Jumpstart Your Financial Literacy
The best way to get out of debt and stay out of debt is to become financially literate. It’s easier to control your finances when you understand your finances and how they work. Don’t be afraid of money, and don’t let it control you. When you control your finances, you control your freedom and your future.
To be financially literate, you should understand some of terms and ideas used when talking about finances. Following are a few examples.
- Credit report: Your credit report provides a snapshot of your overall financial situation. Regularly reviewing your credit report can identify any errors or fraudulent activity that might affect your credit rating. The FACT Act gives you the right to a free credit report once per year from each of the three major credit bureaus: Experian, TransUnion, and Equifax. You can visit www.annualcreditreport.com to order a copy.
- Net worth: Your net worth is what you own (your assets) versus what you owe (your liabilities). Assets minus liabilities will give you net worth.
- Interest Rate: This is the amount of money you pay to a lender for the opportunity to borrow money. It is most often a percentage of the total amount borrowed. The most common mistake is not understanding what “APR” means. This is the annualized or yearly rate of interest that you are paying. This rate, divided by 12, will give you an approximate interest rate for each month of the year.
- Net or gross: Net is used to describe the total amount of income you earn before any taxes or deductions take place. Gross is the amount that is actually deposited into your account on pay day. Too often people think only about their net income and forget that their gross can be significantly different. Basing your budget on your gross income will set you up for success.
- Secured or Unsecured: Make sure you understand how the money you are borrowing is set up. If it is secured it will have tangible property associated with it that can be repossessed if you default on your loan. If the loan is unsecured then if you default, in order to collect on the loan, the issuer will have to go through the courts to try to get their money back. This can be a complex process for them, especially if you have a high quality law firm working for you.
- Insolvency: This term is most often associated with bankruptcy. In its simplest form it refers to what happens when an individual, business, city, or country is no longer able to meet all of their obligations. Their income does not cover their expenses and they can no longer borrow more money. Most often this situation will need professional assistance to either negotiate the debt or perhaps restructure or liquidate it in bankruptcy.
If you are struggling to gain insight into your own financial situation, a full service debt relief law firm such as Harold Shepley & Associates can provide helpful guidance for almost any situation. You need to make informed decisions about your situation and may need professional guidance to get you started on the road to financial freedom. Contact us today by phone 1-866-284-7062 for a free consultation or find out more at www.shepleylaw.com
February 23, 2012 Posted in Financial Literacy Tagged financial distress, financial literacy, Pennsylvania Leave a comment
