Understanding a few key terms and taking advantage of them in your own financial planning can help you feel more confident—and add to your wealth!
Here are some you need to know, and how to put them to use to earn you money.
This is a benefit offered by an employer, in which the employer matches your retirement plan contributions up to a certain percent (the average is 4.3%) of your annual salary. Translation: it’s free money for your future.
Employer Match Tip: Max out the match! Let’s say your employer offers a 100% match on up to 5% of your total salary, and you make $40,000 per year. You are contributing 5% of your salary, or $167 each month. With your employer match, that number jumps to $334 per month straight to retirement. If you had just your $167 monthly contribution with compounded interest at 6%, that savings would grow to $73,718.32 over 20 years; with your employer match, that number jumps to $147,436.65!
Term Life Insurance
All life insurance isn't created equal. Term life has affordable monthly premiums and covers you during a set "term," usually between 5 and 30 years, when you are most likely to have a spouse or dependent children relying on your income. Whole life insurance covers the carrier for their entire lives—but with much higher monthly premiums. It costs more because it can also have cash value and double as an investment, but there are better and more profitable ways to invest.
Term Life Insurance Tip: Term life insurance offers significant savings in annual premiums. An online calculation of annual premiums using an average of three lowest prices available in each category for healthy men and women found that for $250,000 of coverage, a healthy 40 year old woman would pay $2,766 per year for whole and $280 per year for term life coverage—nearly 10 times less!
Thirty years ago, the Fair Isaac Corporation (FICO) debuted FICO Scores to provide an industry-standard for scoring creditworthiness that was fair to both lenders and consumers. This three-digit number is based on your credit reports and payment behavior that helps lenders determine how likely you are to repay a loan.
FICO Score Tip: FICO Scores help you gain access to loans and credit, including getting more favorable rates from lenders. You can even estimate your savings using a loan savings calculator comparing rates for different scores. Upping your score can save you thousands in interest over the life of a loan.
A fiduciary financial advisor works for the client, not an investment company. Unlike brokers, they use a fee-only model for their services because they are not profiting from selling investments to clients, and must make objective investment and portfolio recommendations.
Fiduciary Tip: A fiduciary acts in your best interest to avoid all potential conflicts of interest. If you don't have time to manage your finances, a fiduciary is authorized to make investments on your behalf.
This is the amount borrowed and still owed on the loan. A loan repayment will include principal, interest, and fees.
Principal Tip: Adding an additional mortgage payment each year just to pay the principal could knock as much as 8 years off a 30-year mortgage, saving you thousands in interest payments.
Here at Citizens Bank, we believe that education leads to empowered customers with the confidence and knowledge to build wealth. Give us a call to find out how we can help you make the most of every dollar and build a financially secure tomorrow!