Here’s a start. Take a breather and look at how you can form a strong financial framework for your life as in for now and for the future with advice from the experts in the business of making money. Granted, nothing beats personalized one-on-one time with a professional (although you should always ensure they have your interests at hand and not just their commission in mind) but these guidelines will help you understand where you stand in terms of money and also reel you in from committing your savings to a bum deal. So cheer up and read on to see how effort plus wisdom can help you move on to easy street where the streets are paved with gold.
8 PERCENT OF INTEREST YOU SHOULD BE EARNING ON YOUR INVESTMENTS EVERY YEAR
Forget the dismal fixed deposit rates. The stock market is too volatile and in light of recent economic crunch, putting all your money down on property may not represent the best returns for your investment. Extraordinary circumstances such as terrorist attacks and even an overdependence on fuel prices are reason why the historical financial wisdom from before cannot be applied today. The conventional ways of investing like stocks, fixed deposits, property and even mutual funds are becoming increasingly harder to turn a profit because you could be saving up to 29 years and in the 30th year, an economic upheavel could easily halve your gains. There are however certain investment products which protect you principal and have the potential to provide good returns. These financial products take the emotional factor out of investment by systematically locking in profits instead of going for greed profits and the law of averages would indicate the returns to be between 7 to 8 percent.
35 IS THE MINIMUM PERCENTAGE OF YOUR TOTAL INCOME THAT SHOULD GO INTO REPAYING LOANS
Don’t you hate it when your pay comes in one day and by the next day, almost all the money is gone? When you overextend yourself, the danger is that you will not have enough money for your living expenses, and this situation will also diminish the pool of money which can go into wealth generation. That’s how some people seem to just zoom by to the top wealth ladder, while others are struggling to absolve themselves from debt. The rule of thumb is to ensure that your house should not be more than 2.5 times the annual combined household income. If a man earned $70,000 per year and his wife earned $50,000 per year, then his house purchase price should not be more than $300,000. An amount above 4 times the combined annual household income is stretching, and it will cause a person not being able to save the required amount for retirement and or your children’s tertiary cost.
14 TIMES YOUR DESIRED ANNUAL RETIREMENT INCOME IS WHAT YOU’LL NEED TO SAVE TO RETIRE ANYTIME YOU WANT
Everyone dreams of that day when they can say goodbye to the office desk ball and chain and wake up to endless days of leisure. The good news is, it doesn’t take as much as you think to retire to a decent monthly stipend of about $7,000 or roughly $84,000 annually. The key factor is the inflation which will gradually diminish your spending power over the years. At an inflation rate of 4% per year, a person’s monthly expenses would have to be doubled in 18 years to maintain the same purchasing power. This means you may need to adjust the amount upwards to ensure you’ll always be able to guarantee your future spending power. As an example, you’ll need to save about $1,176,000 and by keeping this in a good mix of financial products, you can withdraw on the returns without disturbing your nest egg. The golden rule of investment is that time is your friend. Provided you start early enough, you can definitely save enough to raise a comfortable sum which will generate the requisite interest for your living expenses. If you are unsure how to build that nest egg to begin with, adopt a long-term investment strategy which helps you put the money aside every month and builds upon it. Granted, you’ll need to keep your paws out the kitty until the tenure is up, but think of it as your option to retire at will and that should help you rub your hands in glee.
1.5 TIMES OF YOUR ANNUAL INCOME IS THE AMOUNT YOU CAN SAFELY SPEND ON A NEW RIDE
Porshe in pink? I love this baby
While everyone would love to cruise about in a Mercedes or a Porsche, your wallet would dictate the kind of car which you can reasonably afford without having to suffer a nervous breakdown every time your auto installment due. By spending not more than 1.5 times of your annual income, you can quickly pay off the car before its worth depreciates into nothingness. A shorter tenure with minimum loan is the most ideal, as banks normally charge the same rate for a 5 or 7-year loan.
20 PERCENT OF YOUR NET INCOME IS THE TARGET AMOUNT TO SAVE MONTHLY
There’s always this talk about ‘living within your means’ but instead of fussing with the application, you should just go ahead and start saving by putting away a sum of money every month to instill the discipline of saving. For someone who hasn’t started saving money, 20% might be difficult as a start, thus they can start with 10% or even as low as 1% every month, and set a target to increase that percentage every 3 to 6 months once, Saving money is like exercising, the key to start doing it, increasing at your own pace as you feel comfortable. Once you’ve hit that 20% target though, break that savings into two equal parts; 10% going into a long term investment for your retirement or financial freedom account in which the compounding interest does its magic, and the other 10% for other purposes like holidays, education, house renovations and weddings. The most important piece of advice though is don’t save on what’s left after spending. Instead, spend on what’s left after saving!
