Financial Traps: Avoid them

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  1. WITHOUT LIFE  INSURANCE

    Do not go without life insurance if you have anyone depending on you.  If you are working and have a family that depends on your income, you need to have ten times your annual salary in term life insurance.  You can stop buying the insurance when you have built up enough cash to replace your salary (again, 10 times your salary).  It would be normal to buy 20-year level term when the children are born since that will last until they are into college and hopefully you will have become wealthy enough to be self insured by that time. (If you are investing regularly, you will be).  If you do not have a standard job but take care of the children, you should still have insurance to cover a nanny or other arrangements.  If you also take care of the house, money for more meals out, maid service, and other help will be needed.
  2. WITHOUT DISABILITY INSURANCE

    Do not go without disability insurance.  You are much more likely to be disabled than die.  If your employer doesn’t offer disability insurance, be sure to buy some on the private market.
  3. CAR/HOUSING LOAN – Even other LOANS

    Do not grab a new house or a new car through BANK LOANS / financing unless you are worth at least 40 million.  The interest is a cleverly cloaking financial TRAP that may break you. Instead, build them or acquire them at zero interest (Cash).
  4. PUTTING ALL YOUR MONEY IN THE BANK

    Do not have a significant amount of money in cash or bank assets (CDs) when you will not use it for 5 or more years. Just maintain a bank deposit of 6 times of your total monthly expense for if you put all your money there, Inflation will take a significant dent on your savings.  It must be invested in equities, bonds, and real estate to protect its value.
  5. WITHOUT A WILL

    Do not go without a will.  Without a will, the state will get to decide who gets your assets.  This will cause all kinds of stress for your loved ones.  Even if you’re still young and invincible, get a will together.  Also, let people involved know what they will be getting and maybe even send a copy to the executor to keep safe.  It will be tough enough on your loved ones when you die – they don’t need to be fighting over your assets.

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