Credit Counseling

And Accumulation Strategy

Credit counseling Step 1: Eliminate all credit card and consumer debt. This provides an immediate "investment return" of 12% to 21%. Not having to pay that interest cost each year is, in effect, the ssame as achieving the same rate of return on any monies invested by you. Therefore, it is the surest and highest form of investment return you can make.

Credit counseling Step 2: Set aside one month's living expenses in the checking account. This is in addition to the current month's living expenses that are in the checking account, so at the beginning of any one month there would be two month's living expenses already deposited in the checking account. This "investment" is for flexibility.

Credit counseling Step 3: Invest between two and six months' living expenses in an interest-bearing money market fund account. This becomes the emergency fund and, in effect, your own bank. As you need money to make a major purchase or have an unexpected major expense or see an opportunity to save through purchasing now instead of later, you can borrow from yourself out of this account rather than from a lending institution. Once the money has been borrowed, it should, of course, be replaced. Step 2 and 3 provide you with flexibility so that you will be guarded against emergencies that come up that might totally drain your resources.

Credit counseling Step 4: Save in an interest-bearing account for major purchases. This is the planned purchase of major items such as automobiles, furniture, and even the downpayment on a home.Steps 1 through 4 should be done in sequence rather than all at once. in other words, you do not go to Step 3 until you have accomplished Step 2. By doing so, you eliminate the need to make a decision whenever an investment alternative comes to you. If you have not already accomplish Steps 1 through 4, you let the options go by.

Today's Bottom Line

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