Even though the United States is the land of opportunity, millions of people miss out on many of the financial opportunities America has to offer every day. You may be one of the many Americans who need a mental makeover when it comes to how you think about money.
The symptoms of financial illiteracy are pervasive and include making enough but never having enough, lack of savings, and any prospects for generating future wealth. None of those symptoms is chronic, but if you don’t get a grasp of your finances, they could become terminal to your happiness and fulfillment. Continue reading to learn some new ways to think about your money.
Rethink Insurance
Many people think of insurance as a tool to be used only when something goes wrong. In the case of a life insurance policy, you can actually cash your own out if you need funds immediately.
Getting hurt at work can be a double whammy because a bad enough injury could sideline you from work and leave you with a mountain of medical bills to pay. Income protection insurance is a type of insurance that keeps on paying you if an injury takes you out of work. It’s a type of disability insurance.
If you work a labor-intensive job, you would be wise to invest in income protection insurance. No one anticipates accidents happening, and no one ever thinks they’ll be the one to get hurt until they are. The best way you can protect your family members from the possibility of you having to miss work due to injury is to get income protection disability insurance.
Rethink Budgeting
The best way to ensure that you always have the money you need for life’s little surprises is to create a budget. There’s nothing new or complex about creating a budget, but it’s the sticking to it part that can be a little difficult.
In essence, a budget is a plan to determine how you’re going to spend your money and make sure you have money for specific needs. The main purpose of a budget is to prioritize spending and aid in saving. Sticking to a budget requires great financial discipline, but you’ll love how much further your money stretches.
If you have an older home, then you should definitely make home improvements part of your budget. You can indeed use a home equity loan to add modern touches to your home, but you should also put money aside for maintenance and renovations as well. Experts say you should put at least 1% of your home’s value into your annual budget to ensure you have money for unexpected breakdowns.
Furthermore, budgeting for home renovations means you’ll always be on the lookout for ways to improve your home. Whether you want to add a fireplace to your living room or new countertops and cabinetry to your all-important kitchen, budgeting is the best way to ensure your next project is always funded.
Rethink Credit
Many people believe that it’s best never to take on debt, but that’s all but impossible in the real world. Could you imagine trying to pay for a new house outright without a mortgage? If you want to buy a house or car, you’re probably going to have to use financing at some point, which means you also should prioritize fixing your credit if it isn’t up to par.
The rule of thumb about credit is that you should try to maintain a credit score of at least 600, but if your score dips lower, that doesn’t mean all hope is lost. There are debt consolidation and debt repair specialists who work hard to help people rehab their financial reputations.
Rethink Investing
One of the most common misconceptions is that you have to buy stocks if you want to invest. One of the most popular ways of investing, and most lucrative, is real estate. Real estate is considered an alternative investment—which is an investment that’s not a financial instrument.
Rethink Saving
Sometimes, it’s hard for people to get motivated to save money. Part of the problem is that many people have a deprivation complex when it comes to saving. That means saving money makes them feel like their withholding something from themselves.
One way to change the way you think about saving is to think of saving as paying yourself. All of the money you spend is what you pay other people, but what you save is what you pay yourself. You should pay yourself at least 10% of every paycheck. In a year, you’ll have enough money to invest. Now, you’ve gone from paying yourself to making your money pay you.