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These 8 Everyday Financial Worries Have One Common Solution

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These 8 Everyday Financial Worries Have One Common Solution

Recent data from a Money Magazine financial survey of American households sheds light on a shocking reality: 60 percent of respondents expressed anxiety about their family’s long-term financial stability. There are myriad experiences and likely a few horror stories behind these figures, with which most of us can identify — the housing market collapse, 401(k) balances, job layoffs, rising healthcare costs, etc. But with the economic rebound and 2014’s all-time stock market highs, you would think American households would have a brighter outlook on the future.

To that point, one especially interesting section of the survey indicated short-term optimism is exceptionally high for these very same folks. Ninety percent of respondents felt their financial circumstances would be the same or better in 2015. Yet their long-term sentiments were sharply different.

This survey is just a small window into the lives of everyday Americans ranging from recent college graduates and young professionals to high net worth business owners and retirees. Let’s examine the root cause for household financial anxieties and focus on eight of the most frequent financial concerns. Along the way, we’ll highlight one very simple, frequently overlooked answer, to calm each and every worry.

1. What happens if my income disappears?

Whether you’re working for an unstable company or in an altogether shaky industry, everyone loses some measure of sleep worrying about income loss. The question is: what have you done about it? Many fortunate employees have disability insurance as part of their company benefits. At the end of 2013, there were almost nine million Americans receiving Social Security Disability checks every month, with the average monthly payout being just over $1,100 each month.

While this serves a very important function, most could not survive such a sharp drop in income. The solution: disability and life insurance protection. A few dollars each month will provide exponential benefit in the event of temporary or permanent loss of wages.

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2. How will I ever erase my debts?

We all take on debt in some form or fashion throughout life — a mortgage on our first home, a loan for a new car, student loans for higher education, or credit card debt out of necessity. Plenty of financial pundits will tell you to erase all debt, but as I’ve mentioned before, not all debt is bad. Uncontrolled debt, however, can ruin your life and the lives of those around you.

A 2012 study of middle-income American households found that those age 50 and older carry an average of nearly 33 percent more credit card debt than those below age 50. Economic hardships, declining real estate values and a host of other problems are to blame, but the data raises an important question. Assuming those over age 50 aren’t working forever and assuming their savings aren’t rebounding, what happens to that debt when they die?

The short answer is their estate typically inherits the debt and offsets any assets. Translation: the debt comes out of the heirs’ inheritance. Plan for this in your younger years and secure enough life insurance to cover any business or personal debts you might leave to your heirs in the event of your untimely death.

3. Can I afford to raise children?

For couples planning for families in the near future or those who are “in the thick of it” already, the expenses of child rearing are nothing short of staggering. There are plenty savings vehicles and investment options for parents or grandparents looking to give Little Junior a boost. Some options offer more features than others but one especially flexible option involves life insurance.

The concept is simple: stash away savings, extra earnings, bonuses, inheritance, etc. into a life insurance policy that has tax-advantaged growth potential. In addition to growing your cash value for school tuition, room and board, or unexpected medical expenses, you also have life insurance attached to provide a lasting benefit at death. Best of all, if Little Junior lands a full-ride scholarship, the cash value is not required for education expenses as with a number of other savings options. The money is yours to do whatever you want.

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4. How do I plan for a tax-favored retirement?

Take a poll of your five closest pals and ask them who looks forward to paying taxes in April. Chances are you won’t get a very warm response. Ever since the Revenue Act of 1978 laid the foundation for the 401(k) plan as we now know it, the burden of a successful retirement has shifted to you and me. Thankfully, we have investment advisors to help guide us along the way, but my point is your parents’ and grandparents’ company pensions are largely a thing of the past.

So how can we take control of our own retirement and help ensure we not only diversify our mix of investments but also diversify the tax treatment of our retirement assets? 401(k) balances were nearly $4.3 trillion at the end of March, 2014, which represents almost 20 percent of the total retirement savings for American households. Each and every dollar of retirement income taken from traditional 401(k) accounts is generally taxable. What if you could supplement these core retirement investments with an account that builds cash value and allows you to turn on a tax-free income stream? You guessed it — a cash value life insurance policy may be a good fit.

5. What will happen to my business and employees?

Most business owners, especially small business owners, are laser focused on growing their companies, building a loyal customer base and ultimately increasing net income. As a small business owner myself, I can tell you my focus is often tested by worries — especially financial worries. If I can’t continue working, who will take care of my client base? My employees? My family? Business owners who have partners have another set of concerns unto themselves: What if something happens to my partner? How will that affect the business and the rest of the partners?

A 2011 survey of more than 900 small business owners found that, while more than 40 percent of respondents said dealing with the death or disability of an owner or key employee was a major concern, fewer than 25 percent had formalized any planning to address the concerns. Disability and life insurance are critical components of any business plan, large or small. The coverage provides the cash flow and capital infusion to continue business operations, hire replacement leadership or buy out partnership interests from a deceased’s family.

6. I’m only getting older. What happens if I get sick?

You’ll never be younger or healthier than you are today. From a financial perspective, it’s imperative to take advantage of opportunities to capitalize on this gift. Start saving as early as possible and save in different ways. Cash in a bank account is good, but so are properly allocated investment accounts, quality real estate or even a life insurance policy that builds cash value.

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Many life insurance policies can be tapped before death in the event of chronic or terminal illness and some carriers even offer a long-term care insurance rider to help cover the cost of care for skilled nursing and home care among other qualifying expenses. Utilizing multiple avenues of savings, including a portion in life insurance, will put you in a stronger position to manage the rising costs of medical care due to illness.

7. Will I be able to continue charitable giving?

Giving to charity may have fallen along with the stock market a few years back, but as account balances have rebounded, so too has charitable giving. In 2013, Americans gave more than $335 billion to a mix of charities, just shy of the 2007 high of $349 billion. Giving has grown each of the past four years and the trend is expected to continue — as was evident with this summer’s wildly successful ALS Ice Bucket Challenge, which topped $100 million in donations from more than three million unique donors.

However, what happens if you die prematurely and your donations are lost? Chances are, the good works, community impact and critical services these charities provide will suffer greatly. Many donors choose to name their favorite charities as beneficiaries of life insurance policies to ensure their funding commitment continues. There may also be favorable tax benefits available to you as donor — a bonus over and above the lasting impact your gift is sure to have.

8. What will my financial legacy be?

Nobody sets out with a plan to leave survivors with a financial mess, but through life’s twists and turns some unfortunately end up with utter chaos. With simple planning in advance, you can chart the best course for your own financial legacy to carry on your values, give a boost to your heirs or simply safeguard treasured family heirlooms.

The term ‘estate planning’ may connote images of blue blood aristocrats with many millions in trust funds, but while few are fortunate to experience that level of success, each and every one of us needs some measure of estate planning. In it’s simplest form, estate planning is merely a directive for your heirs on how you’d like things handled when you’re no longer able to make the decisions and how you’d like things divvied up when you die.

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Studies show that more than 50 percent of American households don’t even have wills, let alone more detailed estate planning documents. Similar reports indicate more than 90 percent of millennials age 35 or under have no planning whatsoever. A simple, cost-effective way to provide a strong financial legacy is to incorporate life insurance into your estate plan. Ensure your wishes are carried out while protecting the assets and providing for the people you value most.

Winston Churchill famously declared,

“Let our advanced worrying become advanced thinking and planning.”

Worry, especially financial worry, is frequent, so it’s important to expect it, anticipate it and plan for it. While life insurance is not particularly sexy, it remains a versatile financial tool worth a closer look as you plan and prepare for the ups and downs of life.

Featured photo credit: Screaming via freeimages.com

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Last Updated on July 20, 2021

Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

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Financial Freedom is Not a Fantasy: 9 Secrets to Get You There

Have you ever considered your life now, and how it would be if you had more time to spend with your family and less worries about money?

Nowadays, financial stress is one of the most troublesome weights in life. If you’ve ever encountered financial stress, you know the difficulty of not having enough income to pay your obligations or bills.

Many people say that money is not the ultimate goal of life. While that’s true, money certainly plays a very significant role. The meaning of financial freedom changes with the different phases of our life, but ultimately, it is something that many people strive for.

In this article, we’ll explain how to capture that financial freedom you’ve been looking for. Read on to learn the secrets to financial freedom.

Break Free of Your Finances

Financial freedom is about having a constant flow of cash from your assets to cover all your regular needs.

When you are not worried about your income, or living paycheck to paycheck, you gain a great sense of freedom. It’s the freedom to be obtain and do what you truly need to make your way through everyday life.

Gaining financial freedom, though, is a process of growth, making small improvements and gaining emotional strength.

Though it seems hard to believe, it is really very simple to get financial freedom.

To do so, you simply need to make sure that your assets exceed your liabilities. In other words, you’ll need to find the sweet-spot where your residuals meet or surpass your expenses. This is something that you can achieve with the proper plan.

While not every person will accomplish financial freedom, the potential for anyone to do so is certainly there. Anyone can achieve this success, regardless of their income level.

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Outlined below are 9 secrets that will help you in your goals of achieving financial freedom.

1. Stop Unnecessary Spending

We often spend money inwardly, instead of objectively.

For example, you may spend when you’re anxious, depressed, restless, exhausted, from fear of missing out, or to please others. This is a very unhealthy way to handle your finances.

To stop this habitual spending, log down all your spending over the course of a month.

Just as some people keep a food diary, keep an expense diary. Remember not to just write down how much and what you spent the money on, also include the circumstances of why you spent the money. Was it an impulse buy at the checkout line or was it something you planned to purchase?

This increased self-awareness could enable you to avoid triggering situations in the future when you are considering an impulse buy.

2. Plan a Monthly Budget

This is a great opportunity to get serious.

Take a seat with your spouse or partner and make a monthly budget based on your income, not your expenses. You are never again going to spend more cash then you have on hand.

Overspending is the thing that led you to more financial obligations. Make sure you decide every month what is coming in and what will be going out and stick to that budget… no matter what.

3. Cut-up Credit Cards

Perhaps you are the type of person who always pays your credit card balance in full before the end of your billing cycle, and enjoys the reward points you gain. If this is the case, then you’re already way ahead of the game.

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If not, you may want to consider ridding your life of the burden that credit cards bring.

Many cards have strategies set up so that if you make a certain number of late payments, they will raise your interest rate much higher. This can really add up in the long run and you won’t be doing your financial situation any favors. If you’re prone to late payments or have a large balance due on your cards, cut them up!

Without proper self control on credit card spending and payments, you are basically throwing your money away. To ensure that you have better control over your spending, use only cash or debit for all future purchases (and don’t forget to pay at least your minimum payment on your cut-up cards each month!).

4. Increase Savings

There is no doubt that for a comfortable retirement you must accumulate satisfactory savings throughout your working life.

It’s good practice to save up to 15% of your income.

Start with your workplace 401(k), if you have one. If not, a Roth IRA (if you are eligible) or a traditional IRA (if you are not eligible for the Roth) are the next logical steps.

Increase in longevity means you might be able to look forward to 25 to 30 years in retirement, or possibly even significantly more. Investing now in good retirement plans will ensure that you have a guaranteed a stable monthly income when the time comes to stop working. [1]

5. Invest Wisely

Consider investing in funds.

Specifically, you will gain higher returns if you invest in different types of mutual funds such as Debt funds, Equity funds and Hybrid funds with a proper balance, although it absolutely relies on your personal preferences and sense of risk taking.

To get the most of these benefits, make sure you are investing in a variety of assets. Another resource of investing in mutual funds is SIP (Systematic Investment Plan) where you invest some money every month in funds. SIP works by averaging the per unit price of the stock.

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Mutual fund investors are aware of the benefits of an SIP (Systematic Investment Plan). For one, it is the most secure way to invest in equity mutual plans so that wealth is created over a long period of time. This plan also helps you to gain a better sense of financial discipline, which will come in handy in all your financial endeavors.

6. Invest in Gold

There isn’t really a better way to invest in gold than to have the physical gold itself in your possession.

You can purchase gold coins and bars from mints as well as from coin dealers and other private sellers.

Another way to invest in gold is through ETFs (Exchange Traded Funds).

These are is similar to mutual funds but they are exclusively investments of gold. ETFs are great because they offer more liquidity; the ETF owns the actual physical gold, stores it, and retains the value of the shares. These shares can then be bought and sold in the stock market, and one big benefit is that the transaction costs of gold ETFs are much lower than the that of physical gold.

With its consistently-increasing demand, investment in gold can be very wise long-term investment to make.

7. Stash Emergency Funds

Whether it’s a cash gift or a work bonus, always try to save any extra money that comes your way rather than making unneeded purchases.

If you get paid every other week, you’ll get an “extra” paycheck (three rather than the usual two) twice a year. Either save those paychecks towards your emergency funds or utilize the money to pay down other obligations, such as loans, credit cards or other debts.

Make it hard to get your cash.

Put your savings in an alternate bank, maybe an online bank that forces you to delay for several business days before transferred money hits your regular bank account.

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8. Find Fabulous Mentors

Find a mentor, such as a friend or family member, who has exceptional control over their finances and pay attention to everything they do.

If you do not have any friends or family that are enjoying financial freedom, then find a mentor online! There are numerous blogs and guru websites featuring the advice of many people who have reached financial freedom, and they exist primarily to let you in on how to achieve it for yourself.

There are also plentiful forums available that share tips and tricks on how to best achieve financial freedom. Read as much as you can and start changing your habits for the better.

9. Be Extra Patient

Patience is the key of financial success.

Being patient can be quite tough, especially when you’re struggling with your finances, but having faith is worth it. You’ll continuously be on the right track if you are taking the proper steps above.

So don’t be discouraged, even if you are only saving a few dollars a month; it all adds up. Within just a few years you’ll look back proudly at your accomplishments and be glad that you had the patience to get there.

Financial Freedom for All

Anyone can achieve financial freedom, regardless of their financial circumstance.

Use the tips provided above to get yourself on the track to financial freedom and toss your monetary concerns out the window. If you wish to achieve a life with financial freedom for yourself and your family then you must adopt a disciplined approach towards your finances.

Following the simple secrets above is a great start to making your money work for you, so you can work less and live more!

Featured photo credit: rawpixel via unsplash.com

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Reference

[1] Hartford Gold Group: IRA Retirement Accounts

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