Loans :: Balance the Need to Save with the Desire to Reduce Your Loans ::
Balance the Need to Save with the Desire to Reduce Your LoansIf you have managed to accumu late quite a few annoying loans, chances are that you haven’t been too diligent on the savings side of the equation. If so, you have to leave enough room in your loan reduction plan to allow for increasing your savings at the same time. As we head into even tougher economic times, not only will you need to get your debts under better control, but you will also have to build up your savings in case you suffer any financial reversals during the down period. Therefore, you have a formidable but important challenge ahead of you, which may be helped by some reductions in your spending. You may have some savings and invest ments set aside, while at the same time you have let your loans creep up. If so, you must address whether to use your savings to reduce some of the loans. It often makes good financial sense to pay off high-interest-rate loans with savings that are almost cer tainly not earning anywhere near the high interest rates being paid on the loans. However, in view of the tough times ahead, don’t deplete your savings in order to pay off loans. It’s better to keep some emergency funds set aside in order to meet any unexpected needs during any future difficult economic times. You really have two choices if you find that your loans are beginning to approach an uncomfortable level. You can wait for hardship to strike, when it will be doubly difficult to get out from under your indebt edness, or you can start now. I think you know which course is preferable. FOREWARNED IS FOREARMED PREPARING FOR THE UNEXPECTEDThis recession is really taking a toll on our finances. We are having so much trouble making ends meet, and we just got two whopping bills for life insurance and house insurance. I think we will let these policies slide so that we can have some breathing room. Suffering uninsured losses is bad enough during good times, but during tough economic times, it is even worse. Unfortunately, when people find that their finances are pinched, they are tempted to drop some of their insur ance coverage. They know they are taking a chance, but tough times call for tough actions. Insurance, however, should be the last thing you drop. Adequate insurance coverage is essential to ensure your longterm financial well-being: a single gap in your insur ance coverage could jeopardize a lifetime’s worth of sacrifice and savings. If you are confronted with hav ing to make tough choices in your financial life, don’t let insurance be a victim. You might think that if you don’t have much in the way of assets, you really don’t have much to lose by being uninsured. This is not true. Many people who incur medical bills, are sued, or suffer other losses and are not insured, end up having to pay out of their future job earnings. If you are pinched financially, I will show you ways to reduce your insurance premiums to a more affordable level while maintaining the coverage that you need. Another concern that many have is what would happen if their insurance company or any other financial institution with which they do business were to go out of business. ESSENTIAL INSURANCE COVERAGE• Health insurance. This protects you from the out-ofpocket costs of health care and from large cash outflows during a major illness. • Homeowner’s insurance. This insures against property losses, including a home, other structures, personal property, and general contents of the dwelling. • Renter’s insurance. This protects the personal possessions of a tenant against theft or destruction. • Automobile insurance. This protects you from large cash outflows for damages resulting from an automobile accident or theft. • Extended personal liability (umbrella) insurance. This protects you from having your personal assets or future earnings forfeited as a result of a personal liability suit. It provides additional protection on top of homeowner’s/ renter’s and automobile liability coverage. • Disability insurance. This replaces part or most of your wage income if you are disabled. • Life insurance. This replaces part or most of your wage income in the event of your death and covers future expenses of your dependents during a readjustment period after your death. |
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