Rodrigues wk 9

 Samuel M. Rodrigues                                  AP Language & Composition                                            23 March 2021

     All About The Money [Continued]   

    Many in the main-stream media have said it's been quite a week in the United States. With two mass shootings in a week and covid cases on the rise, again, I will have to agree. However, as much I want to delve into these current events, I already said last week that I would continue my summary of The Total Money Makeover. So, I plan on following through on that. In this blog post, I plan on sharing Ramey's approach to personal finance. All you need is a set of common-sense principles: [1] avoid credit, [2] set aside money early in life, and [3] invest in mutual funds. Like I said in my last post, there are easily twenty or more principles that he mentions throughout his book surrounding finances, but these three are by far the most important from a wealth-building and financial security standpoint. 

    

     Alrighty, so let's begin with avoiding credit and loans. If you didn't know already, credit is basically used to spend money you don't have. Many students and young adults are targets of credit card distributors because they supposedly have poor money management abilities. So, yes, we are the targets. The reason why credit is pushed so heavily in the US is to make banks more money. If we fail to pay back the loner on time -which is very likely to happen-, we will have to pay interest or an additional percentage of the money we borrowed, in addition to the money we still owe. Basically, when push comes to shove, you should avoid credit to save your hard-earned money, stay out of debt, and avoid irrational spending.

    Now, we will cover the "setting aside money" principle. It's common sense really. Think about it. If you add a little bit of your income to different saving deposits over the course of months or years, you will have a substantial amount of money saved up. Retirement, education funds, and mutual funds are among the most important long-term investments you can have. Additionally, there are important expenses that you should pay annually such as health, home, and car insurance. To avoid paying unnecessary expenses when you are trying to develop your wealth early on, it is important to follow Ramey's #1 guiding principle, "If you will live like no one else, later you can live like no one else." Essentially, if you avoid paying for things you don't really need right now, you can have a much better lifestyle later on.

    Okay, stay with me now. We are going to scratch the surface of the behemoth that is mutual funds. If you are not already familiar, mutual funds are essentially groups of stocks and bonds that are literally 100% guaranteed to make you money over an extended period of time -usually over five to ten years or more. Although their value may fluctuate, they average a total growth of 12% annually. Compared to the .2 to .5% of most banks, I would say that's pretty good. Mutual funds are intended to be used as profitable long-term investments, not "get rich quick" investments. To avoid losing money, you should find a mutual fund with a good track record and invest in it over time. The last important note I would make here is that mutual funds are tax-free! No matter how much or how little money you make with these investments, know that they are not tax-deductible. However much money you make is yours to keep!

    Hopefully, you found this post to be insightful. As always, if you have any questions or thoughts, feel free to let me know in the comment section below!

All About The Money