Eliminate Credit Card Debt
Posted on September 14, 2008
Filed Under Free Financial Course | Leave a Comment
(This is a continuation of the lesson debt reduction.)
Its time to Eliminate Credit Card Debt.
If you currently have credit card or other debts you may be wondering which ones to pay off first. There are two schools of thought. You should decide which one works best for your situation.
High-First Method:
Ideally, you should eliminate credit card debt with the highest interest rates first. By paying off the credit cards with the highest interest rate first you will save more money in the long run. The higher interest rates suck more money out of your pockets each month.
Therefore, getting rid of these first makes the most mathematical sense. However, the next method can have a higher impact due to its psychological effect.
“Snowball” Method:
The second school of thought is to pay off your debts with the lowest balance and then applying the elimated payment to the next lowest balance. This is often referred to as the “snowball effect.” You also have to consider which debt payment will free up the most cash each month.
For example, let’s say you have four debt obligations:
Debts Minimum Pmt. Balance Interest Rate
- Visa $50 $3,000 22.00%
- Am. Express $150 $8,000 17.99%
- Discover $75 $5,000 12.99%
- Auto Loan $300 $2,500 8.00%
Instead of paying off the Visa first (the one with the highest interest rate), it would be a good idea to get rid of the auto loan. That way you can take the $300 per month that you no longer have to pay, and apply it to your Visa. Now you will be paying $350 per month to the Visa card (the next lowest balance). This will significantly accelerate the amount of time it takes to pay off these obligations.
Then take the $350 extra and pay a total of $500 and get rid of the high interest American Express. This method will not only pay your debts off faster, it will cause you to pay significantly less interest over the long run.
Implement a debt reduction strategy (estimated savings - $110 per month)
Simply having a strategy and applying focused attention to it will allow you to significantly reduce your debts. At this moment, decide whether you want to use the High-first method or the “Snowball” method. Once you have decided, write down your debts and decide which ones to pay off first. If you stick with your strategy and apply the extra you will find from budgeting and saving each month, you will be able to pay off your debts faster than you think. In addition, you will no longer be using your credit cards (at least you shouldn’t), so you debts will ALWAYS be decreasing.
The estimated $110 savings is based on someone with $5,000 in credit card debt paying $110 per month. With focused attention, this sort of debt should be able to be paid off in 12 months very easily. Many individuals will be able to do it in as little as 2 months.
Additional Debt Reduction Tactics
In addition to the methods for paying off your credit card debt mentioned above, there are financing tactics that can help you save even more money or pay off your debts faster.
Shop Around for the Lowest Interest Rate (estimated savings - $40 per month).
Simply put, you can save yourself hundreds of dollars each year by lowering the interest rate on your credit cards. I would recommend taking advantage of balance transfer offers that credit card companies frequently send out. You can often get a 0% interest rate on balance transfers for up to a year or more! However, if you get a new card; either close or cut-up the old card to prevent using it anymore.
Now you may be thinking, “I thought the idea was to get rid of my credit cards, not get a new one?” Well, that is correct; however, if you or your family will not be able to pay off all of your credit cards in the next 12 months, you will be throwing away good money, by not doing so.
For example, lets say you have $3,000 in credit card debt, that you do not think you will be able to pay off in the next 12 months. The average interest rate on a credit card is 15.99%. At 15.99% you will be paying about $480 in interest! That’s money down the tubes.
However, if you are able to transfer your $3,000 balance to another credit card at 0% for 12 months, then guess what? You don’t pay a red cent in interest! By simply transferring your balance to a different card you are saving $480! That’s $40 per month.
Remember, only implement this strategy if you have the self control to destroy or never use the old credit card again. This is a SHORT term strategy that is intended to get you out of debt as soon as possible.
This is another one of those Keyblast Bonuses that you can implement right away to begin saving. We have found reputable credit card companies that are offering a 0% or very low interest rates this week. Simply fill out the required information for one of the links below to see if you can begin saving $40 per month or more:
The other financing tactic that may help to reduce the amount of money you pay each month on your debts is debt consolidation. Debt consolidation is simply pooling all of your debts under one loan (whether it’s a credit card loan, personal loan, home equity loan, or a mortgage loan) to reduce monthly payments and/or interest rates. Many factors should be considered when determining whether this is a good option or not. It is not a good option for everyone. In another lesson, we cover debt consolidation in detail.
Credit Repair (estimated savings - unlimited)If you are in a more severe situation where your credit rating has been damaged through unforeseen circumstances or other reasons; you can take some steps to clean up your credit report.An improved credit score could save you literally hundreds of thousands of dollars in interest on mortgages, credit cards, and other loans. According to the Federal Reserve Bank of Dallas to fix errors, dispute items, and improve your credit score:
- Contact the credit reporting company online, by fax or certified letter, identifying the creditor you have a dispute with and the nature of the error.
- Send the credit reporting company verifiable information, such as canceled checks or receipts, supporting your complaint.
- Contact the creditor if the credit reporting company investigation does not result in correction of the error. When you resolve the dispute, ask the creditor to send the credit reporting company a correction.
The credit reporting company must investigate your complaint within 30 days and get back to you with its results. If the issue remains unresolved, you have the right to explain in a statement that will go on your credit report.
(If you have not yet received a copy of your credit report, do so now right here. We will be using it extensively in the next lesson on mortgages & debt consolidation.)
If the errors on your credit report seem too overwhelming, or you would like to have a professional agency help you out; you can do so for as little as $39. One reputable credit repair agency is Lexington Law. This company is an online firm that specializes in improving individuals’ credit and handling all of the associated work.
If you are unhappy with your credit report, I would recommend contacting Lexington Law right here to see if they can help (see below).
- Implement a debt reduction strategy (estimated savings - $110 per month) Decide which debts you will pay off first and whether you will pay off the highest interest rate or use the “snowball effect.” Write this plan down, and STICK TO IT!
- Shop Around for the Lowest Interest Rate (estimated savings - $40 per month).
- Try these current offers: Discover Card
- Credit Repair (estimated savings - unlimited). If you credit is damaged, begin the steps outlined above.
- Or contact Lexington Law, and they will begin the process for you.
To continue on to the next lesson please visit: Mortgages and Debt Consolidation.
Mortgages & Debt Consolidation
Posted on September 13, 2008
Filed Under Free Financial Course | Leave a Comment
In this lesson we will cover mortgage basics, mortgage calculators, and debt consolidation. Mortgages are a fact of life for most people. If you are going to own a home, you will probably need a mortgage. The word mortgage is derived from the French word “Morta” meaning death; or payment until death! It sounds depressing, but it doesn’t have to be.
Don’t Rush In to a Mortgage (estimated savings - possibly a million dollars) Buying a home is HUGE investment. The type of mortgage you get can make your life wonderful or a living nightmare. A few percentage points on a mortgage can really damage your financial future. For example, notice the three interest rate options on a $200k mortgage below:
$200k Mortgage 6.00% 7.00% 8.00%
- Monthly Pmt $1,199.10 $1,330.61 $1,467.53
- Total Paid $431,676.00 $479,017.80 $528,310.44
- Total Interest $231,676.00 $279,017.80 $328,310.44
This chart shows the monthly payments, total paid, and total interest paid on a $200,000 30 year mortgage at 6, 7, and 8%. As you will see by looking at the numbers above, a small change in your interest rate can make a HUGE difference. On an 8.0% mortgage you will not only pay $268.43 more each month (compared to 6%), but you will also pay $96,634.40 more over the life of the loan. You would also miss out on saving and investing this $268.43.
Now if you remember our lesson about Time Value of Money, you already know that $268.43 invested each month over 30 really adds up. In fact, by taking the 268.43 you would have saved by having a lower interest rate over 30 years; you would have accumulated $938,153.22! As you can see, the true cost of getting a higher interest rate mortgage is much more than $96,634.40. In fact, the $268.43/mth invested at 12% over 30 years will actually grow to $938,153.22! This is nearly a million dollar decision! Hopefully, this example illustrates how much a mortgage could really cost you. So, don’t rush in - it could literally be a million dollar decision.
Shop Around If you decide you need to get a mortgage, shop around. As a minimum, you should get at least 2 quotes. You should never rush in and take the first offer that you get. In fact, it is best if at least one of the mortgage quotes that you receive is from a mortgage broker. A broker is able to research many lenders and find the best offers available.
In fact, with so many things being done online; it is even easier to see if you have the best interest rate possible. For example, Lending Tree is a very reputable online mortgage broker. With a simple online application, you can search rates offered from dozens of companies.
If you currently looking for a mortgage, or if would like to see if you can get a better rate on your existing mortgage, try the Lending Tree no-obligation quick quote system below:
Continue >> Debt Consolidation
Debt Consolidation
Posted on September 10, 2008
Filed Under Free Financial Course | Leave a Comment
Debt Consolidation
(This is a continuation of the lesson about Mortgages and Debt Consolidation).
Debt consolidation is a tool that can be good or bad. So, any consideration of a debt consolidation loan should be used with caution.
The advantage of combining all of your debts into one payment is that it can significantly reduce the minimum payments that you make each month. Therefore, this tool can provide significant relief to your budget.
However, debt consolidation can also be a bad move for many people. A mortgage loan is often used to consolidate debts, and can often lead a higher cost over the long run.
For example, lets say the John has 5 different credit cards that total $45,500 and a home mortgage for $224,00. Without going into each and every interest rate, here are some possible options.
- No consolidation. If John pays his debts as they are, he will have monthly payments of $2,410 and will pay a total of $587,561 over 30 years.
- Consolidate all debts with 1st mortgage. In order to do this, John will have to refinance his home loan, and will include the additional $45,500 with the original mortgage. He nows has a mortgae of $269,500 ($224,000 + $45,500) and his minimum payments will be $1,793. You will see that this is $617 less than option 1. However, John will also pay a total of $645,476 over 30 years.
- Consolidate credit cards into a 2nd mortgage. John leaves the 1st mortgage alone in this option. His second mortgage for $45,500 will have a payment of $439 (at 10% interest rate); so his total payments in this option will be $1,892. Over 30 years, he will pay $628,410 towards principle and interest.
So, in summary, John’s consolidation options are as follows:
Options Payment Total Principle & Interest Paid
- 1 $2,410 $587,561
- 2 $1,793 $645,476
- 3 $1,892 $628,410
The above example shows that in this situation, John could reduce his minimum payments by as much as $617 per month by doing a 1st Mortgage debt consolidation loan. However, you will also notice that this option is the most costly as far as interest payments. This loan will cost this person nearly $58,000 more in interest than if they did not consolidate.
In addition, by using the techniques for reducing your budget, making extra payments, and the snowball technique; you might be able to pay your debts off MUCH faster, without ever needing a consolidation loan. So, be very careful be considering a consolidation loan.
Is Debt Consolidation Right for You?
First, pull out the copy of your free credit report that you received in lesson one. (If you do not have one, you can get it right here).
Now list out all of your debts and the minimum payments that you are making. Then use our mortgage calculator to see what it would cost you to consolidate these debts into one loan (follow the example above). This will allow you to see if you could be saving money each month.
To determine whether a consolidation loan is right for you, ask yourself a few questions:
- Can I afford my current monthly payments? (If not, consolidation may be a valid option.)
- If I consolidate, do I have the discipline to save the extra money (without spending it)? If you do not have the discipline, you are better off not consolidating. If you spend the extra money you may have saved from a consolidation loan, you will be in a worse debt situation than before the loan.
- Is there any other way that I can reduce my spending and get out of debt?
- If you can use any other technique, you will probably save money in the long run.
Overall, if you would like to consider if a debt consolidation loan is right for you; contact a financial advisor.
If you would simply like to receive a quote from a mortgage lender with no obligation, they can also explain all of your options. In fact, at LendingTree.com they more than willing to work up several different scenarios for you. This is free advice that you can get from trained professionals, and you are certainly not obligated to take out a loan just for asking. Lending Tree is a good way to get no-hassle information; if you are interested in seeing what your options are, visit their website.
Overall, in this lesson we have covered mortgages and debt consolidation. Most importantly, consider all of your options before rushing into signing any papers!
Review
- Don’t Rush In to a Mortgage (estimated savings - possibly a million dollars). Take a look at your mortgage, and consider whether you might be able to get a better interest rate. Remember, a small change in interest rate really could save you a million bucks. To see if you are getting the best rate possible, go to Lending Tree and apply for a free mortgage quote.
- Shop Around. To see if you are getting the best rate possible, go to Lending Tree and apply for a free mortgage quote.
- List all of your debts and determine if a consolidation loan is a viable option for you. If you think it might be, contact a financial advisor.
To continue on to the next lesson, visit Investments.
Keyblast.com offers a free financial course to help improve personal finances. If you have not done so already, please start from the beginning and learn How to Budget.
Investments
Posted on September 8, 2008
Filed Under Free Financial Course | Leave a Comment
The key to choosing investments is to understand that: the higher the risk, the higher potential return. However, riskier investments also have a higher potential loss.
What is Your Risk Tolerance?
So, before investing, you first need to determine what your risk tolerance is. Your risk tolerance is how much risk you are willing to live with in order to have a chance at a possible return.
Your risk tolerance can be determined by a number of different factors:
- How long are you going to invest? (Longer time = higher risk)
- How much money can you afford to lose? (Higher amounts = higher risk)
- What are your financial goals? Specifically, how much money do you want to accumulate in a certain period of time? (The higher return required = higher risk).
- What is your personal preference (i.e., Are you content to wait, hoping that an investment that drops in value will rise again?) (More patience = higher risk)
- Where is your personal comfort level? (If you are willing to “live on the edge” = higher risk).
You should choose investments that match your risk tolerance. Even though certain investments may earn more in the long run; you need to be able to cope with the fluctuations that are a part of investments.
Types of Investments
There are literally thousands of things you can invest money in. This is not a comprehensive list; however, this is a list of a few major types of investments, along with a brief explanation of their risk levels.
- Savings account. A typical savings account at a bank is a very low risk investment, but also has very low returns. These accounts are typically FDIC insured up to $100,000 (meaning that the government insures your investment up to $100,000); however, the return is usually less than 2.5%. Still, you can find some savings accounts that offer higher returns. For example, E-loan offers much higher rates on an FDIC insured savings account, than most traditional banks. This could be one good option to upgrade your savings account.
- Money Market Funds. Most banks offer a money market savings account. These accounts are not FDIC insured, but typically will earn you a higher return. The bank invests this money in very low risk investments and in exchange, the bank pays you a small return, typically around 3 to 5%.
- Certificate of Deposit (CD’s). Most banks or brokerage firms can offer a range of CD’s. The return is typically determined by the amount you are willing to invest, and the length of time you are investing for. The more you invest and the longer the term, the higher the return. The downside to CDs is that you are penalized if you pull your money out early. So, if you open a 6-month CD, make sure that you will not need the money before the term is over. The typical return on a CD is anywhere from 1 to 6%.
- Bonds. A bond is essentially a loan to someone else, usually a municipality. For example, let’s say the city of San Francisco needs $100 million dollars to build a new bridge. They will ask the public to loan them money in the form of bonds. If you invest $100,000 in these bonds (loaning San Francisco $100K), and the bond has a term of 20 years, then San Francisco is required to pay your money back at the end of the term. In addition, a bond will pay a “coupon payment”, typically every six months. The coupon payment gives an average return on the investiment of around 6%. Therefore, for a bond investment of $100K at a 6% return, each year you will receive a payment of $6,000 ($3,000 every six months). For this reason, bonds are referred to as “fixed income” investments, because your payment is fixed no matter what happens to the value of the bond.
- One of the risks of investing in bonds is that the issuer (San Francisco) may not be able to make the payments, or may go bankrupt. To help investors determine how risky a bond is, Standard & Poors (S&P) and Moody’s rate the risk level of a bond. The higher the rating, the lower the chance that the issuer of the bond will default. For example, S&P rates bonds AAA (lowest risk), AA, A, BBB, BB…to D (highest risk). Investors typically invest in bonds for the income or to even out the fluctuation that stocks have. Bonds with a good rating are considered a very low risk investment.
- Stocks. A share of stock in a company is a portion of ownership in the company. Therefore, if you purchase a share of stock in McDonald’s, you actually own a small portion of McDonald’s. Stocks are considered more risky than bonds and are not FDIC insured. The riskiness of a stock is determined by the company that you have invested in. Therefore the return can vary greatly. You could lose all of your money in a stock, or you could receive a 10,000% return on your investment. The average S&P 500 (the largest 500 stocks) return over the past 30 years is around 12%. The average small cap (small companies) return is closer to 17%. However, these small companies are much riskier. Because investing in stocks can be a risky venture, it is wise to consult an investment advisor for guidance on how to invest in stocks.
- Mutual Funds. A mutual fund invests in a group of stocks in order to diversify the holdings, and thereby reduce the risk. An individual can purchase shares in a mutual fund. These shares will be divided among all the stocks within that mutual fund. Therefore, one share of a mutual fund may actually own a fraction of 10 or more different shares of individual stocks. Mutual funds are typically less risky than stocks; but often have a lower return. A mutual fund that consistently returns greater than the S&P 500 (12% over the last 30 years) would be considered a great mutual fund.
- Real Estate. Investing in your own home is certainly important; however, investing in real estate overall can be a very wise venture. Real estate investing may include rental properties, land, development, “flipping” homes, commercial properties, and many other options. The average annual return on a residential home in the US (depending on loacation) is 1 to 6%.
As discussed, there are a large number of other types of investments; however, the ones mentioned will allow you to obtain great personal wealth.
Continue >> Types of Investment Accounts
Types of Investment Accounts
Posted on September 7, 2008
Filed Under Free Financial Course | Leave a Comment
Types of Investment Accounts
(This is a continuation of the lesson: Investments).
Now we will discuss how to actually purchase investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:
- Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
- Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
- Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
- 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, a good option is Zecco.com. They do not have any account minimums, and they are FREE to use (Zecco stands for Zero Commission). You could save hundreds, if not thousands of dollars in commissions by using them. If you do not have an account, or would like to save on commissions from an existing account; we recommend visiting Zecco.com.
Investing is an essential part of planning for retirement. As we have discussed, using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
- $500/mth at 6% for 30 years = $502,257
- $500/mth at 9% for 30 years = $915,371
- $500/mth at 12% for 30 years = $1,747,482
These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.
Invest with a Plan
Overall, it is important to invest with a plan.
- First, determine how much you need to retire on.
- Second, determine how many years before you plan to retire.
- Third, figure out what type of return you will need to meet your retirement savings goal.
- Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
- Fifth, open the appropriate accounts in order to meet these goals.
In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.
Review of Investments Lesson:
- Determine how much money you need to retire on.
- Develop a savings and investment plan to make it happen (or contact a Financial Planner.)
- Upgrade your savings account to earn more. E-loan currently offers a great rate of return on an FDIC insured savings account. Learn more here.
- Open an investment account. Or switch to a less expensive account like Zecco.com.
Once this review has been completed, please continue onto the next lesson of Wealth Protection.
Types of Investment Accounts
Posted on September 6, 2008
Filed Under Free Financial Course | Leave a Comment
Types of Investment Accounts
(This is a continuation of the lesson: Investments).
Now we will discuss how to actually purchase investments. Typically, in order to purchase different types of investments, you will need to open up an investment account with your bank or an investment brokerage firm. Here are the typical accounts that you can open:
- Individual investment account. This type of account will allow you to buy and sell (on your own or with the help of an advisor) without restrictions; however, there are no tax advantages.
- Individual Retirement Account (IRA). This is a great account to invest money for retirement because it provides tax advantages. The money placed in an IRA is considered pre-tax and you pay no taxes on returns until you take the money out. Because you do not have to pay taxes on your money it will grow larger. You can contribute $4,000 per year tax free. However, if you pull out your money before you reach 59 ½, you will have to pay taxes PLUS you may have to pay an additional penalty.
- Roth IRA. A Roth IRA is similar to a regular IRA, except that it is after-tax money. Therefore, you do not get an additional tax deduction for this type of account. However, after the age of 59 ½, you can pull your money out tax free.
- 401(k) Plan. Many employers offer a 401(k) plan to their employees. This allows you to have money pulled from your paycheck each month and invested in mutual funds before tax. In addition, employers will typically match your investment up to 6% of your income. If your employer offers a 401(k) plan you should be investing as much as possible in it.
If you currently would like to open one of the above mentioned investment accounts, you have many options. For those just getting started, a good option is Zecco.com. They do not have any account minimums, and they are FREE to use (Zecco stands for Zero Commission). You could save hundreds, if not thousands of dollars in commissions by using them. If you do not have an account, or would like to save on commissions from an existing account; we recommend visiting Zecco.com.
Investing is an essential part of planning for retirement. As we have discussed, using the time value of money, investments can grow very quickly. The examples below shows what $500 a month earning a return of 6%, 9%, and 12% can do over 30 years:
- $500/mth at 6% for 30 years = $502,257
- $500/mth at 9% for 30 years = $915,371
- $500/mth at 12% for 30 years = $1,747,482
These examples assume no previous savings. As you can see, simply earning the average market return of 12% over the next 30 years will grow your $500 savings into a healthy nest egg of nearly $1.8 million.
Invest with a Plan
Overall, it is important to invest with a plan.
- First, determine how much you need to retire on.
- Second, determine how many years before you plan to retire.
- Third, figure out what type of return you will need to meet your retirement savings goal.
- Fourth, pick investments that you are comfortable with (and will still allow you to achieve your investment/retirement goals).
- Fifth, open the appropriate accounts in order to meet these goals.
In addition, you would be wise to consult a financial advisor. A good advisor will be able to determine which specific funds or investments are appropriate for your individual situation.
Review of Investments Lesson:
- Determine how much money you need to retire on.
- Develop a savings and investment plan to make it happen (or contact a Financial Planner.)
- Upgrade your savings account to earn more. E-loan currently offers a great rate of return on an FDIC insured savings account. Learn more here.
- Open an investment account. Or switch to a less expensive account like Zecco.com.
Once this review has been completed, please continue onto the next lesson of Wealth Protection.
Keyblast.com offers a free financial course to help improve personal finances. If you have not done so already, please start from the beginning and learn How to Budget.
Wealth Protection
Posted on September 5, 2008
Filed Under Free Financial Course | Leave a Comment
After working diligently to improve your credit and build a retirement nest egg; it is important to protect both your wealth and yourself from identity theft or other financial disasters. In this lesson we will review different types of insurance and protection that are available, and how and when to use them.
Insurance is available for just about anything these days. Most needs can be met with property, health, and life insurance. Along with good insurance plans, you also need to take precautions to protect your identity.
Keyblast Bonus #18: Property, Health, & Life Insurance
1st - Property Insurance
Auto Insurance is required by law on all motor vehicles. The most basic is liability insurance which will cover injury to other people and damage to their property. Beyond liability insurance, coverage can vary greatly.
In general, a higher deductible (the amount you pay out of pocket before insurance kicks in) will reduce your premium each month. Still, the cost of auto insurance can be highly variable from one company to another. You may be able to save a substantial amount for the same coverage by comparing quotes from several different insurance companies. If you have not received a car insurance quote over the past year, you can check at Net Quote to see if your rate is still competitive.
Health insurance for children. Every state provides free or low-cost health insurance for children in low- to moderate-income households. For more information about state programs, contact the U.S. Department of Health and Human Services at 877-Kids Now (877-543-7669) or go to www.insurekidsnow.gov.Or if you would like to see if your current health insurance is still competitive try Assurant Health.
Disability Insurance. According to the Federal Reserve Bank of Dallas, “Statistics show that you have a higher risk of becoming disabled than of dying before age 65. Disability insurance helps you pay living expenses if you are sick or injured and unable to work for a long time. Your employer may offer this insurance in its benefits plan. It is a good idea to buy this protection even if you have to pay for part of the premium.”
3rd - Life Insurance
Life insurance pays money to your beneficiary (whoever you choose) in the event of your death. The amount and timing of life insurance depends on your individual circumstances. Life insurance provides the financial protection for your family and parents. It may even protect your business interests.Lots of different types of life insurance are available and range greatly in price. The cheapest option is to get as much life insurance coverage through your employer as possible.
If that is not an option, or if you would like to see how much life insurance could cost you; here is legitimate company that will search among multiple insurance providers to find the best rates for you. Get a free (no obligation) quote at Insure Me.
Covering all aspects of insurance types, variations, and costs is beyond the scope of this course; however, here are a few additional tips:
- Research the insurance offered through your company and use it to its full capacity.
- Shop around and get at least two quotes.
- Consider a higher deductible to lower your premium.
- Ask companies if they can provide discounts for any reason.
- Review your insurance coverage each year to make sure you are keeping up with life changes.
- Make sure you get all the facts before purchasing insurance.
Continue >> Identity Theft Protection
Identity Theft Protection
Posted on September 2, 2008
Filed Under Free Financial Course | Leave a Comment
Identity Theft Protection
(This is a continuation of the lesson: Wealth Protection).
With the advancement of technology, the way we manage our money has also advanced. Unfortunately, the ways in which dishonest individuals try to steal personal information has also become increasingly sophisticated. In order to protect your identity and financial information, implement these guidelines:
- Shred bank and other financial documents instead of just throwing it in the trash bin.
- Keep important records under lock and key.
- Never carry both your driver’s license and social security card together in your wallet or purse.
- Use a secure mailbox to send outgoing mail.
- Pick up mail from your mailbox as soon as possible.
- Never give out your social security number or other personal information over the phone; unless you are sure of the company or individual that you are speaking with.
- Purchasing items online is usually secure; however, always use caution and make sure you know that the business is legitimate.
If you would like to go a step further; some services will actually monitor your personal identity for you. They will use sophisticated methods to prevent identity theft from occurring, will notify you of suspicious activity, and can help if identity theft has occurred.
If you would like an additional guard against identity theft, a reputable and effective company to use is LifeLock Identity theft services. In fact, they are so confident in their ability to protect your identity, that the CEO has publicly displayed his social security number. His name is Todd Davis, and his social security number is 457-55-5462. It’s not recommended that you publicly display your social security number; however, LifeLock is very well know for their high level of identity theft protection services. To learn more, please visit their website: LifeLock.
Review:
- Make sure that you are properly insured in the 3 areas discussed: Property, Health, and Life Insurance. Get a free quote from NetQuote to see if you could be getting cheaper car or homeowner’s insurance and to get additional insurance needs.
- Get a free quote from Assurant Health for health insurance (if needed).
- Get a free quote from Insure Me for life insurance (if needed).
- Implement the steps mentioned for Protecting your wealth.
- Implement the identity theft protection steps in your life. If you would like to get additional protection against identity theft, visit LifeLock Identity Theft services.
To continue on with the next lesson, please read Entrepreneurship.
Entrepreneurship
Posted on September 1, 2008
Filed Under Free Financial Course | Leave a Comment
In previous lessons we have discussed how to budget, save, and invest the money that you earn. But, what if your current job is not providing you the income level that you need to retire on? There are many ways to increase your income, such as, getting a different job or getting multiple jobs. However, the most lucrative option is often to start your own business.
The purpose of this lesson is not necessarily to encourage you to start a business or even to tell you how to start a business. The purpose is simply to make you aware that most individuals with great personal wealth are all entrepreneurs. So, starting a business could be the missing link between you and great personal wealth.
If you take a look at the world’s richest people as ranked by Forbes, you will see that most of them are entrepreneurs.
Type of Business to Start
The easiest business to start is the one in which you are already in. In other words, if you are a janitor, start a janitorial service; if you are an accountant, start your own practice; if you are a software designer start a software design company. You get the idea.
The main types of businesses can be segmented into three main categories: Services, Products, or Retail.
Services: These businesses tend to be easier to start because they usually do not require as much money to start. Examples of service businesses include the following: house cleaning, window washing, garbage removal, paper shredding, delivery service, consulting, etc. There are millions of service businesses, and they can potentially be very profitable. There are plenty of millionaire plumbers and janitors. They simply started a business and now have hundreds of plumbers or janitors working for them.
Products: In a product business, your company tends to revolve around a new product or invention. If you invented a better stapler, or a different kind of hat, or a way to dispose of nuclear waste; then your business revolves around the product. Most likely, you will need a patent to protect yourself from others stealing the idea.
This is probably the most difficult type of way to start a business; because not only will you need to invent something; but you will also have to develop it, produce it, market it…all before you make any money.
Retail: I call the final categories of businesses “retail”. This simply means that you are selling products (that you did not invent) to someone else; typically the general public. Wal-mart, Saks Fifth Avenue, and the local thrift store all fit into this category. Many people try to open restaurants, which is fine; however, you should know that a restaurant has a VERY low success rate. The costs are high, and it is very difficult to project how many customers you will get.
Other businesses in this category include: eBay type businesses, vending machines, wholesalers, distributors, and many others.
If you are looking for ideas of different types of businesses to start; or more advice on starting a business, visit Entrepreneur.com.
Many things should be considered when starting a business. Explaining all the considerations is beyond the scope of this course. However, one vital component of a successful business is a good business plan that considers Market Potential, Competition, and Strategy.
Have a Plan
First and foremost, when starting a business you need a plan. It doesn’t necessarily need to be a full, written out business plan; however, you should jot down your ideas. Some items to consider are the company’s: Market Potential, Competition, and Strategy.
Market Potential
First, you need to consider whether or not you can make any money with your business. You may have a great idea, but maybe no one can realistically use it, or they don’t want it, or it costs too much. For example, a company called WebVan, decided they would allow people to order anything (bubble gum, t-shirts, pizza, books, groceries), really anything from their website and they would deliver it to your door. They spent hundreds of millions of dollars and opened nationwide. The company lasted less than a year. Why? Because the the market potential was small. The company creators did not account for the reality that they would spend more delivering a pack of gum than they would make from selling it!
Competition
Second, you must consider who you are competing against. If you have created a new and better macaroni and cheese dinner and you want to sell it in Wal-mart; then you have fierce competition. Kraft is a HUGE company and they will squash you before anyone ever tastes your delicious invention.
However, don’t let competition discourage you from developing a good idea. Just because there are lots of janitors, doesn’t mean that you can’t beat them out. The key to overcoming your competition is a good business strategy.
Strategy
Strategy really defines how you will be different from your competition. How will you appeal to your customers? Will you be a low price leader (like Wal-mart)? Will you have the perception of best quality (like Tiffany diamonds)? Will you provide the best service (like Nordstroms)? These are the three main strategies that companies use. There are lots of other strategies that you can utilize, but the key is developing a way that you will be different from your competition.
In conclusion, starting a business is a viable way to build your personal wealth. The main types of businesses are service, products, or retail. In starting a business, it is essential that you have a plan that considers the market potential, competition, and strategy.
The information here really only gives a brief introduction into the opportunities and complexities of starting your own business. If you would like to get step by step instructions on how to start a business, then Entrepreneur.com has excellent books that can help. Visit their website at Entrepreneur.com to learn more.
Review
- Determine if you would like to become an entrepreneur.
- If so, consider if your current occupation could become a business, or if you have any other ideas that you could develop.
- Visit Entrepreneur.com if you would like more complete instructions on how to start a business.
To review all of the lessons covered please continue onto the: Review.
Review
Posted on August 15, 2008
Filed Under Free Financial Course | Leave a Comment
In this lesson, we will review what you have learned in the previous 8 lessons. Although there is no new material in this lesson; reviewing your finances is something you should continually do.
Lesson 1: How to Budget and build Net Worth
The important thing to get from this lesson is that the more money that is spent on Wealth-building Assets versus non-wealth building assets, the faster you will achieve a higher net-worth. This also defines good debt and bad debt. You are encouraged to continue to use our Budget Calculator and Net Worth Calculator. You should continually assess where your budget is each month and you will notice your net worth increasing.
Key Items Discussed:
- Complete the Net Worth Spreadsheet
- Complete the Budget Spreadsheet
Lesson 2: Improve Credit Score
In this lesson, we covered what a credit score is and how to get your free credit score from Annual Credit Report and Privacy Matters 1-2-3. We also briefly touched on how to improve your credit score.
Key Items Discussed:
-
Obtain a free copy of your credit report at: Privacy Matters 1-2-3
-
Also, read the full report, and begin to determine how you can improve your credit score.
Lesson 3: How to Save Money
In this lesson we developed a savings plan to grow your personal wealth. In addition, we offered several day-to-day savings tips to help your bank account grow! As simple as this concept is, it may be the most important lesson to learn.
The knowledge and discipline to budget and save consistently is one that many people never learn. We provided you with the knowledge and offered additional support; however, it is up to you to develop the discipline to consistently save.
Key Items Discussed:
- Eat out one less time each month (estimated savings - $35/month).
- Bring your lunch to work or school (estimated savings - $20 per month).
- Create a shopping list and stick to it when you get groceries, and use coupons (estimated savings - $40 per month).
- Use generic brands
- Lower your utility bills (estimated savings - $20 per month)
- Monitoring Spending - The Cash Method (estimated savings - $20)
- Reduce Car Insurance expenditures (estimated savings - $20 per month). Get a free quote from Net Quote.
- Reduce Homeowners insurance payment. Get a quote from Net Quote and/or 2Insure4Less.
- Set a Savings Goal
Lesson 4: Debt Reduction
The first solution to debt is to stop accumulating more of it. Stop using your credit cards and start paying with cash or a debit card. This will allow you to stop the bleeding of money and begin to heal the debt wounds that you may have. Here are a few tips to eliminating your credit card spending:
- Use Cash
- Keep a written record of any credit card spending and pay it off before the end of the month.
- Limit the number of credit cards that you have (this will also improve your credit score).
- Don’t accept credit cards offers at retail stores just because of a discount or low introductory rate.
- Don’t cash checks that you receive in the mail (from banks or other institutions).
We also covered many other tactics to help you eliminate the debt that you may already have.
Key Items Discussed:
- Implement a debt reduction strategy (estimated savings - $110 per month) Decide which debts you will pay off first and whether you will pay off the highest interest rate or use the “snowball effect.” Write this plan down, and STICK TO IT!
- Shop Around for the Lowest Interest Rate (estimated savings - $40 per month).
- Try these current offers: Discover Card
- Credit Repair (estimated savings - unlimited). If you credit is damaged, begin the steps outlined above.
- Or contact Lexington Law, and they will begin the process for you.
Implementing these strategies will save the average household approximately $150 per month or possibly much more.
Lesson 5: Mortgages & Debt Consolidation
Buying a home is HUGE investment. The type of mortgage you get can make your life wonderful or a living nightmare. A few percentage points on a mortgage can really damage your financial future.
So, if you are looking to get a mortgage, shop around. It could cost you a million dollars if you don’t get the best rate possible.
When getting a mortgage, you should get at least 2 quotes. You should never rush right in and take the first offer that you get.
In addition to shopping around for the best mortgage interest rate, it’s important to do some calculations yourself. We have provided a free mortgage calculator.
To determine whether a consolidation loan is right for you, ask yourself a few questions:
- Can I afford my current monthly payments? If not, consolidation may be a valid option.
- If I consolidate, do I have the discipline to save the extra money (without spending it)? If you do not have the discipline, you are better off not consolidating. If you spend the extra money you may have saved from a consolidation loan, you will be in a worse debt situation than before the loan.
- Is there any other way that I can reduce my spending and get out of debt? If you can use any other technique, you will probably save money in the long run.
Key Items Discussed:
- Don’t Rush In to a Mortgage (estimated savings - possibly a million dollars). Take a look at your mortgage, and consider whether you might be able to get a better interest rate. Remember, a small change in interest rate really could save you a million bucks. To see if you are getting the best rate possible, go to Lending Tree and apply for a free mortgage quote.
- Shop Around. To see if you are getting the best rate possible, go to Lending Tree and apply for a free mortgage quote.
- List all of your debts and determine if a consolidation loan is a viable option for you.