Build Wealth and Protect Yourself: Financial Literacy, Debt, and Fraud Prevention
1. Credit Card Debt: The Silent Wealth Killer
Credit card debt is one of the most dangerous forms of debt due to sky-high interest rates. Ric Edelman emphasized that it should be paid off before focusing on any other debts, including mortgages. Start by tackling the card with the highest interest rate while making minimum payments on the others. Then, address the underlying issue: overspending. Break the cycle by evaluating your income versus expenses and creating a realistic, disciplined budget.
2. Watch for Red Flags: How to Spot Financial Fraud
Financial scams continue to rise, targeting people of all ages. Ric outlined seven red flags to watch out for: advisors who stress their honesty, request direct payments, provide their own statements, or promise guaranteed returns. Avoid any investment you don’t fully understand. Always request a second opinion and use services with third-party, independent custodians. If it feels too good to be true, it probably is.
3. Automate Portfolio Rebalancing
Portfolio rebalancing is key to long-term investing success. It ensures your portfolio doesn’t become too risky or too conservative by regularly selling overperforming assets and buying underperformers. Ric recommends using your 401(k)’s automatic rebalancing feature if available. This “set-it-and-forget-it” strategy helps maintain your risk tolerance and supports the classic rule: buy low, sell high.
4. Breaking Free from Financial Abuse
Rene Renick of the National Network to End Domestic Violence highlighted how financial control is a common tactic used in abusive relationships. Financial dependence can trap victims. Steps like opening a separate bank account, saving small amounts of money, and gathering documents like pay stubs and bank statements are powerful first moves. Resources like the National Domestic Violence Hotline (1-800-799-SAFE) and nnedv.org provide crucial support.
5. Say No to Reverse Mortgages on Non-Primary Homes
Reverse mortgages are often marketed as easy cash, but they can be a trap—especially if the property isn’t your primary residence. Ric advised against using a reverse mortgage to pay off credit card debt. Instead, consider financial counseling and behavioral changes to address compulsive spending. Tackling the real problem will put your family on a more sustainable financial path.
6. Don’t Time the Market—Stay Invested
Missing just a few of the best-performing days in the market can destroy your returns. For example, in 2010, all of the Dow’s 14% annual gain happened in just four days. Ric’s advice: don’t try to time the market. Consistency is your best friend. Stay invested to ensure you don’t miss out on growth.
7. Improve Your Financial Literacy
Financial knowledge is your first line of defense. Educate yourself on how money works, the risks of debt, and how to invest wisely. Ric recommends visiting TruthAboutMoneyTV.com for a deep dive into personal finance topics and tools. Initiatives like the Jump Start Coalition for Personal Finance Literacy aim to bring these lessons to schools and communities nationwide.
Financial Confidence Starts with Education
Whether you’re managing credit card debt, preventing fraud, or learning how to grow wealth, financial education is the key. Stay consistent, seek out resources, and empower yourself with the knowledge to make smart financial decisions.
All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.
