Money Secrets - The Keys to Wealth

The Rule of 72: It tells you how fast your money will double. If you divide 72 by the Interest Rate you will get the number of years it takes for your money to double. Ex: 72/12= 6 It takes six years for your money to double if you earn 12% interest every year.

Roth IRA is better than a traditional IRA because with a Roth IRA you pay taxes with your initial investment but the money accumulated in the Roth IRA is tax-free when you take it out during retirement. Would you rather pay taxes on your $2,000 annual investment to a Roth IRA and have the money become tax-free at retirement or pay no taxes now and pay taxes on your $500,000 at retirement with a traditional IRA?

The concept of PYF or PAY YOURSELF FIRST is important. What the term pay yourself first means is to pay yourself at least 10% off the top when you first get the paycheck without paying any bills or creditors or monthly expenses. 10% off the top of your paycheck goes into a savings account that you will not touch unless its a business you want to start, to better yourself financially, or to invest.

3-6 Months of Emergency Savings is a MUST. Most people work hard every month but have absolutely no money saved up at the end of the month. Some people go years without any significant savings and are devastated when an emergency comes up and they have to tap into credit cards and loans. Its hard to dig yourself out of debt when you dont leave a cushion of emergency savings to fall back on. The typically recommended emergency savings is 3-6 months of living expenses.

Life Insurance is important for those with family. If you have dependents, its risky not having life insurance. What would your family do if you werent there to provide for them? Who would pay the mortgage and buy the groceries? Buy Term insurance, not whole life. Whole life is too expensive and you get less coverage. You need the cheapest life insurance you can get with an adequate coverage amount to protect your family. The coverage should be at least 10 times your income. For more information on life insurance click here where we complile a list of insurance companies and how you can get a comparison without making any commitment. Find out more at Insurance Company Reviews.

Heres how to Divide Up that Paycheck. The first 10% of your paycheck should be to yourself, in a savings account that you should rarely touch. The next 20% of your money should go to creditors or credit card debt. The remaining 70% is monthly expenses, such as housing, food, car, clothes, entertainment, etc.