I have relied on general rules of thumb for the financial well being of clients.
Financial security results by adhering to basic principles:
Controlling Debt
o Not exceeding 20% of your net worth (excluding the mortgage and net equity in the home)
Housing Costs
o should not exceed 28% of your net income
o includes all the expenses related to your house
Emergency Fund
o Represents three to six months living expenses
o Should be liquid and not volatile
This would include your money markets, short-term bond funds, and other cash equivalents.
Retirement Funding
o Contribute 6% on a pretax basis to an IRA or a 401(k)
o Or 8% funded on an after tax basis
Following these four steps should result in the accumulation of enough wealth to retire comfortably
If you would like more ideas contact.:
Charles T Shearman, CFP
Prospero Financial Planning
23 S 8th Street, Suite 3400
Noblesville, IN 46060
Work (317) 774-5136
www.prosperofp.com
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