One of the greatest things about capitalism is that opportunities for financial gain are limited only by your imagination and willingness to take risks. Even if you’re living from paycheck to paycheck, there are opportunities to generate enough wealth to live well now as well as help your children—and theirs—to get off to a headstart with their finances. The key to building financial stability that lasts for generations is to have a financial strategy that combines investing, saving, and wisely using credit to your advantage.
Even in the United States, the “Land of Opportunity,” many people fail to achieve their financial goals simply because they aren’t financially literate. Investment opportunities abound in the U.S., but how can you take advantage of opportunities you know nothing about? According to an article in Inc., most people are financially illiterate, but it’s not an illness with no cure. Just like you studied science and social studies in school to get a general understanding of their basic concepts, you owe it to yourself to get at least a basic education in finances. While this article won’t suffice as a textbook for finances, it will introduce you to several key financial concepts that you need to know about.
Understanding how money works is integral to building wealth, but the first thing you need to understand is what wealth really is. Many people confuse wealth with liquid assets or purchasing power, and while they’re related, there are key differences.
Wealth is the total value of your assets versus how much you owe in debt. The way to figure out your wealth is to subtract the total sum of your debt from the total value of your assets, from cash to cars and property. The amount of wealth you have is usually put in terms of one’s net worth. Because of the way debt and liquid assets are calculated as they pertain to your net worth, you can live a lavish life and have a negative net worth, but it’s not advisable.
One could make the argument that debt is the financial concept that governs the global economy. It’s what allows people to make large purchases like homes and automobiles.
What exactly is debt? In the simplest terms, debt is what you owe for products, services, and loans. Some of life’s most essential material goods are so expensive that most people don’t have the cash on hand to pay for them outright. When you buy something you can’t afford outright you become a borrower and you owe that money back to some type of lender.
Cars cost tens of thousands of dollars on average, and the homes usually cost hundreds of thousands of dollars, if not millions. Who has that kind of cash in their wallet or bank account? Not many, for sure. That’s why most people pay for those purchases by using credit debt.
When people think of investment opportunities, they usually think of the stock market, which deals in exchange-traded funds (ETFs), but some of the surest investments are what are known as alternative investments, which are a secondary market.
Alternative investments are properties like precious metals, commodities like oil and natural gas, valuable art, and investment properties. Alternative investment markets tend not to be as volatile as the stock market, but they require more patience to reach their full cash value because many alternative investments appreciate with time.
Yieldstreet is an alternative investments market that aims to not only provide investment opportunities but also to educate investment beginners. To learn more about how Yieldstreet helps newbie individual investors learn the ropes and invest wisely, you should check out online Yieldstreet reviews.
When lenders are trying to decide whether or not they should lend you money or finance a significant purchase for you, they go by your credit score. Sometimes, if your credit score is low, lenders will let you use something valuable that you can give them as payment in the case that you’re unable to repay your debt. The valuable item that you use to guarantee your loan is called collateral or hard money.
Another financial concept that’s important to know about is hard money loans. A hard money loan is a loan that uses collateral to guarantee repayment of the loan. Hard money loans are usually given by companies and individuals rather than traditional financiers like institutional lenders. Even with collateral, it can be hard to recoup the principal and interest of a loan, so lenders use your credit score to determine creditworthiness.
Hard money loans are usually also for businesses and real estate investors than for individuals. NWPrivateLending has loaned hundreds of millions of dollars to real estate developers. When it comes to hard money loans Oregon has a number of options, but if you’re looking for great people, great value, and a company that will be a partner and not just a lender, NWPrivateLending has your back.
Be sure to do your due diligence before selecting a hard money lender, because once the ink dries, if you go into borrower default, then you will lose whatever you put up for collateral. Some hard money lenders have a better reputation for being patient with borrowers than others, so be sure to do your research before choosing a hard money lender. But most importantly, don’t default on your loan. The last thing you want to see is a picture of your old car on some bank or car dealership’s website when you search online for “cars for sale near me.”
As you can see, there are pros and cons that come with hard money loans, so be sure that it’s the right choice for you before taking one. It’s best to get a hard money loan for investment properties because you have a better chance of your investment paying off the loan itself.
Another concept in finances that’s critical for you to understand is insurance. You’ve no doubt heard of insurance, whether it was when you bought a new car or visited your doctor’s office, but understanding it is another thing completely. You pay insurance companies to have your back financially just in case you need emergency funds. Insurance is just-in-case money, i.e. health insurance is for just in case you get sick, and auto insurance is for just in case you get in an auto accident. Life insurance is a death benefit with the payout going to your beneficiaries when you pass away.
Every insurance policy has what is known as a premium and a deductible. The premium is how much you pay for the policy, and the deductible is how much you have to pay out of pocket before your policy starts covering expenses for you.
With life insurance policies, you can actually cash them in if you need emergency cash. In times of financial strain, many people get life insurance settlements, which is when you sell your policy to a company for a cash settlement. The cash value of your insurance policy depends on how much life insurance you purchase.
Sometimes, people suffering from a terminal illness get what’s called a viatical settlement in return for their life insurance policy. A viatical settlement is a type of life insurance settlement for people who have a life expectancy of fewer than 24 months. A viatical settlement can be used for end-of-life care, living expenses, and treatment for terminal illness. However, when considering life insurance settlements, it’s important to be sure that your beneficiaries will be okay financially without your life insurance policy because they won’t receive your death benefits upon your passing.
The financial concept that may help you the most in your daily interactions is haggling. Haggling is simply about getting the best bargain for purchases. Some people are so good at haggling that they never pay the retail price for anything once they start bargaining! The key to haggling is determining how much you’re willing to pay for something and sticking to your guns. You also have to be willing to walk away if you can’t get the price you want. Sometimes walking away is how you walk into your next great deal.
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