The road to financial success can be a long one for many, but good spending and saving habits as well as one’s definition of “success” can make it an easier journey. In this article, we will review some of the more common and tested methods towards building financial wealth over time.
One of the biggest factors impeding the financial success of many Americans is credit card debt. In the wake of the pandemic, credit card debt has ballooned in size and the interest rate associated with such debt is extremely high in comparison with other credit products. Prudence in stock market investing or saving part of one’s paycheck may be negated by the fact that penalty rates on credit card debt can amount to an annualized 20% or more. So if you’re carrying high balances on your credit cards, it does make sense to pay off as much as you can before trying to grow your money in other ways. If you are the recipient of future settlement payments, you may make the decision to sell life contingent payments in order to obtain the funding you need to pay down credit card debt. In most situations, the discount rate applicable in such a transfer is lower than the penalty rate on most credit cards. If you have questions about this process or would like to know your funding options, call the team at Life Contingent Capital at (833) 760-4006 or visit us online at www.LCpayments.com from your computer or mobile device.
The other good habit to build which brings big rewards over time is to cut down on frivolous spending or at the very least strictly budget such discretionary spending. An easy way to get started is to simply write down and keep track of your spending on a daily basis. That way, you can easily see the $5.50 cup of coffee or the $15 streaming service add up and fritter away the balance in your bank account. Such lifestyle changes and may not be easy, but many find that cutting back on discretionary spending is a relatively easy adjustment relative to other more drastic changes, and can foster even interesting hobbies such as making coffee at home or reading more books. In the end, spending is a necessary part of life and there is a place for all kinds of expenditures, so your willingness to cut back on nice-to-have items will largely depend on the type of budget you have prepared for yourself and your personal sense of frugality.
Another powerful mechanism or building wealth is by contributing to a 401(k) plan, especially if your employer will match your contributions up to a certain amount. As we know from previous articles, the compounding effect of investing can help modest amounts of money invested today grow into a sizeable nest egg over time, providing safety and security during retirement years. If you are lucky enough to have an employer that matches your contributions to your 401(k), this can basically be thought of as free money! Let’s say your income is $40,000 per year and you contribute $2,000 over the course of the year. This comes out to 5% of your salary and, if you’re lucky, your employer could match that contribution by also providing $2,000 to the account. In reality, many employers have a limit on the amount of contributions that they will make, if they even make them at all.
Investing through your retirement account is a wise decision also because the money placed into the account is pre-tax, meaning that taxes are not subtracted from the amount at the time and will only be deducted upon withdrawal of the funds. This will allow your money to compound over time on a tax-deferred basis, reducing the among of tax drag on the eventual withdrawal amount in comparison to a sum of money because taxed on an accrual basis.
When it comes to investing in the stock market, most retail investors are better off allocating money to passive investments as opposed to getting caught up in the craze of certain stocks or commodities. There are also services such as reviews of Louis Navellier that you can take interest in. Be sure to do thorough research on possible risks on these services before going high-value. Investing money in any financial security involves risk, and you should discuss any such investment with a financial advisor.
Life Contingent Capital and its affiliates are purchasers of assets. Nothing written on this website or blog should be construed as financial, tax, or legal advice; you should obtain independent financial, tax, and legal advice in connection with any transfer of structured settlement payment rights.
