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This Basic Financial Knowledge May Save Your Life

What you are about to read may shock your belief system.

You are about to know that the money that you have in your pockets is not true money. True money is something else. What you have is fiat money, which is the current financial system of the world.

From the dollar to the euro and yen and all the paper money of the world are fiat currency. But, what is true money then? We have to understand true money with respect to fiat money.

basic finance
basic finance

Fiat money and true money

Fiat money is the currency that runs on Government certification, but it has no real value as it is not backed by solid and valuable reserves. To understand what means real value, you will have to divert your attention to silver and gold, which have held value for more than 5000 years.

Gold and silver are ancient valuable commodities, which have intrinsic value in human society. The main difference between Gold and Paper currency is that gold does not corrode and therefore it has an immortal stature.

Besides, its yellow sun-like luster has cultural value to human society. It offers the glow that makes it precious because we think it is precious. But, fiat money or paper money is not evenly balanced by an equal amount of gold in Government reserves.

Bankers print fiat money from thin air. It is solely dependent on the faith that we, the citizens of earth have thought to bestow on it. If you are not shocked yet, consider the fact that given the world runs on money, if the money system collapses there is nothing to fall back upon.

But why should you think of the collapse of the monetary system? Is it relevant? Before you get to understand whether is it relevant or not, first a little bit of history about the current system of fiat money that rules the world.

Nixon shock and Bretton Woods system

This event in history has been noted as Nixon Shock. Before the shock, a system of financial exchange called the Bretton Woods system was in place, but the shock was a shock in the sense that it abruptly put an end to the Bretton Woods system.

The immediate consequence of this shock was the loss of direct convertibility of the US dollar to Gold in the Federal Reserve, which was the erstwhile monetary system. According to the Bretton Woods system, the dollar was the index for measuring the value of another currency, and it was redeemable in exchange of gold stored at the US federal reserve at the exchange price of $35 an ounce.

The dollar was based on the gold standard, and all other currencies were put on the dollar standard. But this system began to show signs of breaking down in about 30 years. West Germany was the first to leave the Bretton Woods system as it refused to cope up with dollar devaluation. Switzerland too withdrew its support.

The end to the system came when President Nixon in 1971 passed an executive order on August 15, 1971, ending the convertibility of the US dollar to gold after a closed-door conference with his policymakers. This initiated the new system of fiat money, as we know now.

The paradoxical aspect of this whole complicated problem is that we still purchase gold in exchange for fiat money! Fiat money, simply put, is an illusion that we collectively believe to be true. It has no value backing.

Fiat currency is not new to America. History also shows an interestingly alarming trend. History dictates the fact that in the States no fiat currency has existed for more than 40 years.

General history of Fiat currency

The concept of Fiat currency originated from China during the reign of the Song dynasty, around the 10th century AD. Although originally a Chinese concept, yet it found widespread acceptance and prevalence in the modern history of the United States of America.

From the Bills of Credits of American colonies to the South Sea Bubble, Mississippi Company of John Law and Greenbacks during the American civil war, Fiat currency has never existed permanently in United States financial system.

The greenbacks system and any other fiat currency system introduced in America thereby have failed to be stable for more than 40 years. The current system is 41 years old.

What To Include On A Spreadsheet Of Your Finances

When it comes to money, we all have our grand ambitions and our dreams. Most people have at some point dreamed of winning the lottery or better yet making millions from our own ingenuity and hard work. We all have ideas of what we would buy if we did become rich, and most of us have ideas for what our dream mansion might look like too.

For most of us though, these ambitions will, unfortunately, remain pipe-dreams. But that’s okay; so long as we can fulfill our most basic financial requirements and so long as we can look after our family and keep them safe.

This is a modest ambition sure, but it is all that really matters. Here we will look at how you can make certain that your family have everything that they need and that you will be able to continue providing for them for their whole lives.

We’ll also look at how you can make use of modern technology and software in order to be even more certain – and at how these tools can give you the edge and really ensure you aren’t caught out.

Keep an Emergency Fund

Keeping money aside is one of the most important and simple ways to avoid getting into financial trouble. This is essentially a ‘rainy day fund’ that you can draw on when everything else goes awry and that you will make a pact not to touch the rest of the time.

To do this you need to create a strict budget and put away a certain amount per month into this account to ensure that it grows. Thanks to technology this is easier than ever before.

First of all, you should make sure to actually create that budget using Excel or another piece of spreadsheet software. This will allow you to keep track easily of how much you are spending every month, how much you need, and how much you can safely put away for that rainy day.

Next set up online banking with an e-savings account. This is a very useful way to make budgeting that much easier and to make yourself that much more likely to actually stick to it.

This way you can transfer money as easily as you can click your mouse button and that means you’re less likely to put off doing it.

Most e-savings accounts are also very good prospects for savings because they offer higher interest than current accounts (particularly in the first year) but still allow you to access them immediately which you might want to do seeing as this is an emergency fund.

Note that your savings and your rainy day fund should be separate – this way you won’t be compromising the future property you hope to own or your children’s education whenever you’re forced to draw on it.

Take Out Life Insurance

Taking out life insurance is a crucial way to protect your family from your own demise. Of course in the tragic scenario that this should happen, your family are going to be far too busy mourning you to think about money and that’s going to be the last thing on their mind.

Still, though, it’s important that they should be able to get on with their lives without risking being turfed out of their home, or finding themselves in serious debt – and you will want them to be able to continue with the standard of living they’ve come to know.

Taking out life insurance can help you with this, and going online to find the very best deals on life insurance and to learn about all the different kinds available is the most effective way to ensure that your family is protected in all circumstances and that you aren’t paying over the odds.

Be Sensible

The best way of all to ensure that your family is protected financially is to simply spend your money sensibly and avoid extravagant purchases or poor decisions.

This means reining in your impulses and thinking about the greater good, but it also means budgeting as you go and keeping track of your spending.

There are plenty of great apps out there for your Android or iOS device that can help you to monitor your spending, and any of them will help you to avoid poor decisions that could land your family in debt.

How to Avoid the Worst Financial Situations

You can get into a bad financial situation even if you have good intentions with the financial decisions that you make. Most people are not lucky enough to get financial coaching to help them when they go off on their own.

If you want to avoid getting into a jam because of poor planning or a simple lack of knowledge, it’s important to learn how to avoid getting into the scary and draining financial situations in the first place. Here are 4 common mistakes you can make, and how to avoid making each mistake for the sake of your financial future.

worst financial situation

Do Not Put Your Retirement Account in Debt to Pay Off Debts

It may seem like a good idea to pay off your high-interest credit card with a 21 percent interest rate with your savings that is only accumulating 5 percent. Individuals who do not have experience with finances see it like they are pocketing money by paying off the debt, but in reality, you are withdrawing from an account that is very difficult to pay back.

Even the most disciplined savers find it hard to rebuild a retirement account after they have started to borrow from it. The last thing you want to do is put yourself in a situation where you have to pay yourself back. Instead of doing this, try to pay down your debt by making additional payments above the minimum amount due so that the principal will go down.

Build an Emergency Fund

A rainy day will come, and not having an emergency fund when the times get hard can lead to financial disaster. Preparing for the emergencies that you can’t predict is the best way to avoid relying on a credit card or your rent money to pay for unexpected medical bills, car repair bills, or bail bond premiums in Cleaveland OH, that you would have never thought you would need to pay.

According to A-1 Bail Bonds, Inc., having a 3-month buffer to cover expenses is recommended, but if you can’t do this right away, make a plan to put even a small amount away every time you get paid.

Have a Detailed Budget

With all of the finance apps and different online tools you have at your disposal, there is no reason not to create a budget. This is the only way you can truly see where your money is going, and why you might find your entire paycheck is gone days after it is deposited into your account.

It may seem like budgeting takes too much time, but your financial future is at the mercy of your budget. Track your spending for a month, and then make a budget to curb your spending on things like entertainment, eating out and shopping.

Get Insurance to Protect Your Finances

When you’re young, you might think you have no need for medical insurance. As you age, you’ll realize that one hospital bill can cost you hundreds or thousands of out-of-pocket. The monthly cost of insurance is predictable, the cost of an uninsured hospital stay is not.

Even minor mistakes can lead you to financial ruin. If you would like to avoid making the worst financial mistakes, be sure to consider these tips and you can save more and spend less.

Ways To Improve Your Financial Situation

Like losing weight, improving your personal finances is one of those goals that everyone has but few seem to accomplish. In both cases, the goals are worthwhile but the paths are difficult and full of unpleasant realities.

Both weight loss and personal financial improvement rely on the individual’s willingness to control impulses and act with restraint. They require a strong focus on long-term benefits rather than short-term satisfaction.

The best way to improve your financial life is to enact a series of serious changes in the way you view and spend your money. The list below will show you that restructuring your financial life is actually a fairly simple idea- you cut your spending with a budget and you also repay all or some of your debts when you sell an annuity payment.

By setting some concrete goals and exercising self-control, it is possible to get your finances back on track in a relatively short period of time.

Make a Budget

You always need to know how much money you have. You then need to allow a certain amount of that money to essentials and some to your savings. The point of saving is to cover long-term expenditures like your retirement.

You will also need to create a rainy-day fund to cover any unforeseen expenses. The goal of a budget is to give you an understanding of your money as well as give you control of it.

Your budget will show you where your money is going and allow you to eliminate or curtail expenses as necessary. Once you know what your expenses are, you will want to look at the big ones and find ways to lower them.

Take Care of Your Health

Any improvements you make to your financial life can be quickly derailed by a sudden illness. A study released by the American Journal of Medicine showed that the cost of healthcare in the United States is responsible for 62 percent of bankruptcies.

Having good health insurance can help to protect your savings in the event that you get sick. An even better option is to adopt a healthy lifestyle.

Handle Your Debt

Debt can be overwhelming for many people who live under the crushing burden of student loans and medical bills, but it is an important priority for people seeking to better themselves financially. Before looking to invest your money, cover your debts.

One way you may be able to do this is to sell an annuity payment. Selling annuities for a lump sum is not recommended in all cases, but is a good idea when it can get you out from under a high-interest loan payment.

6 Tips For Pooling Resources In A Financial Emergency

The unfortunate truth is that financial emergencies can and do occur from time to time. In some cases, individuals are caught ill-prepared for these emergencies, and they may be forced to accrue debt or rely on the good graces of friends and family members to help them out of their situation. However, many people may have financial resources available to them that they can draw from. Here are a few of the tips that you may follow to pool your resources to help out with a financial emergency:

financial emergency

1. Use Your Rainy Day Fund

You may have been saving your pennies for a vacation or to buy new furniture for the living room, but the fact is that your rainy day has officially arrived, and that fund is generally the first resource to draw from in a financial emergency. You can access money in your savings account without penalty or accruing fees.

2. Pull From Cash Value Life Insurance

If you have a cash value life insurance policy, a call to your insurance agent may provide you with great news. In some cases, you can take out a loan against the accumulated cash value in the policy. In other cases, you can simply decrease the face value of the policy without having to repay the funds.

3. Sell Your Stocks and Bonds

You can also consider reviewing your portfolio of stocks and bonds. Selling stocks and bonds may be done with minimal cost to you, and the only expense is usually the expense associated with trading fees. However, take note of losses or gains that you may incur by cashing in now. Also, if you trade in some bonds early, you may pay a fee.

4. Borrow From Your Retirement Account

If you have an IRA or 401k retirement account, you may be able to borrow from your account. You can contact your broker for more information about the repayment plan, the fees and other details that may affect your decision to borrow from these accounts.

5. Cash in Your 401k

While borrowing from retirement accounts may be one option, another option is to cash in retirement accounts. When you cash in these accounts, you may have to pay a penalty, so this should be done with care. However, if you look to use your option to cash in pension Detroit financial professionals suggest that you first take time to learn more about the penalties associated with this option before you move forward.

6. Take Out a Home Equity Loan

If you have equity in your home, applying for a home equity loan may be a great option. Keep in mind that it may take time for a loan to be approved. However, this option may provide you with a considerable amount of much-needed cash for major financial emergencies.

While a financial emergency can cause you to panic and feel overwhelmed by anxiety, the fact is that many individuals have a number of resources they can pull from to obtain cash. Consider how each of these options may be available to you.

Five Tips Help Get Your Finances In Order

Few things in life are more stressful than when one’s personal finances are a mess. Financial concerns are listed as one of the top reasons couples head to the counseling centers. It is also listed as one of the top causes of depressions and anxiety.

Financial trouble can be truly disastrous to a person and his or her family. The good news is that there is always hope – no matter how dire the outlook. Financial recovery is a possibility for those who are willing to make hard choices and follow a strict plan. The following are five solid tips for getting your finances in order:

Draw Up a Budget

It may seem like a simple step, but this is one of the most crucial steps of them all. A family budget is critical in cleaning up a financial mess and getting the household back on track. When putting together a budget, get the whole family involved.

It is important that everyone understands why the budget is needed and how vital it is to stick to it. One of the key elements of budgeting is prioritizing bills and other expenses. Shelter, clothing, food, and transportation should always come first.

Necessity versus Luxury

Making cuts is most likely going to have to be part of the financial makeover. Cuts are never easy. Sometimes they hurt, but they will heal up as your financial concerns start to clear way to a brighter day.

Go through the items on your list of expenses and talk with the family about which items are classified as a necessity and which are luxury.

For example, budgeting for gas money to get to school and work is a necessity. Budgeting gas money to go on a cross-country driving vacation is a luxury.

Increase Income

If budgeting shows that your monthly income is just not enough to cover the basics, then you have no choice but to find a way to increase the family income.

This could mean one or both partners should find some part-time work, should seek possible raises or should creatively find a way to bring more money into the home.

Cash Instead of Credit

Credit card bills can build up faster than you can imagine. One rule of thumb is that you should never spend on credit what you are unlikely to be able to pay back. Save up the cash for deposits and purchases instead of using credit and paying interest.

Avoid Unnecessary Charges

No one likes overdraft and late fees. Do whatever you can to avoid acquiring these unnecessary fees. Make sure to keep your accounts in good standing to the best of your ability, and keep track of checks and payments so that you are not caught unaware when something comes through.

When your finances are in trouble it can affect every part of your life. Take the steps now to get your finances back in order and you will be glad that you did when the worries start to fade away.

5 Financial Emergencies That Can Make You In Huge Debt

Debt is a demon that is best avoided. While there are many Americans who are comfortable with a small credit card debt or larger home or car loan, it’s the unexpected expenses that can really start to add up and contribute to a crushing load of debt. Here are five major financial emergencies that will lead to serious debt.

finance emergency
finance emergency

1. A Lost Job

A large percentage of the general population lives paycheck to paycheck. A six-month emergency fund is a dream to these folks. Most would have a problem handling a $1,000 expense.

A lost job entails lost income for the average person, and credit cards or loans from a bank or family could be necessary merely to stay above water. No matter your income, try to save a little each month to put away in an emergency fund.

This will help to pay the bills until you find more work if you lose your job. If you can pay for your bills while you look for work, this will greatly relieve stress and give you time to find a worthwhile job, instead of picking up temporary work that won’t pay as much.

2. Divorce

No one goes into a marriage expecting a divorce, but it can happen unexpectedly in your life, causing financial strain. Divorce is often put off by many couples simply because of the financial burden.

If you find yourself in this situation, try to work with your ex as much as possible to determine the best plan for you and your kids. While working with a lawyer is necessary, they don’t have to be there for every decision you make.

3. A Busted Sewer Pipe

Many older homes have clay pipes that tend to crack after a number of years. When these cracks combine with tree roots or the simple weight of the ground on top of them, a collapsed sewer pipe can result. This can definitely lead to an emergency situation as raw sewage can quickly back up into a home.

The financial damages can range from digging up the pipe to digging up the pipe and replacing the flooring, drywall, and furniture. Investing in good insurance will help with these types of home emergencies.

4. A Medical Emergency

Medical debt is the leading cause of bankruptcy in the US, and an unexpected heart attack or cancer diagnosis can lead to hundreds of thousands in debt for those who do not have insurance.

Even those who have insurance can find themselves in debt that reaches into the thousands. If you are suffering from an injury due to someone else’s neglect, work with a lawyer to cover your losses and get back on track financially.

Be sure to save all doctor’s notes and diagnoses as well, since this can help if you are missing work due to an illness or injury. Find doctors and clinics that accept your insurance to avoid paying a huge amount of out-of-pocket fees.

5. HVAC Problems

A new furnace or air conditioning unit can easily run into the thousands, and those who live paycheck to paycheck will probably not have the money set aside for the necessary upgrade when an HVAC system goes out.

A working system can be a necessity in much of the country during the winter months, so debt may be the only way to fix the problem in a timely fashion. Again, an emergency fund built up over time will help lessen the burden.

These financial emergencies are all-too-common, but they can be a surprise to those who experience them. For the majority of the population, these necessities will lead to extensive debt.

A good long-term financial plan and appropriate insurance coverage can alleviate some of the stress. In some financial situations, bankruptcy is the best option for a fresh start. Work with financial experts if you feel overwhelmed and don’t where to start.

Do You Want to Save $100 a Month?

Whether you are single or have a family of your own, it is important to save money every month. However, it can be difficult to save money when wages are going down and prices are going up. But the good news is that it is not impossible.

If you take the time to make some small changes, you can actually save more money than you think. Here are seven ways you can save $100 a month.

100 dollar
100 dollar

Bring Your Own Lunch At least Twice a Week

Going out to lunch every day might be nice, but it can get pretty expensive. If you go out to lunch five days a week, you could end up spending close to $200 a month.

While you do not have to give up eating out entirely, you should consider bringing your lunch to work at least twice a week. It’s not just cheaper; it is also a lot healthier.

Buy the Generic Brand

A great way to save money is to buy generic brands occasionally. Name brand items can get expensive and often are not any better than generic brands. For example, foods like chips, cereal, and bread taste the same whether they come from brand names or generic brands.

Bring Your Own Snacks to the Movies

The snacks they offer at movie theaters are not cheap. If you buy a small popcorn, soda, and box of candy, you could end up spending almost $15 just on snacks. Going to the grocery store beforehand and buying a can of soda and a couple of boxes of candy will save you a lot of money.

Stop Getting Your Coffee At Starbucks

The coffees served at Starbucks may taste very delicious, but they are not cheap. If you get coffee every morning before you go to work, you could be spending nearly $100 a month just on coffee. If you are the type of person who always has to drink coffee in the morning, just buy your own from the grocery store. It is not just cheaper than those fancy lattes; it also contains fewer calories.

Avoid ATM Banking Fees

If you withdraw money from an ATM that does not come from your own bank, you will be charged at least $2 or $3 each time. That might not sound like much, but it does add up. For example, if you withdraw cash every day, you could end up spending at least $60 a month on bank fees.

That is why you should try to always withdraw money from your own bank’s ATM machine. If that is not feasible, go to a nearby drugstore or grocery store and take advantage of their cash back option.

Go Meatless Occasionally

It is no secret that meat is expensive. The good news is that you do not have to eat meat every day to get enough protein in your diet. In fact, it is actually healthier to go without meat occasionally.

There are plenty of other protein-rich foods that you can eat including beans, tofu, and eggs. These foods are much cheaper but will still fill you up.

Get Rid of Your Gym Membership

If you rarely go to the gym, you should consider getting rid of your gym membership. There is no sense in paying at least $30 or $40 a month for something you do not even use. Instead of paying for a gym membership, go for walks outside or do strength training exercises in your living room.

As you can see, it is not that difficult at all to save $100 a month. If you follow these tips, you should be able to put some money into your savings account in no time.

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