Having at least a foundation in financial literacy is so important in the average American’s life because without it one will never have the chance to experience what wealth and freedom is all about. The recession and the rising amount of credit card debt that American’s have prompted me to write this article. The urgency of financial education is paramount because people are feeling hopeless and are becoming slaves to their credit cards. This is why I will discuss how a 6-month safety net of cash, investments, and paying off debt can be a good foundation for changing one’s financial future.
Safety nets with cash are always important to any person because one can loose their jobs at any minute and instantly have no source of income. This is why I say having a safety net is important. When one has at least 6 months of reserve cash that can cover all expenses then they will be in better shape. Having this cash can help to insulate you from not being able to pay a mortgage or car note in the event that a job is lost.
The next cushion is investments; this can range from stock to a 401(k) retirement plan. This is important because if you don’t have the 6 month safety net then hopefully you can have some investments you can cash out which will put cash in your hands quickly. Understanding these investments can prove valuable as so that you can understand the tax implications of clearing out an investment account in the event of lost employment.
The last area that can help straighten up your financial house is debt and debt control. Having debt is something we all have, bun we all need to practice good debt control so that balance can be paid off as soon as possible. Most of this debt we have will be in credit cards and those generally carry high interest rates. Sometimes I think debt is the number one burden for anyone when getting their financial houses in control.
Lastly having financial literacy is so important without it one can feel as though they are hopeless and that they will never have money because of debt. If you enact some of these strategies I just suggested then perhaps more financial stability can come into one’s life.