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How do you define wealth? Is it “a large amount of money and possessions”? But consider this definition: wealth is the financial security that comes from managing your money wisely.

Most of us want to be rich because we think it’ll make our financial problems will go away. Sadly, research shows that people who suddenly come into large sums of money, like lottery winners, are more likely than average Americans to declare bankruptcy within 3 to 5 years.

Professional athletes are another group of people who can suddenly earn enormous salaries, notably while young and not too experienced with personal finance, only to lose their wealth after they retire. A 2015 paper from the National Bureau of Economic Research estimates about 15 percent of NFL players are bankrupt after being out of the league for about 12 years. A Sports Illustrated article revealed that 60% of former NBA players are broke within 5 years of retirement and 78% of NFL players have gone bankrupt or are under financial stress within 2 years of retirement.

Why does this happen? The problem is a lack of basic financial skills: If you don’t know how to manage money, it won’t matter how much you have. Your habits are what contribute to financial success or failure. When people without those skills suddenly come into more money, they often increase their spending. They haven’t learned the financial restraint needed to keep and, most importantly, grow their money.

Being rich means you have money. Being wealthy means you know how to hold on to money and make it work for you. The good news is that if you earn a living wage, you can change your financial habits and create personal wealth. Focus your spending on needs (housing, groceries, retirement savings, etc.) rather than wants (a new sports car, expensive jewelry, etc.). Spend wisely rather than carelessly. Start a savings account if you haven’t done so yet, and then acquire assets with the money you save, like investment accounts and retirement plans. These will provide you with long-term financial stability.

By curbing your spending even just a little, you can begin to develop personal wealth and habits that will stick with you as your income increases.

 

Travel Insurance – Is it Worth the Cost?

With summer here, many people are making plans for a fun get-away. If your vacation plans come with a hefty price tag, then you may want to consider getting travel insurance to protect your investment. This is especially true if the trip includes non-refundable expenses, overseas travel, or your credit card doesn’t provide much coverage. In these situations, purchasing travel insurance is money well-spent.

The insurance cost varies depending on how much coverage you are looking for. You can buy it for single trips or get coverage for a full year. It can cover a variety of risks, from lost luggage to medical emergencies. You get to choose what you want to be covered.

Here are the typical situations/events where having insurance will protect you from major financial losses.

Trip Cancellations – If your trip is canceled due to an illness, a natural disaster, strikes, a death in the family, then this coverage will reimburse you for prepaid, nonrefundable travel expenses. Coverage varies with different agencies, but generally, those expenses include airfare, cruise reservations, hotel reservations, ground transportation, and booked tours.

Lost bags – If your luggage is delayed more than 12 hours and you need clothes, this coverage will reimburse you for clothing, up to a certain limit specified in your policy.

Medical emergencies – If you travel outside the U.S. and you get sick or injured, your U.S. medical insurance won’t be accepted in most hospitals and clinics. Get this coverage to avoid paying for these expenses out-of-pocket.

Lost or stolen cash or travel documents – You’ll get reimbursed to replace your passport or other important travel documents, as well as any cash that is stolen.

You can buy travel insurance through a travel agent or a booking site like Expedia.com. Some airlines offer certain kinds of coverage on their websites. There are also travel insurance companies, like Allianz and Travel Guard, that deal solely in this kind of insurance.

Not all insurance providers offer the same kind of coverage, so do your research. Make sure you read all the fine print before buying insurance and understand exactly what is being covered. Then relax and enjoy a fun trip!

 

Brought to you by our friends at BALANCE