Smart financial moves involve keeping your expenses low, saving for retirement and staying away from debt. Purchasing insurance protection now, perhaps before you really need it, can position you to deal with the unexpected changes that come your way in the future. The following tips for financial freedom can help younger workers get their financial houses in order and ensure their future flexibility.
First, buy life insurance when you’re young.
Purchasing whole life insurance when you’re young and healthy will allow you to lock in much lower premiums that will never be raised. If you wait until you’re older, when you may start experiencing health issues, you will pay much more. As long as you pay your premium when due, your policy will provide a guaranteed life insurance benefit—which protects your family should something happen to you—and its cash value grows over time giving you increased financial security. These guarantees are customized and based upon the claims paying ability of the issuer. Having coverage, with a guaranteed life insurance benefit and access to cash value should you need it, gives you more flexibility in life.1 If whole life is beyond your budget, purchasing a term life policy is a good alternative. Term life doesn’t have the savings component of whole life, but it gives you life insurance coverage for a set period of time (until the mortgage is paid off, for example) at an affordable rate. This provides financial security for your family should something happen to you, and that security gives you the freedom to venture off the beaten track. Over time, you can convert some or all your term coverage to whole life insurance, which has a cash value component and eligible to receive dividends subject to conditions and limitations. (Dividends are not guaranteed, but New York Life has paid annual dividends for 166 consecutive years.)
Second, pay off debt—then stay away from it.
Few things can limit your future like debt. Some low interest debt can be considered good debt—like a mortgage on your home or a student loan for your education—because it offers the opportunity for a long-term positive outcome that can be scheduled to be paid over time. On the other hand, examples of bad debt include credit card balances and high-interest car loans. This type of debt comes with financial penalties and can be hard to break free from. If you make a point of paying off any debts you have now, you can take more steps to financial freedom by using the money you would have paid on interest to contribute to your savings vehicles.