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Achieving Financial Security Is Possible

It’s important to note that financial security isn’t some sort of threshold. It also isn’t a number. Financial security relates to your income.

UBS, a wealth management firm, has conducted research that proves this. In fact, their research had taken a look at millionaires, and sixty percent of those with more than $5 million considered themselves wealthy. That’s compared to 28% of those who are worth between a million and five million dollars. Furthermore, only 10% considered the meaning of wealthy as not having to work, with 16% saying that when you surpass a certain asset threshold, then you are considered wealthy.

Two-thirds of the participants said the point of building wealth was to create financial security, where just one setback wouldn’t cause them to not be rich. Half of the participants who were worth one million to five million dollars believed that their lifestyle could be impacted in a major way if they lost their job or if the market crashed. About 34% of those with more than $5 million felt the same way. However, you don’t need rich lifestyle to protect, but the middle class can achieve financial security the same way the ultra-wealthy achieve it.

Steps To Reaching Financial Security
You have a surplus when you spend less than the money you are bringing in. This is a step in the right direction, but you may still be at the edge of a cliff that could send you right back down the ladder. As time goes on, and the more money you save, then you will be protecting yourself in the event something unexpected pops up and you have to spend a lot of money. With that said, how exactly do you achieve financial security?

Here’s How
There’s a few things you can do. In fact, we will provide you with some steps. Below are a number of steps you can take:

1. Create an emergency fund, but you don’t need a whole lot of cash. Set aside $500 to cover various expenses that may come from out of nowhere, such a an insurance deductible or a car repair. If you have to dip into the emergency fun, then build it back up to the set amount ($500) as soon as you can. The key to building security is to have a way to deal with events that can wipe out your savings.

Achieving Financial Security Is Possible

2. Toxic debt should be paid off as quick as possible, and this includes payday loans, credit card debt and things of that nature. Have a look at your debt and figure out if it can be paid off within at least five years. If it can’t, then consider filing for bankruptcy or speak with a credit counselor.

3. Keep your overhead low and keep expenses you must have, such as food, shelter, insurance and minimum payments to loan companies. Try to keep your expenses at 50% of your income. This should help ease the burden in the event you cannot work or if you lose your job.

4. Investing in your future is important, so take advantage of a workplace retirement plan if it’s offered, and do this even if you are paying off your debts. If there’s no workplace plan in place, then open an IRA, but use a retirement calculator because this will give you an idea of how much you should contribute. If you cannot contribute the recommended amount, then use whatever money you can for now.

5. Get health insurance and any other insurance to help protect yourself in the event of an emergency. For example, disability insurance comes in handy if you can’t work, while liability insurance can help if you get sued. If you become wealthier, then you should increase the liability limits on your car and home because you will want the added protection that comes along with having more insurance.

6. Your emergency fund should be built up once your debt has been paid. Boosting your funds will come in handy. Just make sure you have planned for your retirement too.

7. If possible, retire your mortgage. When you don’t have mortgage payments to make, you can save even more money. If you have to, consider downsizing or get a reverse mortgage.

8. Create streams of income that are guaranteed because social security will only help you so much. Getting an immediate annuity is worth considering. This allows you to get money in return, after you have given the insurance company a sum of cash.

When you have financial security, then you’ll have peace of mind. Sometimes achieving financial security is easier said than done. However, the above tips should help you out.

12 Money Rules You Can Live By

Supposedly generic financial advice intended for everyone doesn’t work. All of us are unique like snowflakes, so we need to have financial rules that are tailored to our individual situations to help guide us.

Except that it turns out that it can be very helpful to have rules of thumb to follow.

For example, a study involving West Point cadets found that teaching them rules of thumb was just as effective at least as regular personal finance training when it came to increasing their confidence and knowledge of money in addition to them being willing to take financial risk. It was found by researchers that actually rules of thumb for money were more effective compared to teaching Dominican Republic small business owners accounting principles.

All of us lead very busy lives – so we just would like to have an answer sometimes. If you tired of approaches to financial advice that tell you on the one hand to do this, but on the other hand try that, then check out the following guidelines that I have been collecting over the years. You might find that some of these one-size-fits-all tips might suit you very well.

1. Buying a car: Buy a used vehicle and keep it for 10 years

Although new cars are great, they are very expensive and lose a great deal of their value during their initial two years. Let somebody else pay for all that depreciation and capitalize on the fact that the better-built cars of today tend to run very well for a decade at least if they are maintained properly. This will allow you to save thousands of dollars over the course of your driving lifetime.

2. Car Loans: Use the 20/4/10 rule if you must borrow money to buy a car

You ideally wouldn’t borrow money in order to purchase an asset that is going to lose value, however, you might not always have the ability to pay cash for your car. If you are unable to do this, to prevent yourself from overspending put 20% down on your car, limit your loan to only four years and make sure that your monthly payment isn’t higher than 10% of what your gross income is. A large down payment will prevent you from being “underwater,” which refers to owing more on your car than what it is actually worth, immediately after driving it off of the lot. When you limit how long your loan is for it will you build up equity more quickly and reduce how much overall interest you have to pay. Lastly, when you cap how large your payment will be it, it will help to prevent your car payment from eating too much into your monthly budget.

3. Save for college

It is very important to save for retirement, but immediately after your child is born you should get into the habit of saving at least $25 a month for college. It is always possible for your children to get student loans. However, nobody will loan you money for your retirement. Your kids aren’t gong to thank you if having to pay for their college education means you have to move into their house because you are broke and 70. Fortunately, making even small contributions into a 529 college savings plan over time can really add up. Joe Hurley, who founded SavingForCollege.com says that if you start early it can mean the difference between having to choose between a college that offers the most financial aid as opposed to the one that is best for your child.

4. Credit cards

Search for a low-rate credit card if you are carrying a balance in order to help you get your debt paid off. If you pay your bill in full every month (the way you should do), then look for a rewards card that will return to you 1.5% at least of whatever you spend. However, if credit card debt is dragging you down, don’t mess around with rewards cards. Instead, focus your efforts on getting a low-rate card and paying off your debts quickly. However, if you do pay your bill in full, review your rewards program regularly to ensure you are getting maximum value from them. These programs do change at times, or the way you utilize your rewards or spend your money can also change. Steve McQuay, a credit card expert at NerdWallet says that even if you don’t want to have manage a complex wallet or play the game, you shouldn’t ever earn less than 1.% 5 back on all of the purchases you make.

5. Emergency savings

12 Money Rules You Can Live By

It’s important that you can get hands on credit or cash that is the equivalent of at least three months of expenses. That classic advice on emergency funds – that you need to have saved three to six months worth of expenses – is sound advice. However, it could take you several years to save this much and you also have other priorities that are just or even more important (like retirement, for example). As you are building up your cash, be sure to have a Plan B also. That might be having cash in a Roth IRA (you are able to pull your contributions out any time without having to pay any penalties or taxes), have a home equity line of credit available, or room on your credit cards.

6. Insurance

Make sure you are covered for catastrophic expense, instead of the kinds of things that can be paid out of pocket. When it comes to insurance, it should provide you with protection against major things – those unexpected expenses that potentially could financially wipe you out, like a car accident where a lawsuit is trigger or your house burning down. On your policies you want to have high deductibles as well as high limits. It doesn’t make a lot of financial sense over the long run to make a number of small claims. Amy Danise, an insurance expert with NerdWallet, says that you could obtain some smaller insurance payments that way, but you are risking have your rates increased which could cancel those gains out and more.

7. Mortgage amount

If you are unable to afford the payments on a fixed-rate 30-year mortgage, then you really can’t afford that house. There may be another way of saving money through using a different type of mortgage, like a hybrid loan where a lower initial rate is offered. However, if you use an alternative loan due to it being the only way way of being able to purchase the house you really want, then your sights might be set too high. A mortgage that busts your budget places you at risk of ending up in even-deeper debt, particularly when all of the other costs associated with home ownership are considered.

8. Mortgage rates

12 Money Rules You Can Live By

The interest rate on your mortgage should be fixed for as long as you are planning on begin in your home at least. Obviously plans can change. However, you don’t want to be forced from your home due to a large payment increase when you were planning on living there for many years. If you are fairly certain you are going to move in five years, then getting a five-year hybrid might be a good option for you. However,if you are thinking you will be staying in your house for at least 10 years, then thinking about going with the certainty that a 30-year fixed rate brings you.

9. Mortgage prepayments

There are better things that can be done with your money than prepaying a low-rate mortgage that is also potentially tax-deductible. It sounds great to save money on the interest you have to pay and reducing the number of years on your mortgage. However, before you think about making extra payments in order to reduce the principal on your mortgage, be sure all of your other important priorities have been covered first. For one thing, you need to save enough money for retirement, and all other debt needs to be paid off, given that a majority of other loans will have a higher interest rate than a mortgage and it won’t be tax deductible. In addition, you should have an emergency fund and be adequately insured as well. Once all these bases have been covered, you can then start paying down your mortgage if you want to.

10. Retirement: Save 15%

You might need to save even more if you would like to retire early or got started late. Take out your retirement plan and run the numbers on it. For a majority of people, a good starting point is 15%,which includes any company match. Even if you are unable to save as much as you’d like to, just start with as much as you can and then increase your rate of savings on a regular basis. Your top financial priority should be your retirement. There is no way to get back those lost years of your money earning tax-deferred returns, all the lost tax breaks or lost company matches.

11. Retirement, Part 2

Leave your retirement money in for your retirement. If you have a small retirement fund, you might be tempted to spend it and think that it won’t really matter. However, it does. Penalties and taxes will cost you 25% at least and probably more of whatever you take out. In addition, for every $1 taken out, it will cost you $10-$20 in future lost retirement income. After your retirement fund has grown larger, it might be easy convincing yourself that you have good reasons for withdrawing or borrowing the money. However, there actually aren’t. Leave your money alone so it will be there when you really need it after you retire.

12. Student loans

The total amount that you borrow shouldn’t be more than what you are expecting to earn during the first year after you graduate. At the current interest rates, that will help to ensure you will be able to pay off whatever you owe in 10 years and your payments kept under 10% of your total income. According to Mark Kantrowitz, a financial aid expert and author, that is considered to be an affordable repayment rate. There are still options for you if you didn’t limit how much you borrowed and currently struggling. Brianna McGurran, a student loan expert with NerdWallet, says that if your federal loan balance is overwhelming, that there are income-driven repayment plans available. You might be ashamed of your debt or be tempted to hide it, however it is better to look at what your repayment options are to get some relief.

3 Strategies For Dealing With Debt Collectors

Do you have a debt collector hassling you, trying to get a payment on some consumer debt that you owe? At best debt collection tactics are annoying – and at the worse can be illegal or predatory.

It is critical knowing how to manage debt collections in order to assert your rights and select the best way of managing your debt. Before making any payments or saying anything:

To avoid making your situation even worse, think before acting:

  • Know what your rights are.
  • Gather all the facts.
  • Having a plan for how you plan on dealing with your debt.

The following is important information on debt collection that you need to be aware of, in addition to strategies for how to handle debt collectors.

Debt collection – what you need to know

Whenever a debt goes unpaid for a certain amount of time – usually beginning 30 days after it is due, it can be reported as being delinquent. Then it gets to the point, which is commonly after 180 days of the debt going unpaid, the creditor – like a medical provider, bank or credit card company – will give up on attempting to collect. Your debt may be sold by them to a third-party debt collector to get some money and least and remove the debt from their books.

You were previously receiving bills from a familiar creditor. Now a different company is sending you debt collection notices. You still owe the debt, however a third party has purchased the right to collect from you.

The Urban Institute issued a 2014 report that showed that around 77 million individuals, or 35% of Americans, have a debt on their credit reports that is in collections.

A debt that is in collections leaves a negative ark on your credit report up to seven years, which it makes it more expensive and harder to get new lines of credit.

How a debt in collections should be handled.

1. Think before acting

Just like you wouldn’t sing a contract before you understood the terms, don’t rush into making a payment whenever you are contacted by a debt collector. Take your time weight what your different options are.

Former debt collector Ramon Khan says that many people are ashamed of their debt, and debt collectors prey on this.

They work to create a sense of urgency and then prey on your pain points in order to convince you to pay them something. Even if you happen to owe $100,000 or $50,000, they don’t actually care whether you pay the whole things. If they are able to get you to pay a portion, it will still count towards the quota they have.

3 Strategies For Dealing With Debt Collectors

Strategy: On first contact, don’t cave into the pressure.

Even when you make just one payment – even if it is only $5 to $10 – there can be serious repercussion since it acknowledges the debt. For example, when the best is actually past its statute of limitations, if you make a payment it resets the clock and may lead to wage garnishment or a lawsuit.

Don’t provide any payment information that could be used by the collector later, don’t make any promises to pay and don’t pay. Ask for information regarding the debt and then tell them you will call back at a later time to discuss it.

2. Gather all the facts

As your debt gets sold to a third party from the original creditor and then potentially is resold numerous other times, it can be easy to neglect your record keeping. There are often errors in terms of the amount that is owed or even the person who owns many of these sold debts.

Practices of debt collectors are one of the biggest source of consumer complaints that are made with the Consumer Financial Protection Bureau. In 2015 more than 85,000 complains were filed. The main reason was consumers being told to pay debt that they didn’t actually owe.

Strategy: Gather information from your own records and the debt collector.

If you don’t receive a validation letter within the first five business days of the debt collector contacting you, request it. It should include information on who the collection company is, details on your debt, and how the debt can be challenged.

Collect your own records regarding the debt, including your payment history and information about the original creditor.

Keep detailed records on any communication you have with the debt collector as well as any payments that were made previously. For documentation purposes, you should use certified mail.

3. Know What Your Rights Are

Your ally is the Fair Debt Collection Practices Act. The law details what your rights as a consumer are and protects you from predatory collection practices. For example:

Communication: You have the right to request when and how you are contacted by debt collectors – including having them completely cease communication. Debt collectors are not allowed to use threatening violence or profane language.

Honesty: Debt collectors are not allowed to mislead you about the amount of money you owe, who they are, or legal repercussions of failing to pay your debt – for example, threatening to have you arrested.

Challenging the debt: Disputing the debt is another right you have. If you challenge a debt within 30 days of a debt collector first contacting you, that collector can’t ask for any payments until your dispute has been settled. You are still able to challenge the debt after 30 days, however the collector may seek payment during the time the dispute is under investigation.

Additional consumer protections may be offered by your state. Check with your state attorney general office or legal aid within your local area.

If your legal protections have been violated you may want to get a complaint filed with the CFPB.

Strategy: Learn what your consumer rights are – and know how you can use them.

Make sure you understand what your state and federal protections are in regards to the debt collection process. Two informative sources are the Federal Trade Commission and your state’s attorney general.

Whether you demand a debt collector stop contacting you or sending the debt collector a letter to ask for more information about the debt, it is important to know how to best exercise your consumer rights – and not be afraid of doing so.

Additional steps

Once you have taken the time to collect information on your debt and learning what your consumer rights are, the next thing you need to do is compare the various options that are available to you to handle a debt in collection:

  1. Search for ways that you can pay the debt off.
  2. Challenge the debt. Read the collector’s validation letter for information on how the debt can be disputed.
  3. Look into a debt relief solution, like credit counseling.
  4. If the debts you have are unmanageable and you don’t think you will be able to pay them off in five years, then you might want to look into bankruptcy.

Make an assessment of how your finances would be affected by each of the options, and seek credit counseling or legal advice if you need assistance.