Sunday, December 30, 2012

Financial Literacy 101

The next year can bring some unwanted gifts that can be unwrapped if the government doesn't take action.  These include a smaller pay check, cuts on Medicare and tax increases on investments.  Whether these events take place or not it is best to hedge, stocks may be in for the roller coaster ride we experienced in summer 2011 as another credit downgrade for the U.S. may be just around the corner.  We have already been downgraded harshly by China's Dagong Global Credit Rating Co in 2010-11.  Whether you have no clue about the world of finance or are financially literate following a few steps to free yourself of worries and doubts is a good way to start the new year. Why don't you stuff the following steps down your newly emptied Christmas stockings:

1. Be Frugal

It all starts with freeing money to pursue activities/investments you like.  There are things we can't avoid such as rent, mortgage, food, clothes and utilities but even these can be played around with.  Try to shop for deals and get in the habit of buying items that can easily be resold once you don't need or want them anymore.  Open up an eBay account to resell items.  Take advantage of the close to free sites you can make money from such as YouTube, Gumroad and T3Media.  It's not a crime to be cheap it's a gift for those who possess it.

2. Save

Try to save as much as you can from every paycheck or monetary gift.  If you are in debt get rid of it as soon as possible there is no point in giving companies so much of your hard earned money in the form of high interest rates.  You need to save to feel safe and to give yourself breathing room as you don't want to have the feeling of going to work and knowing that if you lose your job you will be in deep financial trouble, get rid of the paycheck to paycheck lifestyle.  You don't want to give anybody that much power or control over you.  Financial troubles are one of the top reasons couples argue, the risk of family violence is greater when the family's income level is low.

3.  Invest

By following step 1 and 2 successfully you are now ready to invest.  It doesn't really matter what you do for a living or even the name of the company where you work at with the right mentality you can multiply your money.  The younger you start the more time you have to let the money pile up.  You have to take risk in order to enjoy the finer things in life.  Yes, 401k's are fine but why not learn about investing by opening up your own stock trading account.  When other people manage your money for you it doesn't put you in the position of control as when you do the investing yourself.  A business, real estate, more education and futures contract trading are other forms of investing that you may want to try.  Sure there will be losses along the way, how you handle them will make the difference between becoming financially free or stuck in a 9-5 job you don't like for life.

4. Be Well Informed

You don't create wealth by coincidence it takes hard work and knowledge of the tax law and the rules that govern investments to make money.  You need to be well informed on how to protect your money and you have to keep finding ways to multiply it.  Get in the habit of reading and reaching out to experts to stay informed.  Go to the bank and ask about mortgage rates, credit cards and interest rates.  Don't place all your trust on others they mostly serve as supplemental instructors most of the hard work will need to be done by you.

5. Be Strategic

As a financially literate person you must think of money making opportunities at all times.  During the 2008 recession when people were losing their homes, as tough as it was for the masses it was also the best time to get in on stocks and commodities as well as real estate.  Once you get the experience and confidence that financial literacy brings set out to make your own path.  You don't acquire wealth by being a sweetheart and letting others decide what is best for you. 

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