December 29, 2013

A year’s worth of financial wisdom

Some of the top money advice from 2013.

By Gregory Karp
Chicago Tribune

(Continued from page 1)

But sometimes it’s because they don’t have a good enough reason. Here are a few.

You’ll avoid putting charges for “emergencies” on a credit card and paying finance charges. If you have cash, you can choose higher insurance deductibles, significantly and permanently lowering your annual insurance costs.

A robust emergency fund can help compensate for losing a job, bridging the financial gap until you can get income flowing again. Having a pile of cash can provide peace of mind, a feeling of control and options.

For example, if you have no money, perhaps you will decide against buying an airline ticket to visit a sick relative or say no to an operation that could save your pet’s life. Having extra cash sometimes means you won’t make regrettable money decisions.

PAYING DEBT

It’s a burning question in personal finance: Which debts should consumers pay off first, ones with the highest interest rates or the smallest amounts?

The answer is highest interest rates if you’re mathematically inclined or have no doubt you will pay off all debt. But if you need some encouragement, paying small debts first will give you a feeling of quick accomplishment.

INSURANCE

This is another area of confusion for consumers, and a topic that brings irate missives from insurance sellers. Insurance – auto, home, life – is one of the best spending categories for consumers to save money. It requires understanding the insurance and regularly shopping for better deals.

Among the fundamental questions is, should I buy term life insurance or permanent insurance? Here’s a rule of thumb: Buy term life insurance.

Only buy pricey permanent insurance – whole life, universal life and variable life – if you fully understand the policy, its costs, its rate of return and exactly why you need it instead of term.

Who needs life insurance? People who have others depending on their work income.

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