The Index Card summary

When your grandparents stumbled upon a must-have purchase that they didn’t have the cash to cover, they paid for it in weekly installments, eventually paying off the item in full. But today, no such delayed gratification is necessary. Credit cards have removed this barrier, and the average credit-card owning American has 3.7 cards to her name.

However, this doesn’t spell financial freedom. In fact, it’s a recipe for financial doom. That’s because this rapid transition toward easily accessible, high-interest credit means that the average American household bears a shocking $7,000 in credit card debt.

The budget people set when shopping for a house is generally based on the amount they can borrow. But invariably, people fall in love with a dream home; before long, they begin to wonder if they can stretch their mortgage just a little bit.

Unfortunately, this is a huge mistake. Rather than reaching past your price bracket, you should assess what you can afford. To do so, there’s a simple rule of thumb: only buy a house if you can put down 20 percent of the purchase price.

Imagine you’ve just started a new job and are signing your contract and other forms. You come across one that asks what percentage of your salary you’d like to contribute toward your retirement plan. You’re young and healthy, so you toss it in the trash. Just like that, you may have thrown away your future. This mistake can easily be avoided.

That’s because the common failure to save for retirement often stems from faulty logic. People tend to think they’ll never retire while the majority of retirees report being forced to stop working sooner than they had planned. In fact, just 20 percent of people work past age 65. You never know when health difficulties, age discrimination, or a crisis in the family might take matters out of your control.

It’s no secret that shopping for insurance can be a depressing and demoralizing experience; preparing for the future brings you face-to-face with all the horrible things that could happen to you and your family. Who wants to do that?

But it’s even scarier to think about what would happen if something went wrong and you weren’t properly insured. What would your loved ones do if something happened to you? Would they suffer financially? If so, you need life insurance.

If you’re in the market for a financial advisor, you might come across people with titles as confusing as “chartered college planning specialist” or “retirement management analyst.” After all, financial advisors depend on convincing clients of their reputation. As a result, there are over 50 different job titles to describe people who specialize in financial planning for senior citizens alone!

So, who should you trust for your financial advice?