Insurance
For younger people, this is generally the cheapest kind of life insurance in terms of actual cash on a year-to-years basis. As such, it is often the policy of choice for young families with large insurance needs and modest incomes.
Term insurance is “pure” insurance. It has no savings or investment component, unlike whole life and universal life, which are described later. With term insurance, insurance company statisticians figure out the probability of youth death and set a rate that, when large numbers of people buy insurance, covers all the benefits that will have to be paid out.
Making Money
Among the many investment books on the market, there was once one entitled Die Rich. For me, I should say NO THANK YOU!
I have no objection to leaving a vast estate behind me when I go, but neither do I have any objection to leaving no estate at all. One owes one's children love, and support during the early years of their life, and enough education to prepare them to make their way in the world. One does not owe them continued support after dear old Mom and Dad pass on. If money is there for them when I'm gone, that's nice. But if I have to sacrifice enjoying my own life just to leave a bundle behind, no thank you. I'll leave them the family Bible, some photographs of myself, and my very best wishes for the future.
Insurance
While universal life may generate a higher rate of return than whole life policies, there is still one drawback to using insurance for investment purposes: When insurance companies take the money paid in by policyholders and invest it, they buy some of the same stocks, bonds, and real estate that you could buy on your own. By investing directly in financial markets, you can pocket all the proceeds yourself (minus brokerage commissions) instead of giving a cut to an insurance company.
Debt
Of all the financial imaginable, the grimmest is falling too deeply into debt. You do not have to be poor to get bogged down in excessive borrowing. Yet there is no reason to slip in beyond your means. Fortunately, there are ways to figure out how much debt you can comfortably handle.Think hard about whether you really want to borrow at all. It is not cheap. short-term rates on personal loans not backed by collateral averaged 17% in mid-1989, and with inflation at moderate levels, you no longer can count on paying back creditors in significantly cheaper dollars. But Some Debts Can Be Good For you too. Not all debts are bad.
Insurance
Planning, unfortunately, involves more than accounting for the things you want to have happen. You also need to be prepared for the things most people don’t want to think about happening. Couples should know what fears and worries the other has, and they need to jointly assess the likelihood of worrisome happenings, their possible effects, and the protective action they need to take.
Home Mortgage
You should now understand that equity in your home does not enhance your net worth, but separated from your home, it has the ability to enhance your net worth over time. I am often asked, "What kind of a mortgage should I use?"
In your own home free and clear or have a substantial amount of equity, you may consider obtaining a conventional mortgage or home equity loan. An amortized loan provides for repayment of the debt over a specified time period (term) by means of regular payments at specified intervals.
Mortgage
Most homeowners approach the goal of outright home ownership-part of the every family dream- in a traditional fashion. They feel that saving mortgage interest and paying off the loan early is the best solution and is accomplished best by applying extra principal to the mortgage, usually with one of four methods (for an in-depth examination of each method):
mortgage
Let’s look at costly misconception held by millions of Americans:
1. Most people believe that home equity is a prudent investment, yet you have proved that it does adequately pass the liquidity, safety, and rate of return test of prudent investing.
2. Most people believe making extra principal payments on their mortgage saves them money.
3. Most believe mortgage interest is an expense that should be eliminating as soon as possible.
4. Most believe home equity has a rate of return and enhances their net worth.
Be A Banker
The prevalent myth-conception is that there are only two kinds of people in the world: those who earn interest and those who pay interest. There is really a third kind of person: those who do exactly what banks and credit unions do- borrow money at a lower interest rate and invest it to earn a higher interest rate. These people accumulate a much great degree of wealth than most people, because they have learned to be their own banker. You maintain that you do not need to pay off your house to be considered “out of debt.” If you have a greater amount of assets in a liquid, safe environment than is needed to wash out liabilities, the net result is positive.
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