Tag: insurance

So paying off debt, it's
gonna sound stupid, give me a chance. Paying off debt is
not just about having some money and sending it
over to pay off debt, right? It kind of sounds
like that is what it is, but paying off debt is
also about staying out of debt. Having a system so
when you pay things off, you pay them off
efficiently because a lot of folks, they pay something
off, they go back into debt. They start paying things off and then
they'll be like, "Hey, it's not going down.

I'm not understanding it. I pay this, this, this, this, but the balance every month
is going up and up and up." And it doesn't make sense, okay? So in this video, I'll
teach you how I was able to pay off $13,000 in credit
card debt in about 12 months, okay? And not just that, I
paid off a total amount in my debt-paying career
of about $70,000, all right? So in this video, you
know exactly all the techniques I used to be able to pay
that off as fast as possible. And if you guys don't
know me, my name is Tommy Bryson. If you know me,
welcome back to the channel.

Now, as always, do me a
favor and also smash the like button. Now, the very first
thing, guys, is going to be this. If you want to pay off
debt, it's not just about grabbing the extra money you have left
over and putting it towards debts. No, it's about budgeting and finding
all the money possible to pay the debt off. And here's what I mean, you know? A lot of folks, they
live paycheck to paycheck.

I get paid $3,000, I spend $3,000. Next month, I
can't wait for that paycheck. And if I can find $100 or
$200, I'll send that over to my debt payments, but that's
why you never actually finish. So what you actually want
to do is you want to get a budget. The budget is
going to help you find money to actually pay the debt off even faster. Here's what you want to do. You want to open up or
start up right now a baseline budget. It's my little budget
that I actually made up and it's very functional
and it makes a lot of sense. Okay. You want to have
basically, write this down. You want to have an account for
your shelter costs, utilities, groceries, transportation, healthcare, and also fun. Those are usually going
to be the six most important expenses and the ones
you can't really negotiate on. But it's not just that, okay? Because that would just
basically liberate you from saying, and justify, because I spend
so much money on rent or whatever.

No. You want to limit your shelter
expense to 33% of your monthly income. On top of that,
utilities, only gas, water, electricity, internet
bill, and also your phone bill. Your phone bill should not be more
than 30 bucks per month and your internet bill should not be more
than 80 bucks per month. Okay. That is it. Tell me how. I pay $6 for my phone bill. They exist. I have a video on it. The link is going to be down
below or just search up on YouTube. Tommy Brice and phone
bill, and you will find a video. When it comes to food, no
more than 200 to 250 per person max. How do you do this? You cook at home and you don't
spend money on trash on the streets. Tragitation. If you have a car,
make sure it's paid off. If it's not paid off, well, you
consider selling it because that's important, but you're only paying for
gas, insurance, and maintenance. And some car washes every now and then. Those are going to be your core expenses. Then you also have health insurance. If you have that,
if you don't consider it.

And on top of that, you're
also going to have your fun expense. Okay. Take at least five to 10% of your money every time you get
paid and have fun with it. Tommy, I'm trying to pay off debt. I don't have fun for this. I want it to be exciting every time
you get paid because you look forward to it because you get money
for fun, but you also look forward to it because
you're actually getting debt free. It will be slower. You can cut this out,
but I highly recommend you don't because it actually helps
make the whole journey a lot more bearable.

So basically, if you make 3000, now
you're only spending about $2,000 with this budget and you
have $1,000 left, that's the money you're going
to use to pay off debt. But obviously, I'll
give you the system later. Number two is going to be this guy's. Okay. You actually want to
get extra cash or paying off debts by selling things
you don't need around your home. This is the most fun I had. And it's also the most
embarrassing part of this entire system. Okay. Because so if you got a value
so far, I'm going to ask for a favor. Subscribe to the
channel because only like 20% of the people
that watch our actions scribe. So go ahead and subscribe right now
because I have a lot more content and it's also the most embarrassing
part of this entire system.

Okay. Because for me, my identity
for a long time was what I wore. The sneakers I
had, the clothes I had, and when I wanted to get
debt free, I sold everything. I sold, I had 23 pairs of sneakers. At the end of it, I
kept about like nine to eight pairs and I sold my
consoles, my gaming consoles. I sold basically everything I had and
I use all the extra money to pay off debt. That's how I did it. Okay. So if you can sell the things around
your home and you can keep, for example, 500 or 200 bucks, that's money
you're going to use to pay debt.

And by the way, going back up when I
told you about that baseline budget, whatever is not included in that,
you obviously want to cut it out. If you want to buy,
for example, something that you don't need, use your
fund money to actually do it. I think that's clear, but I
wanted to make it even crystal clear. Now, number three guys is you want to
get extra cash to pay off debt by hustling. Now, the good thing is
I'm only asking you to get a job or hustle with a minimum
pay of at least $15 per hour. Okay. If you can't get
that, then try to find someone else, but I recommend
like at least 15 bucks per hour.

And you might say, Tommy, I
don't have the time, but you do. And here's how you sleep eight hours. You work eight hours. You spend on showering food
and driving about three hours a day. That's a total of about 19 hours a day. You still have a free
five hours every single day. So if you do the math, okay, if
you're able to actually make $15 an hour and you work five extra hours per day, I
don't let you know, like a hustle or whatever. The answer is about like 75 bucks a day. Time is five, only
like five times a week you actually do this because
you rest on Saturdays and Sundays. The answer is going
to be every single month. That's an extra $1,500 to pay off debt. I mean, that is awesome. That is a lot of money to pay that off. You can basically be done with 10K
in a short amount of time, just with this. Okay. $10,000 divided by 1,500. That's going to be like in
six months, you're almost debt free. That's the idea. Now here's the fourth part.

Tommy, okay. I budgeted, I sold things, I'm hustling. How do I pay the debt off? There are two methods. One I did, and I don't recommend. What I did not do, and I do recommend, sounds strange,
sounds crazy, but it's very true. The one I did was
basically the avalanche method. Okay. Avalanche method says this, okay. You want to organize your debt from the highest interest rate
to the lowest interest rate. You want to pay
the minimum balance on all of your debts and
grab all the extra money you actually have and pay the
debt with the highest interest rate.

Tommy, how do I
find out my interest rates? You call the debt people. Okay. Who do you owe money to? Call them and ask
them what is my interest rate? Okay. Why do you do this one, Tommy? Because it saves you the most money mathematically because
you're paying the debt that's costing you the most money. Okay. Why don't you recommend it? Because it can take a long time to see progress because your
highest interest debt could be the one with the highest balance and it can take a long
time to actually pay that off and it can feel like
you're not making progress. That's why I recommend the one I
didn't do, which is basically the snowball method. This method says this, okay. You organize your debt from the
lowest balance to the highest balance, not the interest rate,
doesn't matter, and you pay the minimum on all
the debts and you put all of the extra money towards
the debt with the lowest balance. Okay. That means on your first run, your first month, you can
easily be debt free on one of these accounts.

You can pay something
off and you will build momentum. That's why I recommend it because
you're more likely to keep going as you're seeing progress. Okay. Now it doesn't save you money like
it does, for example, with the Alan's method mathematically, but it does
build momentum and it can get you there. And that's what I'm interested in. Okay. I'm not worrying about you saving money because you'll do
that anyways, but I'm more worried about it. You actually get
into the goal in the end. All right. So that's why I say I
recommend the snowball method. Now in the end, if
you made it all the way to the end of this video, and if you make it all the way to the end of this
entire journey of paying off your debt, the next question is going to be, tell me,
what do I do once I'm actually debt free? Once I paid off $10,000 in 12 months or six months, you
know, you can use this whole formula, this whole strategy to pay off a lot more money, a
lot less money, a lot more time or a lot less time.

It doesn't matter. But what happens when
you actually get to the end goal? The answer is very simple. What I did was this. The first time around,
I kept my credit cards open. I kept some debt that
was actually low interest around. That was a mistake because I eventually went back into some
more credit card debt and I still had debt that I
carried around like a puppy or whatever. Okay. My second time around when I paid off all my debt again,
which was like last year, I paid off about $40,000 in debt. I went ahead and I closed down
every single credit card I actually have. So I only deal right now on a cash
basis or a debit basis, which is also just cash. I don't have any credit cards. Now there is a benefit to this
and there is a disadvantage to this.

Okay. Benefit is you don't have any debt. You can't go into debt because you
don't have any way of getting into debt and you actually have a lot more peace. Um, the, the disadvantage in the
senses that you're no longer making, for example, two to 3% on cash back and all this
other stuff, but in reality, those are just incentives for you
to actually get into debt.

So it's like a little hook you
sent to a fish and you are wishing you actually get hooked on it. Okay. So I don't worry about it. Okay. But for the most part, that's my system. That's how I got debt free. And that's how I was able to pay off
$13,000 in about less than 12 months or so. I think it was like about six months. Okay. Cause I was very crazy. Um, so yeah, there's that guys. Good luck around your journey and
do me a favor before you ask you leave this video, not just
smash the like I do want that. Okay. I do appreciate it, but
it's also comment down below this. Okay guys, what
method are you going to use? Avalanche or snowball? How much money do you ask you? Oh, okay. And how much money were you
able to free up from your budget? How much money do you plan on
making and how much money do you plan on making from selling all
the stuff you don't need? Okay. And once you sum up all those
things together, well, tell me what's your deadline? Okay.

And it's very simple. It means basically if you owe
about $10,000 and you have basically a thousand dollars, basically pay
off your debt, just divided by 10, well, a thousand dollars, basically
it means that, Hey, in about 10 months, you're going to be debt free. That's the idea. Okay. So comment down below. Let me know. It's not just for the algorithm,
although it does help with the algorithm, but it's also because I want you to leave
this video with actions that you actually took and you know
what you're going to do next. Okay. And come back to this video in six months or four months or
two months or one month. We were done with it. And I want to hear some success stories. Okay. That's why I do this for, right? So thanks for
watching as always, like subscribe. Hit the bell straight
notified up here in another video. And thank you for everyone on
Patreon that helps with the channel.

Here you guys are. I appreciate you guys a ton. If you want to join us on
Patreon, the link is going to be down below. Peace..

As found on YouTube

Growing up, you learned how to do things right. You went to school, got good grades, and now
you've started working. The paychecks are coming and you are happy
to receive them. You may have worked for 3, 5, or even 10 years
but your finances are not looking as good as your career. You are probably one or two paychecks away
from going broke. You know this is a problem, but you don’t
know how to fix it. Have you ever wondered why you have been so
successful in your career, but you seem to be struggling with your finances? The reason is simple.

Personal finance management is not taught
in schools, and it isn't taught at home either. Your school teachers were more concerned about
doing their jobs and grading your papers. Except in a few cases, your parents on their
part encouraged you to be a good student and also to become a responsible citizen. The reason both parties never talked to you
about financial management is that they didn't know it. Probably, they were also struggling with their
finances and never had solutions to their money problems. Managing your personal finance can be a tricky
task especially in the world that we are living in. If care is not taken, even the most prudent
person could slip and find themselves in a financial mess. Do you know why? It is easy to spend the money you earn.

Your bank accounts are linked to multiple
services. Placing an order or making a purchase could
be as easy as a few clicks on your computer or mobile phone. If you want to make the most from the money
that you earn, you must plan for it. You must live in constant awareness of the
money that is coming in and how it is going out. Without the right information, you may not
know how to come out of the rat race most people have found themselves in. That is why we are looking at how you can
be in total control of the money you earn and the things you are spending your money
on. You can effectively account for your money
only if you manage your finances properly. Are you getting some value from this video
so far? If you are, I would like you to do something
right now.

Pause the video. Go ahead and hit the ‘like’ button and
also click subscribe if you are new, and welcome. That way you will be notified of all our inspirational
videos any time we upload them. Done? Great! Let’s dive in. What is personal financial management? As a term, personal finance covers all aspects
of managing your money as well as saving and investing. This includes budgeting, investments, banking,
insurance, tax, mortgages, and retirement plans. Personal finance has to do with meeting your
personal financial goals including short-term, mid-term, and long-term goals. Personal financial management has to do with
your ability to know where you are financially at the moment and what you can do to make
the most out of your income in order to plan for a better future. This involves gaining control over your present
financial situation so that you can organize your daily expenses to match your plans and
expectations for the future.

The reasons why money management is important
1. Saving money
The questions you need to answer are these: What if you lose your paying job today? How far can you go before you get another
job? Have you ever heard the expression "Saving
for the rainy day"? It is important to have some money kept aside
that could save you from emergencies. 2. Security for your family
As you grow in life, your responsibilities will grow to catch up with you. You want to plan for your child’s college
education. You want to plan for your family's health
through insurance and other solutions. Planning for your family security is an essential
part of money management. 3. Investment opportunities
No matter how much you earn today, your needs will increase over time. Managing your money effectively will prepare
you for investment opportunities. You will learn how to pick the right kind
of investments. Having the right kinds of investments will
help you meet your growing needs in the future. Without proper management, you may not have
enough to meet your present needs. And if you can’t meet your present needs,
how are you going to have extra money to invest for your future needs? 4.

Better Living Standard
Are you happy with your present living standard? I’m sure you would like yourself and your
loved ones to enjoy a better living standard in the future. You want to own your own home, or at least
a better one. You want to go on vacation with your loved
ones to distant places. All this can only be accomplished if the money
you earn today is properly managed. 5. Increase in Financial Intelligence
The good thing about financial planning is that it exposes you to higher financial knowledge. When you start saving and making plans for
the future, you will need the services of financial advisors. As you plan and work closely with these experts,
your financial intelligence will increase. Make sure you build a relationship with financial
advisors that you can trust. Trusted advisors will be transparent and willing
to share their knowledge with you.

Over time, you may find that you are beginning
to take investment decisions on your own. Now that you have seen the reasons why you
must manage your finances, you also need to learn the strategies that you can apply to
get it right. Strategies to effectively manage your money
1. Budgeting
It is easy to spend most of your money on irrelevant purchases if you don't have a budget. Making unnecessary purchases will affect your
savings and leave you disappointed at the end of each month. You can get it right by making a proper budget. Map out different areas you want to allocate
your money. As you allocate money for your daily expenses,
also allocate money for your long-term goals such as investments. There are no rules of the thumb here. You should identify a budgeting plan that
is most suitable for you. Several budgeting apps have been created for
smartphone users. You can as well use excel sheets. Do a little research and identify the ones
that suit your purpose the most. A school of thought suggested a budgeting
method known as 50/30/20. A breakdown of this method goes like this:
Assign 50% of your income after taxes to essential living expenses such as rent, groceries, utilities,
and transport.

Assign 30% to casual expenses such as wear,
vacation, recreation, and charity (if you like). Assign 20% to future plans such as savings,
investment, and retirement plans. It doesn't matter how much you have had things
messed up. It is never too late to start. You can start today by drawing a budget for
yourself. 2. The right bank accounts
Operating the right bank accounts is necessary to successfully manage your finances.

You can set up checking, saving, and investment
accounts. These accounts will become the pillars of
your financial success. Your checking account should hold the money
you use for your regular purchases. You should not leave your savings in a checking
account. Keep your savings in a separate account designed
for that purpose. If not, you could constantly interfere with
your savings and squander it on unplanned purchases. Also, fund your investment accounts and be
consistent with them. 3. Emergency fund
One thing about life is that unexpected expenses show up from time to time. What happens if you weren’t prepared for
it? No one prays for misfortune but as long as
we live on planet Earth, situations beyond our control will surface. Set money aside for unexpected situations
such as the loss of a job. You should save up money in your emergency
fund that should last you up to 6 months assuming you lost your job.

Your emergency fund should also hold funds
for situations such as medical bills, major house repairs, or a huge car repair. 4. Keep track of your finances daily
You must check in with your finances daily. This shouldn't take much of your time. Dedicate 5-10 minutes of your time to it daily
and you will be good. Keep track of all your purchases and keep
receipts. Enter your spending into an excel sheet or
the budgeting app you are using. That way, you will know when you start spending
above your budget. 5. Clear up debts
Debt could be a major hindrance when you start working to achieve your financial goals. Identify the recurrent debts that you have
and start with the biggest ones. If you have many accumulated debts, then you
may have to set up a debt repayment plan. Allocate a good chunk of your income to paying
up these debts and aim at clearing them as soon as possible. You can take it up one after the other. Start with the biggest ones, and then the
next, until you have them all cleaned up. When you are done paying off your outstanding
debts, avoid getting into new debts.

Here are some tips that could help you clear
up your debts faster. • Set up a side hustle – If your current
income cannot pay off your debts quickly, you may consider starting a side hustle. A side hustle will not only bring in extra
cash that you need at the moment, but it will also position you to reach your future financial
goals faster. You can go online and research available work-from-home
jobs that you can do in your spare time. You can start with freelance jobs, drop shipping,
or affiliate marketing. Who knows, your side hustle could grow to
become a major source of income for you. • Get a second job – A second job will
be handy to help you clear up your debts. This may require some sacrifices on your part,
but you have to do whatever it will take to come out of debt and become financially free. • Sell off idle items in your home – If
you look around your home, you could find unused or unwanted items lying idle. Put them up for sale on online marketplaces
such as eBay. There could be someone out there searching
for that exact item and willing to pay for it.

• Cut down your budget in some places – Go
back to your budget. Look through your listed items. You may find some things you can do without. Take them off from the list or at least cut
down your budget for them. That way, you could find extra cash to pay
your debts faster. 6. Be smart with your credit cards
Credit cards have become an essential part of our financial activities. It seems unrealistic to not own one these
days. Credit cards provide convenience to us in
paying for goods and services, but they can also become major traps for debts.

Make sure you pay off your full balance every
month. If you can’t do that, then keep your credit
utilization ratio at a minimum. It means that you must strive to keep your
account balances below 30% of your total available credit. 7. Examine your credit score
Keep an eye on your credit card score. Your credit score is a three-digit number,
but it can make a great difference in your finances. If your credit card score is high, you will
attract lower interest rates and better loan terms from lending institutions. A good credit card score will become useful
when you apply for large loans such as a mortgage. Getting a low interest rate on a mortgage
could save you thousands of dollars. Here are some ways you can improve your credit
card score.

1. Get your credit report and check for errors. 2. Use a credit monitoring service to prevent
future errors. 3. Pay bills on time and keep your credit utilization
rate low. Late payment of bills is one of the fastest
ways to ruin your credit score. Well, that’s all for the video. If you are interested in more interesting
content. Check out these two videos. How businesses manage money Cashflow explained It’s Not About How Much You Make, It’s
About How Much You Keep Fundamental’s of Money Management Thank you guys so much for watching, have
a great day and I’ll see you all in the next one.

As found on YouTube

https://youtube.com/watch?v=H39W-fEmJOM

for consumers
in over their heads the realization that their monthly income is increasingly
exceeded by their bill payments is usually a traumatic one in many cases
years can pass before people consider drastic measures like filing bankruptcy
both financial and emotional issues come into play
in one of the most difficult and painful yet potentially beneficial
decisions with bankruptcy certain types of debts can be completely eliminated or
discharged debts that typically can be discharged
include credit card medical auto utilities and rent
debts that may not be cancelled generally include child support
alimony student loans taxes and court order damages
for example drunk driving settlements eliminating your debt
also allows you to start working towards your financial goals depending on the
amount of debt you have outstanding relative to your income
you may need a decade or more to pay it all off
filing bankruptcy needless to say has a number of drawbacks
first bankruptcy appears on your credit report for up to 10 years
so you'll have difficulty obtaining credit especially in the years
immediately following your filing however if you already have problems on
your credit report because of late payments or a failure to
pay previous debts the damage has already been done and
without savings you're probably not going to be making
major purchases such as a home in the next several years anyway if you
do file bankruptcy getting credit in the future is still
possible you may be able to obtain a secured credit card
which requires you to deposit money in a bank account equal to the credit limit
on your credit card of course you'll be better off without
the temptation of any credit cards and better served with a debit card also
know that if you can hold down a stable job most creditors will be willing to
give you loans within a few years if you're filing bankruptcy
almost all lenders ignore bankruptcy after five to seven years
and finally most people find that filing bankruptcy
causes emotional stress admitting that your personal
income can't keep pace with your debt obligations is a painful thing to do
although filing bankruptcy clears the decks of debt and gives you a fresh
financial start feeling a profound sense of failure and
sometimes shame is common despite the increasing
incidence of bankruptcy bankruptcy filers are reluctant to talk
about it with others including family and friends another
part of the emotional side of filing bankruptcy
is that you must open your personal financial affairs to court scrutiny
and court control during the several months it takes to administer a
bankruptcy accord appointed bankruptcy trustee
oversees your case and tries to recover as much of your
property as possible to satisfy the creditors
those to whom you owe money some people also feel that they are shirking
responsibility by filing for bankruptcy so if you file for bankruptcy don't feel
bad about not paying back the bank the nice merchants from whom you bought
the merchandise have already been paid charge-offs the banker's term for taking
the loss on debt that you discharged through bankruptcy
are the banker's cost which is another reason why the interest rate is so high
on credit cards and why you shouldn't borrow on credit
cards regardless of how you deal with paying
off your debt you're in real danger of falling back
into old habits backsliding happens not only to people
who file bankruptcy but also to those who use savings or
home equity to eliminate their debt this section speaks to that risk and
tells you what to do about it getting out of debt can be challenging
but i have confidence that you can do it with my tips and advice
in addition to the ideas such as eliminating all your credit cards and
getting a debit card the following list provides some
additional tactics you can use to limit the
influence credit cards hold over your life reduce your credit limit
if you're not going to take the advice i give you and get rid of all your credit
cards or secure a debit card be sure to keep a lid on your credit
card's credit limit the maximum balance allowed on your
card you don't have to accept the increase just because your bank keeps
raising your credit limit to reward you for being such a profitable customer
call your credit card services toll-free phone number
and lower your credit limit to a level you're comfortable with replace your
credit card with a charge card a charge card such as the american
express card requires you to pay your balance in full each billing period
you have no credit line or interest charges of course spending more than you
can afford to pay when the bill comes due is possible but
you'll be much less likely to overspend if you know you have to pay in full
monthly never buy anything on credit that
depreciates in value meals out cars clothing and shoes all
depreciate in value never buy these things on
credit borrow money only for sound investments
education real estate or your own business for example
think in terms of total cost everything sounds cheaper in terms of monthly
payments that's how salespeople entice you into
buying things you can't afford take a calculator along if necessary to
tally up the sticker price interest charges and upkeep the total
cost will scare you it should stop the junk mail avalanche
look at your daily mail you can save some trees and
time sorting junk mail by removing yourself
from most mailing lists limit what you can spend
go shopping with a small amount of cash and no plastic or checks
that way you can spend only what little cash you have with you
no matter how hard they try to break the habit some people become addicted to
spending and accumulating debt it becomes a chronic problem that starts
to interfere with other aspects of their lives
financial problems can lead to problems at work and with family and friends
making wise investments doesn't have to be complicated
however many investors get bogged down in the morass of the thousands of
investment choices out there and the often conflicting perspectives
on how to invest before you select a specific investment
first determine your investment needs and goals
why are you saving money what are you going to use it for
you don't need to earmark every dollar but you should set some major objectives
establishing objectives is important because the expected use of the money
helps you determine how long to invest it
and that in turn helps you determine which investments to choose
the risk level of your investments should factor in your time frame
and your comfort level investing in high-risk vehicles doesn't make sense if
you'll have to spend all your profits on stress-induced medical bills
for example suppose you've been accumulating money for a down payment on
a home you want to buy in a few years you can't afford much risk with that
money you're going to need that money sooner rather than later putting that
money in the stock market then is probably not a wise move the
stock market can drop a lot in a year or over several consecutive years so
stocks are probably too risky a place to invest money you plan to use soon
perhaps you're saving toward a longer term goal such as retirement
that's 20 or 30 years away in this case you're in a position to make riskier
investments because your holdings have more time to bounce back from temporary
losses or setbacks you may want to consider investing in
growth investments such as stocks in a retirement account that you leave
alone for 20 years or longer you can tolerate year-to-year volatility
in the market you have time on your side for a moment
forget all the buzzwords jargon and product names you've heard
tossed around in the investment world in many cases they're only meant to
obscure what an investment really is and to hide the hefty fees and
commissions the investment world is really just as simple
you have only two major investment choices you can be a lender
or an owner you're a lender when you invest your money in a bank certificate
of deposit cd a treasury bill or a bond issued by a
company like general motors for example in each case
you lend your money to an organization a bank the federal government or
gm you're paid an agreed upon rate of interest for lending your money
the organization also promises to have your original investment
the principal returned to you on a specific date
getting paid all the interest in addition to your original investment as
promised is the best that can happen with a lending investment
given that the investment landscape is littered with carcasses of failed
investments this is not a result to take for granted
the worst that can happen with a lending investment
is that you don't get everything you're promised promises can be broken
under extenuating circumstances when a company goes bankrupt for example
you can lose all or part of your original investment
another risk associated with lending investments is that even though you get
what you were promised the ravages of inflation may make your
money worth less it has less purchasing power than
you thought it would some conservative-minded investors make
the common mistake of thinking that they are diversifying their long-term
investment money by buying several bonds some cds and an
annuity the problem however is that all these
investments pay a relatively low fixed rate of return that's exposed to
the vagaries of inflation a final drawback to lending investments
is that you don't share in the success of the organization to which you lend
your money if the company doubles or triples in
size and profits your principal and interest rate don't
double or triple in size along with it they stay the same of course such
success should ensure that you get your promised interest
and principle you're an owner when you invest your money in an asset
such as a company or real estate that has the ability to generate earnings or
profits suppose that you own 100 shares of
verizon communication stock with billions of shares of stock
outstanding verizon is a mighty big company
your 100 shares represent a tiny piece of it
what do you get for your small slice of verizon as a stockholder
although you don't get free calling you do share in the profits of a company in
the form of annual dividends and an increase you hope in the stock
price if the company grows and becomes more profitable
of course you receive these benefits if things are going well
if verizon's business declines your stock may be worth
less real estate is another one of my favorite financially rewarding
and time-honored ownership investments real estate can produce profits when
it's rented out for more than the expense of owning the property
or sold at a price higher than what you paid for it
the value of real estate depends not only on the particulars of the
individual property but also on the health and performance
of the local economy when companies in the community are
growing and more jobs are being produced at higher wages
real estate often does well when local employers are laying people off
and excess housing is sitting vacant because of previous overbuilding
rent and property values are likely to fall
finally many americans have also built substantial wealth
through small business according to forbes magazine
more of the united states and the world's wealthiest individuals
have built their wealth through their stake in small businesses
than through any other vehicle small business is the engine that drives much
of our economic growth although firms with fewer than 20
employees account for about one quarter of all employees
such small firms were responsible for nearly half of all new jobs created in
the past two decades you can participate in small business in
a variety of ways you can start your own business buy and
operate an existing business or simply invest in promising small
businesses many investors have a simplistic
understanding of what risk means and how to apply it to their investment
decisions for example when compared to the yoyo motions of the
stock market a bank savings account may seem like a
less risky place to put your money over the long term however the stock
market usually beats the rate of inflation
while the interest rate on a savings account does not thus if you're saving
your money for a long-term goal like retirement a savings account can be
a riskier place to put your money before you invest ask yourself these
questions what am i saving and investing this
money for in other words what's my goal what is my
timeline for this investment when will i use this money what is the
historical volatility of the investment i'm considering
and does that suit my comfort level and timeline for this investment
after you answer these questions you'll have a better understanding of risk
and you'll be able to match your savings goals to their most appropriate
investment vehicles the risk with ownership investments is
the short-term fluctuations in their value
during the last century stocks declined on average by more than 10 percent in
one particular year every five years drops in stock prices
of more than 20 percent occurred on average once every 10 years
real estate prices suffer similar periodic setbacks
therefore in order to earn those generous long-term returns from
ownership investments like stocks and real estate
you must be willing to tolerate volatility you absolutely should not put
all your money in the stock or real estate market
you should not invest your emergency money or money you expect to use within
the next five years in such volatile investments the shorter the
time period that you have for holding your money in an investment
the less likely that growth oriented investments like stocks will beat out
lending type investments like bonds despite what professors teach in the
nation's leading business and finance graduate school programs
low-risk investments that almost certainly lead to high returns are
available paying off consumer debt if you're
paying 10 14 or 18 interest on an outstanding
credit card or other consumer loan pay it off before investing to get a
comparable return through other investment vehicles
after the government takes its share of your profits you'd have to start a new
career as a loan shark if between federal and state taxes
you're in a 33 tax bracket and you're paying 12 percent
interest on consumer debt you'd need to annually earn a whopping
18 percent on your investments pre-tax to justify not paying off the
debt when your only source of funds for
paying off debt is a small emergency reserve equal to a few months living
expenses paying off your debt may involve some
risk tap into your emergency reserves only if you have a backup source
for example the ability to borrow from a willing family member
or against a retirement account balance investing in your health
eat healthy exercise and relax investing in friends and family invest
time and effort in improving your relationships with loved ones
investing in personal and career development pick up a new hobby
improve your communication skills or read widely
take an adult education course or go back to school for a degree
your investment should lead to greater happiness and perhaps even higher
paychecks diversification is one of the most
powerful investment concepts it refers to saving your eggs or
investments in different baskets diversification
requires you to place your money in different investments with returns
that are not completely correlated this is a fancy way of saying that when
some of your investments are down in value
odds are that others are up in value to decrease the chances of all of your
investments getting clobbered at the same time
you must put your money in different types of investments such as bonds
stocks real estate and small business you can further diversify your
investments by investing in domestic as well as international markets within
a given class of investments such as stocks
investing in different types of stocks that perform well under various
economic conditions is important for this reason
mutual funds which are diversified portfolios of securities such as stocks
or bonds are a highly useful investment vehicle
when you buy into a mutual fund your money is pooled with the money of
many others and invested in a vast array of stocks or bonds
you can look at the benefits of diversification in two ways
diversification reduces the volatility in the value of your whole portfolio
in other words your portfolio can achieve the same rate of return that a
single investment can provide with less fluctuation in value
diversification allows you to obtain a higher rate of return for a given level
of risk keep in mind that no one no matter whom
he works for or what credentials he has can guarantee
returns on an investment you can do good research and get lucky
but no one is free from the risk of losing money
diversification allows you to hedge the risk of your investments
because the future can't be predicted diversifying your money into different
investments is safer thousands of firms sell investments and
manage money banks mutual fund companies securities
brokerage firms and even insurance companies all vy for
your dollars just to make matters more complicated
each industry plays in the other's backyards
you can find mutual fund companies that offer securities brokerage
insurance firms that are in the mutual fund business and mutual fund companies
that offer bank-like accounts and services you may
benefit from this competition and one-stop shopping convenience on the
other hand some firms are novices at particular
businesses and count on some people's shopping by brand name recognition
make sure that you do business with a firm that offers the best value
investments in comparison to their competitors
value is the combination of performance including service
and cost given the level of risk that you're comfortable with
you want investments that offer higher rates of return but you don't want to
have to pay a small fortune for them commissions management fees maintenance
fees and other charges can turn a high performance investment
into a mediocre or poor one also look for a firm that
employs representatives who don't have an inherent self-interest in steering
you into a particular type of investment this criterion has nothing to do with
whether an investment firm hires polite well-educated or well-dressed people the
most important factor is the way the company compensates its
employees if the investment firm's personnel are
paid on commission pass on that firm give preference to
investing firms that don't tempt their employees to push one investment over
another in order to generate more fees mutual
funds are an ideal investment vehicle for most investors
no load mutual fund companies are firms through which you can invest in mutual
funds without paying sales commissions in
other words every dollar you invest goes to work in the mutual funds you choose
nothing is siphoned off to pay sales commissions in other words
no matter which brokerage firm an investor did business with
the cost of the firm's services was set and the level of commissions was high
competition inevitably resulted in more and
better choices many new brokerage firms that didn't do business the old way
opened they were dubbed discount brokers because the fees they charged customers
were substantially lower than what brokers charged under the old fixed fee
system even more important than saving
customers money discount brokers established a vastly improved
compensation system that greatly reduced conflicts of interest
discount brokers generally pay the salaries of their brokers
the term discount broker is actually not an enlightening one
it's certainly true that this new breed of brokerage firm saves you
lots of money when you invest you can easily save
50 to 80 percent through the major discount brokers
but these firms investments are not on sale or
second rate discount brokers are simply brokers without major conflicts of
interest of course like any other for-profit
enterprise they're in business to make money
but they're much less likely to steer you wrong for their own benefit
be careful of discount brokers selling load mutual funds
the worst places to invest are those that charge you a lot
have mediocre or poor performing investments and have
major conflicts of interest the prime conflict of interest arises when
investment firms pay their brokers commissions on the basis of what
and how much they sell the result the investment firms
sell lots of stuff that pays fat commissions
and they churn or cause a rapid turnover of
your account because each transaction has a fee
the more you buy and sell the more money they make
financial consultants also known as stock brokers financial planners
and others who sell investment products can have enormous conflicts of interest
when recommending strategies and specific investment products
commissions and other financial incentives can't help but skew the
advice of even the most earnest and otherwise well-intentioned
salespeople if you like the idea of spreading your
money around you may want to invest through a number of different firms
with a discount brokerage account you can eat your cake and have it too
you can diversify across different mutual fund companies
through one brokerage firm however you'll pay small transaction fees on
some of your purchases and sales of funds unless you work in
the industry you may find insurance to be a
dreadfully boring topic most people associate insurance with
disease death and disaster and would rather do just
about anything other than review or spend money on
insurance but because you won't want to deal with money hassles when you're
coping with catastrophes illness disability death fires floods
earthquakes and so on you have to secure insurance well before
you need it insurance is probably the most
misunderstood and least monitored area of personal finance
most people are overwhelmed by all the jargon and sales and policy statements
thus they pay more than necessary for their policies
and fail to get coverage through the best companies
law one insure for the big stuff don't sweat the small stuff
the point of insurance is to protect against losses that would be financially
catastrophic to you not to smooth out the bumps of everyday
life you should insure against what could be a huge financial loss for you
or your dependents the price of insurance isn't cheap but
it is relatively small in comparison to the potential total loss from a
financial catastrophe the beauty of insurance is that it
spreads risk over millions of other people
should your home burn to the ground paying the rebuilding cost out of your
own pocket probably would be a financial catastrophe
if you have insurance the premiums paid by you and all the other homeowners
collectively can easily pay the bills think for a moment about what your most
valuable assets are also consider potential large expenses
perhaps they include the following future income
during your working years your most valuable asset is probably your future
earnings if you were disabled and unable to work
what would you live on long-term disability insurance exists to
help you handle this type of situation if you have a family that's financially
dependent on your earnings how would your family manage if you died
life insurance can fill the monetary void left by your
death business if you're a business owner what
would happen if you were sued for hundreds of thousands of dollars or a
million dollars or more for negligence in some work that you
messed up liability insurance can bail you out
health in this age of soaring medical costs
you can easily rack up a hundred thousand dollar hospital bill in
short order major medical health insurance coverage helps you handle such
expenses and yet a surprising number of people
don't carry any health insurance particularly those who work in small
businesses psychologically buying insurance coverage for the little
things that are more likely to occur is tempting you don't want to feel like
you're wasting your insurance dollars you want to get some of your money back
darn it you're more likely to get into a fender bender with your car or have a
package lost in the mail then you are to lose your home to fire
or suffer a long-term disability but if the fender bender costs 500 which
you end up paying out of your pocket because you took my advice to take a
high deductible or the postal service loses a package
worth fifty dollars or a hundred dollars you won't be facing a financial disaster
on the other hand if you lose your ability to earn an
income because of a disability or if you're sued for a million dollars
and you're not insured against such catastrophes
not only will you be extremely unhappy but you'll also face financial ruin
i agree that the odds of this happening are quite low
but the risk is there the problem is that you just don't know what
or when bad luck may befall you and don't make the mistake of thinking that
you can figure the odds better than the insurance companies can
the insurance companies predict the probability of you're making a claim
large or small with a great deal of accuracy
they employ armies of number-crunching actuaries to calculate the odds of bad
things happening and the frequency of current
policyholders making particular types of claims
the companies then price their policies accordingly
so buying or not buying insurance based on your perception of the
likelihood of needing the coverage is foolish insurance companies aren't
stupid in fact they're ruthlessly smart when
insurance companies price policies they look at a number of factors to
determine the likelihood of your filing a claim
most insurance policies have deductibles the maximum amount you must pay
in the event of a loss before your insurance coverage kicks in
on many policies such as auto and homeowners renters coverage
most folks opt for a 100 to 250 deductible here are two benefits to
taking a higher deductible you save premium dollars year in and
year out you can enjoy the lower cost of an insurance policy with a high
deductible you don't have the hassles of filing
small claims filing an insurance claim can be an
aggravating experience that takes hours of time in some cases you may even
have your claim denied after jumping through all the necessary hoops
getting your due may require prolonged haggling
when you have low deductibles you may file more claims
although this doesn't necessarily mean that you'll get more money
after filing more claims you may be rewarded with higher premiums
in addition to the headache you get from preparing all those blasted forms
filing more claims may even cause cancellation of your coverage you pay a lot of money in taxes probably
more than you realize believe it or not few people know just
how much they pay in taxes each year most people remember only whether they
received a refund or owed money on their return
but when you file your tax return all you're doing is settling up with tax
authorities over the amount of taxes you paid during the year
versus the total tax that you owe based on your income
and deductions some people feel lucky when they get a refund
but all a refund really indicates is that you overpaid in taxes during the
year you should have had this money in your
own account all along if you're consistently getting big
refunds you need to pay less tax throughout the year
fill out a simple tax form the w-4 to determine how much you should be paying
in taxes throughout the year you can obtain a w-4 through your
employer's payroll department if you're self-employed you can obtain
form 1040 es by calling the irs at 800
tax form 800-829-3676 or visiting its website at www.irs.gov
instead of focusing on whether you're going to get a refund when you complete
your annual tax return you should concentrate on the total
taxes you pay to find out the total taxes you pay
you need to get out your federal and state tax returns
on each of those returns is a line that shows the total tax
if you add up the totals from your federal and state tax returns
you'll probably see one of your largest expenses
understanding the tax system is the key to reducing your tax burden
if you don't you'll surely pay more taxes than necessary
your tax ignorance can lead to mistakes which can be costly if the irs and state
government catch your underpayment errors
with the proliferation of computerized information and data tracking
discovering mistakes has never been easier the tax system
like other public policy is built around incentives
to encourage desirable behavior and activity home ownership for example
is considered desirable because it encourages people to take more
responsibility for maintaining buildings and neighborhoods clean orderly
neighborhoods are often the result of home ownership
therefore the government offers all sorts of tax
perks to encourage people to buy homes not all people follow the path the
government encourages after all it's a free country however
the fewer desirable activities you engage in
the more you pay in taxes if you understand the options
you can choose the ones that meet your needs as you approach different stages
of your financial life when it comes to taxes
not all income is treated equally this fact is far from self-evident
if you work for an employer and earn a constant salary during the course of a
year a steady and equal amount of federal and
state taxes is deducted from each paycheck
thus it appears as though all that earned income is being taxed equally
in reality however you pay less tax on your first dollars of earnings
and more tax on your last dollars of earnings
for example if you're single and your taxable income totals forty five
thousand dollars during two thousand six you pay federal tax at the rate of
ten percent on the first seven thousand five hundred fifty
dollars of taxable income fifteen percent on income between seven
thousand five hundred fifty dollars and thirty thousand six hundred fifty
dollars and twenty five percent on income from thirty thousand six hundred
fifty dollars up to forty five thousand dollars your
marginal tax rate is the rate of tax you pay on your last
or so-called highest dollars of income in the example
of a single person with taxable income of forty five thousand
dollars that person's federal marginal tax rate is 25
percent marginal tax rates are a powerful concept
your marginal tax rate allows you to quickly calculate the additional taxes
you'd have to pay on additional income conversely you can delight in
quantifying the amount of taxes you save by reducing your taxable income either
by decreasing your income or by increasing your deductions as
you're probably already painfully aware you pay not only federal income taxes
but also state income taxes your total marginal rate includes your
federal and state tax rates you can look up your state tax rate in
your current state income tax preparation booklet
taxable income is the amount of income on which you actually
pay income taxes the following reasons explain why you don't pay taxes on your
total income not all income is taxable for example
you pay federal tax on the interest you earn on a bank savings account
but not on the interest you earn from municipal bonds some income such as from
stock dividends and long-term capital gains
is taxed at lower rates you get to subtract deductions from your income
some deductions are available just for being a living breathing human being
people over age 65 and those who are blind get a slightly higher deduction
other expenses such as mortgage interest and property taxes
are deductible in the event that these so-called itemized deductions exceed the
standard deductions when you contribute to qualified
retirement plans you also effectively get a deduction you