Life is in the details. It is rare for a single, grand gesture to set the course of a person’s life. It is usually the accumulated result of thousands of little actions. Good habits and bad habits add up day by day and year by year to set lifestyle and circumstances. This applies to diet and exercise. It also applies to financial health.
Let’s look at an example. Imagine that a person’s annual budget allows them to accumulate $1,000.00 each year. That is $83.33 each month or $19.16 each week. They save this sum and get 7% interest at the end of each year. That is a rather healthy investment rate. After 10 years, this results in an accumulation of $14,783.60. For larger monthly savings, this result can be multiplied.
Let’s look at another example. Image that a person’s annual budget carries a shortfall of $1,000.00 each year. Again, that is $83.33 each month or $19.16 each week. They incur debt in this sum and pay 15% interest at the end of each year. This is not an unusual rate for credit card debt. After 10 years, this results in a debt of $23,349.28. For larger monthly shortfalls, the result multiplies.
Small changes can have huge impacts over time. When it comes to estate planning, this highlights the importance of protecting an inheritance as a means to avoid or cancel debt. When it comes to long-term care planning, this highlights the importance of protecting family assets for community spouses and the next generation, protecting income for community spouses, and avoiding future debts through purchases during Medicaid planning such as pre-need funeral arrangements.
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