Financial responsibility means living within your means. Spending less money than you earn; might sound simple, but in reality, it can be more challenging to follow. As agents selling insurance and financial products, we might talk to many clients who can be financially educated meanwhile others are not that much. It is essential as agents to guide clients toward understanding the products they are purchasing, and at the same time, we can help them better understand their finances overall.
This blog post will review some essential components of a healthy financial life.
The most important principle of personal finance is to spend less than you earn. There is an incorrect concept of believing that a higher salary equals financial stability, and although it is partly true, it is not entirely true. It doesn’t do much good to have a salary of $100,000 when we can spend $115,000. Making a budget and following it requires a degree of discipline and restraint. Discipline yourself to track your budget plan and delay short-term gratification to achieve financial goals first.
2. “Pay Yourself First”
The Pay Yourself First principle can help people to set aside 10% and 20% of their paycheck for savings before paying any debt or bill. A 2018 United States Federal Reserve study found that nearly 40% of surveyed Americans did not have $400 in their savings to cover a sudden emergency.
3. Emergency Fund
Dedicating part of the savings to creating an emergency fund for unforeseen emergencies is recommended. Having a reserve of at least two to four times the monthly expenses can relieve your clients if they suddenly lose their jobs, have to repair a mechanical problem in their car, or cover the medical costs for an accident or illness.
4. Debts and Credit Cards
Part of becoming financially responsible includes paying off debts and correctly using credit. It is recommended not to use more than 30% of your line of credit and pay the entire account at the end of the month. We are financially irresponsible if we cannot repay all of what we borrow from our line of credit. It is not enough to pay a minimum payment because it means we cannot pay for the debt. Therefore we must emphasize this aspect because it is widespread knowledge to issue minimum payments to credit cards, and this practice, although common, is not exactly the right thing to do.
Pay yourself first to create financial capacity to acquire what is known as an asset that makes money grow over the years. Stocks, mutual funds, and real estate are some of the best-known investments. There are several types of insurance investments to choose from, and as an agent, you can provide insight into this area to your clients.
Finally, financial responsibility also includes protecting family, investments, and property. Obtaining insurance is an essential component of a healthy and accountable life. Health insurance, life insurance, and all kinds of insurance are tools that help families and assets to be safe in the event of an accident, illness, or death.
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We hope that this information on financial responsibility was helpful to you as an agent.
Empower Brokerage is dedicated to helping you make informed decisions about your health and finances. Whether it’s through webinar training, one-on-one calls, seminars, or marketing plans, we want you to be successful!
Give us a call at 888-539-1633 or leave a comment below if you have any questions.
Jessimar Lopez graduated from the University of Puerto Rico Río Piedras Campus with a bachelor’s degree in audiovisual communications and participated in a study abroad internship at the University of Málaga with the sponsorship of the Benjamin G. Gilman Scholarship. She joined the Empower Brokerage team in 2022 as a videographer and editor.