As I see it, the wealth-seeking world is divided into two camps. In one, you have the wealth accumulators: men and women who are cautious about spending but eager to save and invest.

The other camp is populated with spenders: men and women who are obsessed with things. They spend all their spare money, and often much more than that, buying things that say “rich” but impoverish them. To become wealthy, first, you need to build a small nest egg by spending less than you earn. Simple, huh? But not if you don’t have the self-discipline to do it.

Meanwhile, keep in mind that even though the material things you hunger for are indisputable of value, unless you have the financial capacity to keep them, to maintain them, and to replace them, you do not have wealth. You simply have its obligations.

Pay Yourself First.

It is advisable to set aside 5 to 10% of your income to save for the future. If possible, save 15% or more. Treat it like a bill that you must pay, and pay it first. That’s your family’s financial bill. Doesn’t it make sense to pay your family first before paying other people’s bills? Your cable TV bill is not more important than your family’s financial well-being.

Buy Only What You Need.

Spending money is a way of life for many people. Shopping becomes a habit. Finding bargains and buying on-sale items don’t always mean that you’re saving. It could be that you’re buying things you don’t necessarily need. Know the difference between what you need and what you want. When a person says they need new shoes, is it truly essential or simply a desire? How many people intend to buy a Toyata but drive home with a Lexus?

Small Changes, Big Money.

Turns out, millennials are not spending all their money only on food and eating out. However, they are a lot more spendy than all other living generations. According to a new analysis from GOBankingRates, millennials spend $208.77each day, on average about $44 more than the average American, who spends about $164.55.

That being said, what if you could make small changes to your spending habits and start saving $10 a day? That’s $300 per month. What if you are able to find an investment vehicle with 8% Rate of return in 30 years, you will have approximately $447,107.

Get Rich Slowly.

Do you want more freedom in your life? Do you want more choice about where you live, how you live, how much you work, and so on? Do you want more leisure in your life? Do you want to end the lifestyle of living from paycheck to paycheck? You don’t want to feel compelled to work 8 or 10 hours every day, or five and six days every week. You want more tranquility in your life.

You would like an end to the stress that the lack of money sometimes causes. You want to be able to sleep easily at night and enjoy your days without worry. These goals are wrapped up very tightly in your desire for financial freedom, and your understanding of how money works and being able to use the wealth formula.

Avoid get-rich-quick impulses. Hot stocks and rising real estate markets can sound appealing, but one wrong pick can set you back big time from your savings goal. Investing is not gambling. You must understand how money works, have a plan, and stay disciplined with your action plan until you reach your goal of financial freedom.

“If you have any feedback about the wealth formula – how money works that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

Since when it was first introduced in 1997 as an insurance product by Transamerica, much has been said about Indexed Universal Life Insurance (IUL), but very few people know this product. And the ones who knew this product don’t understand how it works. This product has been the fastest-growing permanent life insurance product in the industry for the past 23 years.

Indexed Universal life insurance is a type of universal life insurance where rather than your cash value growth based on a fixed interest rate, it’s tied to the performance of the index market like Global Index and S&P 500. You can access this cash value at any time during the length of the policy on a tax-deferred and tax-favored basis.

Unlike other insurance products, you won’t lose money when the market has a downturn. It is because there’s a guarantee applied to your principal, insuring it against losses or market downturn. There’s also a cap, which is the maximum rate used to determine how much excess index interest that an Insurance Company will credit your index account.

Asset Accumulation, Protection, And Flexibility.

Let’s look at a more detailed description of Indexed Universal Life Insurance;

1. A form of permanent life insurance policy that is designed to last your entire life, eliminating the uncertainty of not knowing when you will die and whether your family is financially protected at the time of your death.

2. Includes a savings component designed to accumulate assets in a tax-efficient manner, which can be used for retirement supplementation, education funding, wedding expenses, or any other way you want.

3. The term “Index” signifies that the savings component earns interest that is indirectly tied to the performance of a stock index. This potentially allows for a higher rate of return than traditional fixed rates, which allow assets to grow more rapidly and provides a hedge against inflation.

4. The term “Universal” stands for flexibility. You get to determine, within certain guidelines how much premium to pay, how often to pay a premium, to skip premium altogether, how your assets are invested, when to take money out, how death benefits are paid and in some cases, you can even change the amount of insurance coverage.

When this product is structure properly as an accumulation vehicle, you would want to pay the maximum premium possible while keeping the death benefit to a minimum. This is the key to keeping your policy expenses to a minimum and therefore more premium to be available for your equity-indexed universal life insurance to accumulate.

This post contains affiliate links. Please please read my Disclaimer for more information.

Premium And Flexibility Of (IUL).

The difference between IUL and other permanent life insurance policies is the way interest is credited to the policy. In addition to offering a traditionally declared interest rate, IUL also offers the ability to earn interest that is linked to the movement of a selected stock market index over a specific period of time, usually, 1 year but some policies offer 2 and 5 years periods. Even if the index goes down, your credited interest rate will never be negative, and it is guaranteed. So your worst-case return for a year could be 0%. or 0.75% depending on which insurance company.

 Flexible premium- You can pay more for one month or less the next. Sometimes when you face money problems, you can even skip a few payments as long as the cash value inside the policy is enough to pay for the cost of insurance (COI).
You can adjust your death benefit to fit with life-changing conditions. The interest on the cash value may also be sensitive to market conditions. That allows insurance companies to adjust the interest rate to give higher or lower rates if necessary.

Death Benefit Protection.

1. Permanent Life Insurance (Up to age 121) – If your goal is to protect your family with the flexibility to adapt as life changes, IUL Protect may be the right choice for you. With Index Universal Life Insurance Policy, you get clarity with simple, guaranteed protection so you can live more today, keep more of the money you earn, and gain the potential to build more cash value that you can use it while you are still alive as living benefits.

2. Living Benefits ( Long-Term Care, Chronic, Critical and Terminal illness).

The second form of protection that IUL provides is a relatively new feature in the industry called Living Benefits. Living Benefits are benefits that you don’t have to die to use. Interestingly, this protection benefits you while you are still living rather than only being a benefit that your beneficiaries receive upon your death.

Specifically, you may have options for chronic, critical, and terminal illness and long-term care which you can receive part of your death benefit tax-free while you are living to help pay for medical bills, time off work, or any other reason. Not all companies offer these benefits and, for those companies that do, there is little uniformity of how the benefits are offered and administered. Generally, these additional benefits are offered by the voluntary option of adding insurance riders to your policy.

Cash Value Account (Savings).

1. Interest – Interest is credited to the policy’s index account value is based on the performance of the index chosen and will never be less than zero percent.

2. Liquidity – when you take a withdrawal from your policy, you will permanently reduce the face amount of your policy. The withdrawal will generally be income-tax-free up to the number of premiums that you have paid into the policy. You may also face surrender charges on the amount that you withdraw.
On the other hand, taking loans can be a huge advantage to accessing your cash value and they don’t even need to be repaid. Loans are also not taxable. Just like taking a home equity loan against your home – those loans are not taxable. Now there are generally 2 types of loans. Standard and variable loans. The most commonly used loan in an IUL is the variable loan.

3.Tax Advantage – The tax advantages of insurance are only good if you have gained and a significant accumulation of money. If you have term life insurance, all these tax-free loans, tax-free withdrawals, and tax-deferred earnings are of no use because the Term policy has no cash value account. For those with Permanent Life, if you have little money in it, it also makes little difference.

4. Creditor Protected – This feature will depend on your state. Many states will not allow creditors to come after the money in a life insurance contract.

Why Are Many People Not Buying This Product?

In reality, many policy owners either don’t understand the advantages of Indexed Universal Life Insurance and they don’t have the money to contribute enough to capitalize on the tax advantages. Also, in the past, traditional policies with low-interest rates did not help to accumulate high cash values, so these advantages were not so beneficial.

With the recent introduction of different saving and investment choices, more people can get better cash accumulation and make great use of these tax advantages. Considering the amount of taxes people pay, people must understand and look for financial vehicles whether, in insurance or investment, that can save their future build-up and retirement supplementary income.

“If you have any feedback about how to index universal life insurance works that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

* Saving Your Future ( www.worldsystembuilder.com).

It was Benjamin Franklin who said that nothing is certain in this world except for death and taxes. Americans are tax in four different ways when you make money, they tax you, you spend money, they tax you, you save money, they tax you, and when you die, they tax you. From sales tax to income tax to property tax to estate tax and every other tax, anywhere you turn, the IRS is waiting for your hard-earned money.

If there were strategies where you can legally reduce or avoid paying taxes during your retirement years. Is that something you would like to know more about, and if possible try to implement them in your retirement planning?

A Growing Tax Problem In The United States.

Taxes take a big chunk of your money as an active worker and also during your retirement if you don’t understand or use tax-free retirement strategies. Any saving and investment strategy must consider the tax impact on it. What is your current tax rate? What will the tax rate be in the future? Will taxes rise and fall during your retirement years?

We now know that with the COVID-19 and the recent economic crisis, millions of Americans are in danger of not having enough money to maintain their standard of living in retirement years. The consequences of these growing economic and savings crises could be severe for both American families and the national economy. Let’s look at the challenges ahead.

This post contains affiliate links. Please please read my Disclaimer for more information.

1. The Shrinking Tax Base – Between 1945 and 1965, when Social Security began, the decline in worker-to-beneficiary ratios went from 41 to 4 workers per beneficiary. And the number continues to decline due to the aging demographics in the United States.

The Social Security program matured in the 1960s, when Americans were consistently having fewer children, living longer, and earning wages at a slower rate than the rate of growth in the number of retirees. As these trends have continued, today there are just 2.9 workers per retiree, and this amount is expected to drop to two workers per retiree by 2030.

The program was stable when there were more than 3 workers per beneficiary. However, future projections indicate that the ratio will continue to fall from two workers to one, at which point the program in its current structure becomes financially unsustainable.

2. Mounting Debt Crises – As of August 31, 2020, federal debt held by the public was $20.83 trillion and intergovernmental holdings were $5.88 trillion, for a total national debt of $26.70 trillion. Guess who is going to pay for this debt? Our future generations. The government borrows most of it through public debt, which it owes to individuals, businesses, and foreign governments who bought Treasury bills, notes, and bonds. Foreign investors hold the largest share of the U.S. national debt. China and Japan top the list, holding more than $1 trillion each in IOUs.

As the tax base for workers per retiree is shrinking, the costs to provide retirement benefits, Medicare, defense, and infrastructure continue to rise. The government will have to choose between cutting down the budget or raising taxes. Many people believe taxes may have to go up in the future. What do you think? That’s why many Americans are looking for strategies to reduce or avoid taxes during their retirement years.

Tax Free Or Tax Advantage Retirement Vehicles.

These are legal tax-free or tax advantage retirement income financial vehicles;

1. Health Savings Account ( HSA) – This is a savings account used in conjunction with a high-deductible health insurance policy that allows users to save money tax-free against medical expenses.

2. Roth IRA – It’s an individual retirement account allowing a person to set aside after-tax income up to a specific amount each year. Both earnings on the account and withdrawals after age 591/2 are tax-free.

3. Roth 401(k)- It’s a type of retirement savings plan. It was authorized by the United States Congress under the Internal Revenue Code, section 402A, and represents a unique combination of features of the Roth IRA and a traditional 401(k) plan.

4. Roth 403(b)- It’s essentially a hybrid combining some features of a traditional 403(b) plan with some features of a Roth IRA. Roth IRA plans are self-established without any employer involvement.

5. Cash Value Life Insurance- It’s a form of permanent life insurance that features a cash value savings component. The policyholder can use the cash value for many purposes, such as a source of loans or cash or to pay policy premiums.

Indexed Universal Life Insurance (IUL 7702A).

It is important that all individuals understand that, by definition, a life insurance policy is a tax-deferred vehicle. It is not a tax-free vehicle. In other words, the cash value within a Universal Life Policy grows without being taxed, but if this money is simply withdrawn, then all the gains realized within the policy (the amount above the total premiums paid) will be taxed and taxed as income, not capital gains.

Let’s look at how Indexed Universal Life Insurance can help us retire tax advantage or tax-free. Let’s say you are going to borrow money to buy a new house or car. Is the loan you receive from the bank being taxed? No. The house or car may be taxed ( due to state sales tax), but the loan is not taxed. Right?

Loans are not taxed; items are not taxed. So Life insurance companies, in their brilliant ingenuity, created a contractual policy feature that allows the policy owner to have access to tax-free money by using their life insurance cash value as collateral. This feature enables the owner to avoid any tax on the money received because it is just a loan from a financial institution, not a withdrawal.

A policy owner can always take a tax-free withdrawal up to the total premiums paid into the policy, subject to surrender charges because the first money allowed coming out of a life insurance policy is simply a return of the owner’s total premium payments, which have already been taxed prior to being put into the policy.

However, if an individual wants to withdraw money above the total amount of premiums paid ( again, always subject to any surrender charges) then a withdrawal of this gain would be taxed. It would be taxed as income because the policy owner would now be withdrawing money that has not yet been taxed.

How To Access Tax-Free Money During Retirement.

For you to benefit from Indexed Universal Life Insurance as a tax-free retirement financial vehicle, the policy must stay in force until the insured’s death. The reason that policy must stay in force is that if the lapse or cancels for any reason, then all of the gains that have been taken as a tax-free loan will suddenly become taxable. You should sit down with your financial adviser should you want to include any of these products in your tax-free retirement planning.

Why Isn’t Everyone Using This Tax-Free Retirement Vehicle?

Many Americans aren’t using this Indexed Universal Life Insurance strategy for tax-free retirement income because they don’t know about it. And secondly because though this financial product is open to everybody who can qualify for and needs life insurance, it is often best suited for those who earn a relatively large income or for individuals who want to save more each year than what Roth IRA will allow.

During our retirement years, most retirees don’t have the monthly income to take of their living expenses and they would like to reduce or avoid paying too many taxes. If you would like to pay fewer taxes during your retirement years and have much money to spend on other living expenses and medical expenses, then please talk to your financial adviser to take a look at Indexed Universal Life Insurance as a tax-free or tax advantage financial vehicle.

“If you have any feedback about how to retire tax-free that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

If you ever thought that getting out of debt with a low income was difficult, wait until you try to get out of debt with a low income during this period of the COVID-19 pandemic!

We all know that the COVID-19 pandemic has triggered an unprecedented wave of business closures, placing millions of Americans out of work. It has also exposed a deeper, more structural problem with the United States economy that has been looming just beneath the surface for some time. In the following paragraphs, we will learn more about how to get out of debt with a low income during this difficult period.

Understanding Debt And How To Live Without Debt.

It’s often believed that debt can be used as leverage and that it can get you where you want to go faster than living a debt-free life. That can be true, but living with debt can also get you bankrupt faster than living a debt-free life. Debt has become a way of life in the United States.
Many Americans are now living from paycheck to paycheck as result, a lot of people are also in debt and some are still borrowing more money. Ironically, we live in one of the wealthiest countries in the world, but we always have money problems. We can work hard all our lives but retire poor. We do so much to raise our kids just to see them finish college with a lot of debt.

Debt becomes a way of life. We don’t have much, and we don’t know much. Nobody teaches us how to manage our money in school. Financial issues are not often discussed, and financial products are not always explained. Most people have trouble balancing their checkbooks and reading a financial statement. We use credit cards every day and don’t always understand all the hidden charges. We may be active spenders but passive savers. In my videos, I want to share with you about personal finance as to how a friend would talk to another friend.

This post contains affiliate links. Please please read my Disclaimer for more information.

Debt Management is one of the four pillars of building a solid financial foundation or living a life of financial freedom. We can not live a life of financial freedom if we owe a lot of debt. Most interest rates on our debts are higher than the interest rates on our saving or investment accounts. That’s why it’s advisable to pay off your first before saving and investing.

Don’t Get More Debt when you have a low income.

I know a lot of people might be wondering is it possible, yes it is very possible to live without debt. You can pay it all off and stop borrowing money. Some people get more debt when they have a low income because they spend more money on things they don’t need with money they don’t have.

What Is The True Cost Of Debt?

You’re paying lots of interest to someone else.
This money is not working for you. Here’s is why you need to know the cost of debt;

Rule of 72.

How to use the Rule of 72? Divide 72 by the interest rate of your loan or credit card. The result is the number of years it takes for the debt or investment to double. Let’s take a look at the following interest rates; 18%, 20%, and 24%.

72/18 = 4                              72/20 = 3.6                                 72/24 = 3

Assuming that you have a $10,000 credit card debt, let’s see how long will it take before the borrowed amount doubles!

At 18% interest rate, it will take 4 years for your borrowed amount to double to $20,000.
At 20% interest rate, it will take 31/2 years for your borrowed amount to double to $20,000.
At 24% interest rate, it will take 3 years for your borrowed amount to double to $20,000. This is why it’s good to pay your debt as fast as possible to avoid the double effect.

This is why it’s good to pay your debt as fast as possible to avoid the double effect. Here are the simple ways to manage your debt;

1. Don’t Get More Debt – If you borrow more money, the interest will skyrocket over time which you will not be able to pay.

Always buy used items from thrift stores and classifieds when you need to buy anything, including clothes, furniture, vehicles, and even appliances.

2. Live Below Your Means – Spend less and only buy things with your own money instead of credit.

Make a grocery shopping list as per your budget. Let’s assume you have allocated a certain amount for grocery shopping, then you shouldn’t spend more than this amount. You can buy groceries online to get all the items on your list at a huge discount. This will help you save on grocery shopping. Always use cash, debit cards, and prepared credit cards when shopping for groceries because you don’t have to pay interest rates. You are using your own money.

3. Reduce Your Credit Cards Usage – Many middle-class Americans turn to use their credit cards as a plastic money savior to help purchase necessary items when they have a lot of debt and low income.

4. Make a Budget – Budgeting helps you manage your spending and also helps manage your debt. Use coupons for grocery shopping and for dining out. Reduce gas and parking costs. Save by carpooling, walking, biking, or taking public transport. Avoid ATM fees, checking and saving accounts fees, overdraft charges bounced checks, money orders, the list goes on.

5. Cancel Any Unnecessary Subscriptions – Recurring payments can add up, even if you don’t have any unnecessary expenses. During COVID-19, my family canceled our gym membership because we not going to the gym, so we find alternative ways of exercising like using home gym pieces of equipment.     

Use Debt Snowball Method.

With the debt snowball method, you always put your extra money toward the debt with the smallest balance.

Here’s an example – Assuming that you have a credit card with a $1,000 balance, another with a $3,000 balance, and a third with a $7,500 balance. You make the minimum payments on each card, and any money left over would go toward the card with the $1,000 balance. Once you pay off that card with $1,000 you would put your extra money toward the card with the $3,000 balance.

Mathematically, the debt snowball method isn’t optimal. You would also save more money on interest rates by prioritizing debts with the highest interest rates on credit cards or loans.
Using this method is extremely popular because it works from a psychological perspective. When you prioritize your smallest debt, you get one of your debts eliminated as quickly as possible. That gives you the motivation that you can take care of the rest and be on your way to live a debt-free life.

Take Control Of Your Cash Flow.

Get educated about all aspects of personal finance to take control of your cash flow and reduce or eliminate your debt with a low income. You also have to make money when you can, while you can. If you have multiple sources of income, paying your debt with a low income during this period of the COVID-19 pandemic won’t be a problem.

We spend so many years in school learning how to make a living, but we should also invest our time learning the financial basics to save a fortune for our family and our future! If you don’t re-evaluate your spending habits and determine where your money is going, you will never be able to pay off your debt with a low income during this pandemic.

“If you have any feedback about how to get out of debt with low income that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.

It’s ironic that we live in one of the wealthiest countries in the world, but we always have money problems because of the lack of a solid financial foundation. We can work hard all our lives but retire poor. We do so much to raise our kids just to see them finish college with a lot of debt. Debt becomes a way of life.

We all know that the COVID-19 pandemic has triggered an unprecedented wave of business closures, placing millions of Americans out of work. It has also exposed a deeper, more structural problem with the United States economy that has been looming just beneath the surface for some time. Many Americans are living hand-to-mouth and have almost no savings.

Why Should You Build A Solid Financial Foundation?

According to a recent survey from America Debt Statistics, almost half of the families in the United States live paycheck to paycheck. 19 percent of Americans have zero dollars set aside for an emergency. Two out of ten Americans use at least 50% of their income to pay back what they owe. 13% of Americans expected to be in debt for the rest of their lives.

The cost of raising a child in Americans around $250,000 from birth to age 18. Medical costs have increased by 33% in the past 30 years, while income has only grown by 30%. The average consumer debt is $38,000 excluding mortgages. The average American household mortgage is $189,586. Mortgage debt is the biggest debt in America – with $9.44 trillion owed collectively and 80% of Americans have consumer debt.

We don’t have much, and we don’t know much. Nobody teaches us how to manage our money in schools. Financial issues are not often discussed, and financial products are not always explained. Most people have trouble balancing their own checkbook and reading a financial statement. We use credit cards every day and don’t always understand all the hidden charges.

We buy insurance policies and stick them in a file cabinet. We contribute to our 401k or 403b and hope someone will take care of it. We all want to have a comfortable retirement, but few have a plan. We may be active spenders but passive savers. Building a solid financial foundation will help us reduce or eliminate some of the above-mentioned problems and live a life of financial freedom.

This post contains affiliate links. Please please read my Disclaimer for more information.

Four Pillars Of Building A Solid Financial Foundation.

Many Americans want to build a solid financial foundation or live a life of financial freedom, but few of them don’t know how to do it. Like building a house we must start to build it from the ground up. Here are the four pillars of building a solid financial foundation;

1. Protection – You should have the proper protection in the event of disability, health problems, or premature death. People must prepare in case they die too soon and also if they live too long.

2. Debt Management – You should reduce your liability and get out of debt.

3. Emergency Fund – You should set aside 3 to 6 months of your income to deal with sudden changes in your job or business or to pay for unforeseen accidents or repairs.

4. Investment – You should save and invest for the long run or your future.

A strong financial foundation will build a sturdier, more enduring financial house. Otherwise, it won’t remain standing when the storms, tornadoes, and earthquakes strike. Thus, the 4 financial foundation layers will build a solid ground for your financial future.                              

Understanding How Money Works.

Wealthy people tend to spend time learning and understanding how money works. They look for advice and solutions to get better returns for their money. A lot of poor people lack knowledge about personal finance. Some don’t care to understand. Many have no plan and little savings. What savings they have are usually put into accounts with a low rate of return. Their money doesn’t work for them.

Compounding interest works both ways. It can make you, and it can break you. If you owe money, the compound interest on your debt can ruin you. As a result, many people keep paying the bill with high interest. Despite numerous payments, the balance of the bill barely goes down because high interest on the balance continues to compound. Sometimes, it feels as if it’s impossible to pay the balance off.

The Power Of Compounding Interest And The Rule Of 72.

The Rule of 72 is a simplified way to estimate the doubling of an investment’s value, based on a logarithmic formula.

The Rule of 72 can be applied to investments, inflation, or anything that grows, such as GDP or population.

The formula is useful for understanding the effect of compound interest. Here’s how the rule of 72 works:

Assuming that you saving $10,000, At 1% rate of return, it takes 72 years for $10 to turn into $20,000.

At 4% rate of return, it takes 18 years for money to double. It’s a simple formula. Now, instead of your money doubling once over your lifetime, you could experience two or multiple doubles depending on your rate of return.

At 8% rate of return, it takes half the time, 9 years for money to double. What if your money doubled four or five times in your life? Let’s look at the rule of 72 this way. At 29 years old, if you had $10,000 earning a 4% rate of return, your money would double in 18 years. You would have $20,000 at age 47.

If you earned 8% rate of return, your money would double in only 9 years. At age 38 you would have $20,000. Let’s double it one more time in 9 more years you would have $40,000 at age 47 and one more 9 years $80,000 at age 56. Now you can see the power of the rule of 72 and compounding interest. The more rate of return you earn your money doubles faster.

If you earned 6% on a $10,000 investment, after 36 years, you’ll have $80,000. That’s three doubles in your working lifetime.

If you double your return from 6% to 12% you double every 6 years. Your money could double 7 times in your lifetime. At age 65 you will have $640,000.

The difference between $10,000 at 4% versus 12% is $600,000. $600,000 is equal to 20 years salary of someone who earns $30,000 annually. The Rule of 72 unveils the powerful impact of compounding interest on money. It also reveals 2 types of people. People who don’t understand how money works- end up working for money. And people who understand how money works-they let money work for them.

Be Your Own Money Manager And Control Your Future.

You won’t be free until you are financially free. You can be free from the burden of debt, just start with a simply written budget. Look at your bank accounts, add it all up and see where your money is going. Look at the reality of your situation, and don’t be afraid to make changes. Financial concepts and solutions may not be the most exciting subject, but with discipline and patience, you can learn and understand the fundamentals. And you can build a good financial foundation. Financial independence is not a dream. It is a priority. Take control of your future.

“If you have any feedback about how to build a solid financial foundation that you have tried out or any questions about the ones that I have recommended, please leave your comments below!”

NB: The purpose of this website is to provide a general understanding of personal finance, basic financial concepts, and information. It’s not intended to advise on tax, insurance, investment, or any product and service. Since each of us has our own unique situation, you should have all the appropriate information to understand and make the right decision to fit with your needs and your financial goals. I hope that you will succeed in building your financial future.