Chapter 3: Understand Your Finances

People don't save enough money. Not only that, they are in debt. A good portion of the working classes' income go to pay all sorts of loans from mortgages, credit cards, car loans and student loans. People are approached everyday to get new credit cards or refinance their mortgage. They are asked to spend rather than save. Debt becomes a way of life. Despite enjoying the biggest per capita income in the world, our biggest problem is money. "I owe, I owe and off to work I go!" We go to work to pay bills, and we pay them all our life. 

For those who save, they put money in savings accounts that pay too little to offset inflation and taxes. In fact, they're losing their money! For those who invest, they put money into risky investment vehicles. Most people buy stock by the recommendation of friends and coworkers. They also put their pension in the company they work for and trust that it will be there when they retire. It's not always the case. 

In terms of life insurance, a large majority of people do not have proper protection or don't have any at all. In most cases, when the breadwinner dies, the family finances will be devastated. Sadly, insurance is affordable for many families. The cost to protect their family is probably much less than what they spend on their daily lattes! The problem stems from a lack of insurance knowledge. Americans can talk effortlessly about cars, the different models, the new features and prices, but very few can identify the different types of life insurance such as term, whole life, universal life, variable or index universal life. They usually pick the right car but often choose the wrong kind of insurance and investments. 

The lack of insurance protection along with the shortage of retirement savings are ticking time bombs for most families. This is not considering the looming problem of health care costs and long-term care in old age. Both Social Security and Medicare are threatened by a tidal wave of deficits. The biggest crisis we're facing is not terrorism, global warming or political stalemate. It's the retirement crisis. It's coming soon, and it will plague our generation. 

Chapter 2     Chapter 4