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Unfortunately, financial management is not something that is taught to children in schools today. Therefore, it is unfair to expect them to consistently make good choices with regard to how they handle their money. However, some basic financial principles can help anyone begin to understand how to manage their money and reap the rewards of intelligent money management. This article will look at five ways anyone can start making smart financial decisions in 2021.
Understanding your Credit Report and Credit Score
Your credit report and credit score reflect how responsible you have been with your money and the financial debts you owe to others. An essential aspect of all of this is that people with great credit pay a substantial amount less for almost all major purchases, partially due to receiving lower interest rates. People with higher credit scores also have more access to cash, which can be used to generate even more income. Everyone should get their credit reports from all three credit bureaus and monitor this closely. Learn how to remove negative items from your credit, improve your overall credit score and take advantage of the many opportunities that will come with having a high credit score
Multiple Income Streams
A job is not financial security in any way. Having multiple income streams is one of the smartest financial moves you can make in your lifetime. Exchanging money for time is not a good long-term financial strategy. It limits you in what you will have the finances and the time to do with your life. Having a job for a short period of time is fine. It may be necessary until your additional income streams are all functioning on a high level. It is also critical to create passive (stocks, options, bitcoin, etc.) and semi-passive (e-commerce, online marketing, etc.) sources of income.
The use of 1031 exchanges is a great way to build tax-free income and eventually own a home of your own free and clear of a mortgage. Using a 1031 exchange company allows any real estate investor to roll all of the profits into their next real estate deal, tax-free! Eventually, this process can be continued over and over again until you decide to purchase your own home. All of your previous deals' profits can be used to pay for your new home in cash. The best thing about it is that it can all be tax-free!
Saving 10% of all your Earnings
Most people have no idea how to properly save money. However, there is a simple concept that has been taught by financial experts for years and even addressed in the popular financial book The Richest Man in Babylon. The concept is easy to follow. Every time you earn money, you should always pay yourself at least 10% first. This money can be designated for retirement, emergency medical expenses, or creating additional income streams. This easy savings strategy can protect you from being derailed from reaching the goals in your life. Consider it an insurance policy to protect your goals in life from being delayed due to financial emergencies. 10% is just the beginning. If you can afford to do more, you definitely should.
Having an Estate Plan that Includes a Living Will
None of us are immortal. It is essential to have a plan that spells out in detail your wishes for how your assets are to be utilized or distributed in the event of your death or having an incapacitating long-term health care need. This estate plan can also be used to protect your children from unfair estate taxes or "death taxes," as they are also called. The use of an estate plan also helps keep the government from gaining a large share of your hard-earned money.
Rome wasn't built in a day, and none of these financial behaviors will make someone rich or even financially independent overnight. The most crucial benefit that comes with everything discussed here is that making these moves can start to put you on the road to financial independence. This is especially important now since the government has proven to be totally incapable of helping American citizens in the way they really need. Hopefully, this will be just the beginning of financial empowerment for all who learn this, and they will be inspired to learn additional ways they can make smart financial moves in 2021.