Sunday, September 15, 2013

How money works - Answers to financial problems - By Christopher Wallace

How Money Works is designed to help consumers find answers to their financial problems.

It is intended as an overview of how to overcome the most common financial challenges facing people today.


Primerica believes the ultimate key to financial success is knowledge– about how money works, how to make responsible, well-informed decisions and how to get the best value for the dollars you spend. That’s what How Money Works is all about. As part of Primerica’s continuing commitment to consumer education, over the next several months we will discucss common sense financial concepts that can help people overcome the obstacles they face and achieve their goals. We will show you how greater financial security is within reach of every working American.


As the text explains, the critical first step is learning to make wise financial decisions. Primerica encourages consumers to become independent thinkers and always make their own choices, whether they’re purchasing financial products or any other goods or services.


There is a common misunderstanding that average and ordinary folks can’t become millionaires.


That couldn’t be further from the truth.


The fact is, you have the power to accumulate wealth beyond your dreams. Many people who never earned a six-figure income become financially independent. How do they do it? Doesn’t it take a high-level job with a big salary? Or a large inheritance? Or winning the lottery?


The answer is no. No matter what your income level, you can achieve financial security – if you take the time to learn a few simple principles about how money works.


You can get out of debt. 


You can build savings.


You can get on the path to financial independence!


By applying the simple principles discussed here, you can achieve financial security and ultimately reach your goals. But nobody else can make it happen. It’s up to you. You have the power to change your life forever. Ready to get started?

The first step is to take control
Did you know one of the biggest financial mistakes most people make is dependence? Dependence on others allows “outside” factors in people’s lives to control them. The secret to financial security is learning to control te things ou can control.

1. Pay yourself first


Paying yourself first means putting yourself and your family before any other demands on your money. Paying yourself first is a form of self-respect. Deposit a set amount each and every month into an investment program, no matter what other financial obligations you have. It’s amazing how fast your money can grow if you invest even a small amount regularly, at a good rate of return.

2. Adjust your priorities


It’s been said that:


If you make $10 and spend $9 = happiness
If you make $10 and spend $11 = misery


As you begin your journey to financial independence, remember this key point: It’s not what you make, it’s what you keep.


3. Change your thinking


The way you think about money is everything. Your mindset is a powerful thing – especially when it comes to money. That explains why so many of the people who win the lottery … end up losing it all. It helps you understand how so many millionaires are self made. What is the difference between the two groups? It’s how they think. If you think you don’t deserve to be financially secure, you’ll never be financially secure. However, if you “upgrade” your self-image and believe you deserve the freedom and peace of mind that financial security provides, you’ll have a better chance at doing what needs to be done to obtain wealth beyond your dreams.

4. Adjust your lifestyle


Along with setting priorities comes one tough rule of life: you can’t have everything. You have to make conscious decisions about every purchase. An important concept to understand is want versus need.


• A need is something you have to have, something you can’t do without. You “need” food. You “need” shelter.
• A want is something you would like to have. You “want” ice cream. You “want” a bigger house.


If you want to achieve financial independence, you may have to make sacrifices for a period of time and go without some of your “wants.” It’s not that tough, but it is very, very important to your financial health.

5. Earn additional income


If your family income is very modest, things may be so tight that it’s tough to invest more than $50 a month. If you want to make significant progress, consider taking a part-time job to get the extra income needed to start your investment program.

6. Re-align your assets


This is another way to take control and free up income for savings. There are two major areas in which families are not getting their money’s worth that are great areas to target for adjustment:


   * Low-interest savings accounts or accumulations with banks. You can take money from a one percent savings plan and invest it in an area that has the potential for higher returns.
   * High-cost life insurance. You can replace your outdated, expensive cash value insurance policies with term insurance and potentially save thousands of dollars in premium over time!

7. Avoid the credit trap


Credit cards are good for convenience but that’s it. Be careful to avoid the pitfalls of “plastic money.” Pay your balance in full each month and you’ll not only avoid interest charges, but you’ll prevent your balance from escalating out of control. To keep your monthly charges under control, pay with cash. You’ll probably find you spend less when you have to hand your money over. See how many options you have? You do have a choice about your financial future.

8. Set goals and have a plan


You can’t reach your destination if you don’t know what it is. Setting goals gives you two things:


 * An incentive to make the necessary sacrifices.
*  Benchmarks along the way to gauge your progress.


After you’ve set your goals, you need a road map to get you there. You need a financial game plan. Together with your goals, a game plan is the cement that holds together your financial foundation.

In the months to come we will delve into more detail on these topics as you begin to learn “How Money Works.”

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