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  • Writer's pictureMarc Primo

How Life Works: Welcome to the Real World

Updated: Apr 3, 2020

The following is an article “How Life Works: Welcome to the Real World” by Marc Primo.

After college, reality usually welcomes us into a world where our quality of life depends on our financial know-how and capability. Spend more than your means and you’ll find yourself in debt, but plan ahead to make gainful investments and you have a chance to live a comfortable lifestyle for you and your family. Knowing the ‘ins’ and ‘outs’ of the world of money starts when you step away from the confines of school and into the threshold of real world.

The road to financial freedom is a rocky one but only if you lack the necessary preparation. Read up early to hone your financial literacy and know that you will need more coverage in your early years, and will need even more money in the future when you retire. While younger, you might want to consider your budget ahead for the possibility of having a family where costs will be present for the children’s and wife’s needs, house mortgages, and loans.

In looking ahead, a good financial plan always entails knowing the rules of the money game as banks do. Remember that debt is not purchasing power but money you spend today to be paid by your future earnings. Debt is almost always a constant for everyone and you should be wary of early red flags that may signal danger.

Whether you are in a revolving, fixed, or interest-only debt, work your way out of it as much as you can or at least keep it manageable. Being debt-free takes time unless you win the lottery or stumble into a lot of money, but in the meantime stay committed, develop proper discipline, earn extra income, draft a budget, stick to the plan, and make the tough decisions.

To speed up your financial freedom, opt for an accelerated debt repayment approach by appreciating your principal to debt stacking. Debt Stacking is your continued monthly payments to creditors after your debt is paid in full, so you could target to pay off your next loan as necessary. Paying extra in your principal will go a long way in your road to being debt-free.

Your money in the bank will also be subjected to taxes and inflation so do not assume that it will always be safe there. Earned interest might sometimes be reduced by annual taxes and inflation rates. For example, you put $1,000 in the bank with 4% annual interest or $40. But then you pay 20% tax on the interest, which is $8. This leaves it to $32 for a total of $1032. If the current inflation rate is at 3.5%, which is $36.12, then your money will be reduced to $995.88 making you lose -$4.12 instead of earning more.

In dealing with your investments, make sure that you start early with your long-term financial goals. When investing in shares, know that the stock market is an ever-unpredictable system. Go for pound cost averaging or investing a fixed amount per month regardless of stock market fluctuations as this would allow you to purchase less units when prices spike up and more when they become low. That way, you do not have to worry about determining the right time to invest every time and concentrate more on other things you can do to further appreciate your savings.

Knowing what works for you is winning half the battle of the money game. If you really want to have a more comfortable life in the future, start now and make a good financial plan with a trusted expert and make the proper adjustments and projections as the economy shifts.

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