Financial Success and Debt Personal Finance Financial Success and Debt

I. Financial Success “You’ve got to be very careful if you don’t know where you are going, because you might not get there.” -Yogi Berra No matter what our objectives in life, they are easier to achieve if we have less debt and more wealth. There’s more to life than making money.

I. Financial Success Shortcomings You must come to terms with your shortcomings and the consequences for your behaviors. By knowing your problems, you can plan and avoid working just spend money on your shortcomings. Good Habits Financial strategies importance may vary different points in your life. But by knowing and using your good habits, especially when you have a lower income, you can avoid living in fear of unexpected costs.

II. Bad Habits Not Planning Overspending Buying on Consumer Credit Delaying Saving for Retirement Falling Prey to Financial Sales Pitches Not Doing your Homework Making Decisions based on emotion Listening to Non-experts Exposing Yourself to Catastrophic Risk Focusing too much on Money Not Planning: take the time to make sure your investments and debts are not collecting too little or too much Overspending: make sure you have enough money left over to save Consumer Credit: encourages you to spend more than you can afford Delay Retirement: must starting saving as soon as possible, so you can save less of your own income and watch the money grow Sales Pitches: make sure you spend time reviewing offers of high returns and those with a lot of pressure. Homework: shop around, read reviews and get advice from third parties Emotion: when you feel pressure or make major life changes; take time and reflect before making decisions Listening to non-experts: if you’re not an expert you run the risk of following bad advice Catastrophic Risks: Insurance and savings can keep you from ending up homeless in catastrophic circumstances Focusing too much on Money: warp your perspective; relationships and non-monetary forms of happiness are typically more important.

III. Good Debt vs. Bad Debt Real Estate Small Businesses Education Education can be tax deductible Real estate and businesses and unemployable education can also be bad; depends upon the amount of debt and your ability to pay it off.

III. Good Debt vs. Bad Debt Bad Debt (Debt incurred for consumption) Auto Loans Clothing Vacations Other consumer items Tend to have higher interest rates than good debt Goods depreciate in value quickly Financially healthy amount of bad debt is zero

III. Good Debt vs. Bad Debt The financially healthy amount of bad debt is zero. No more than 25% of your annual income. Never buy anything on a credit card that you can’t afford to pay off in fully at the end of the month. Bad debt tends to come with high interest rates, meaning if you hold onto the debt for a long time you end up paying a lot more for the goods than you should.