Many people don’t realize how some investments can reap benefits in the long run. Emergencies happen; such as medical crisis, needing a down payment for car, home, etc. Building a financial portfolio will increase you net worth. Here’s a few investments that are worth it:
Life Insurance
Choosing the right life insurance for you and your family is important. It’s important to understand the difference between whole and term. Term is very affordable compared to whole life. Whole life is beneficial because it produces a cash value. It is a type of permanent insurance that lasts the entire life of the policyholder. 4 types of life insurance can produce cash value: whole life, variable, universal and indexed. Lets say you purchased a $200,000 whole life . 20 years later, you fell ill and needed funds to pay for surgery and other costs. You then remembered your whole life has a cash value that grew over the years. You contact your provider and you’re now granted $100,000 of the $200,000. Its like taking a loan out of your policy.
Equity
Buying a home comes with benefits: ownership and equity. Equity is a long term strategy to build wealth as the length of ownership goes up. Let’s sat you want to help one of your children in the future and you need $10,000 to save them out of a hardship. You can borrow from your home(equity) and use the money to help out. There are two popular options: equity line of credit or home equity loans With equity line of credit , there are pros and cons.
Pros
You can borrow only what you need and use it on what you want
interest rate may be tax deductible
flexible repayment options
Cons
You are putting your home up for collateral
fluctuating interest rates; no fixed rate
You may find yourself in deep hole by overspending/over withdrawing
Could ruin your credit
Always do research ahead of time!
401k
401K is another great investment that builds wealth over time
You can use your 401k to invest in a business, hardship, medical expenses, etc. Keep in mind, IRS limits the maximum amount you can borrow at the lesser of $50,000 or half the amount you have vested in the plan. The maximum amount that an employee can defer from their salary in 2022 is $20,500.There is also a penalty for pulling out before the required age limit. 401K loans have an advantage over withdrawals since they don’t require paying a 10% early withdrawal penalty fee and income taxes. The only con is setting yourself back. You are decreasing the amount that was initially invested. This could have a negative impact on your retirement savings.
Always do research and speak with professional who can help you choose the right investments for your future. Emergencies happen. It is always good to have multiple back up plans and money allocated. You can’t go wrong when your investments are growing over time!
