Are My Legs Really Strong Enough?
We love keeping up with the Jones' " getting the newest car, having the latest technology, buying the biggest house on the block " but keeping up with them is putting us further and further behind our goals when it comes to paving our way (and our children's way) towards the future. Sure it's okay to have nice things but the wealthy pay themselves first and create assets versus liabilities. Some people may argue and say that a house is an asset€¦but is it really? If you live in a house with a mortgage that is stretching you thin, then you most likely have a liability. Let me discuss with you the four basic building blocks of financial security and how this process will help you.
1. Minimize debt - begin immediately to eliminate all high-interest, non-deductible
debt, and put €smart€ debt to work for you.
Get rid of credit cards, car loans etc. and take on debt such as a manageable mortgage and student loans where you deduct the interest at the end of the year. If possible use a line of credit to (home equity line or personal line) to help you speed up the process of paying of becoming debt-free.
2. Build an emergency fund - have three to six months income set aside to protect you so
that a small emergency doesn't become a major financial crisis.
We all know someone living check-to-check. If you don't, then it is probably YOU! Let's look at the domino effect this can have on us: We are on our way to work when our engine blows out (and we do not have the money to pay for the repairs); if we cannot make it to work we lose our jobs; if we lose our jobs, we cannot pay for our homes; if we cannot pay for our homes, the banks foreclose " okay, we understand where this is going.
Building adequate cash for emergencies may be a challenge for some. If possible substitute using a line of credit for your emergency fund until you can build enough cash to put away.
3. Have proper protection - make absolutely certain that you have the proper coverage
to protect your family from possible financial ruin.
I cannot tell you how many families I have seen living in $500,000 homes and only have $100,000 in life insurance. With today's dual-income families, if one income earner is killed or seriously injured, the family will surely be in a vulnerable situation. Plus, life insurance is how some families have built legacies: The father will ensure a child at birth. The policy is cheap and now the child is covered for life. When the child has children, he or she will do the same for their children. When the eldest in family pass away, the money from the insurance policy is collected and passed back into the family. Hence, you begin a legacy of generational wealth.
4. Build long-term wealth - To meet today's financial challenges, you need to save even
more money, decrease market risk and minimize taxation.
How much is really enough for retirement? That really is situational dependent upon each family. For some it may be a $300 - $400K. For others it may be a $1M or more. But, if we do not start putting money away early and often we may find ourselves working into our retirement years. A company 401K is a good start but it should not be the only savings vehicle for our money. I am not a stock market expert but there are two things I can tell you about the market " It is going to go up; it is going to go down. So, diversify. 10 " 12% of your yearly income should help you retire by 65. I would not recommend maxing out your 401K if the company is only matching 6%. Put the maximum amount of what the company is willing to match and consider an IRA, annuity or an Equity-Indexed product.
1. Minimize debt - begin immediately to eliminate all high-interest, non-deductible
debt, and put €smart€ debt to work for you.
Get rid of credit cards, car loans etc. and take on debt such as a manageable mortgage and student loans where you deduct the interest at the end of the year. If possible use a line of credit to (home equity line or personal line) to help you speed up the process of paying of becoming debt-free.
2. Build an emergency fund - have three to six months income set aside to protect you so
that a small emergency doesn't become a major financial crisis.
We all know someone living check-to-check. If you don't, then it is probably YOU! Let's look at the domino effect this can have on us: We are on our way to work when our engine blows out (and we do not have the money to pay for the repairs); if we cannot make it to work we lose our jobs; if we lose our jobs, we cannot pay for our homes; if we cannot pay for our homes, the banks foreclose " okay, we understand where this is going.
Building adequate cash for emergencies may be a challenge for some. If possible substitute using a line of credit for your emergency fund until you can build enough cash to put away.
3. Have proper protection - make absolutely certain that you have the proper coverage
to protect your family from possible financial ruin.
I cannot tell you how many families I have seen living in $500,000 homes and only have $100,000 in life insurance. With today's dual-income families, if one income earner is killed or seriously injured, the family will surely be in a vulnerable situation. Plus, life insurance is how some families have built legacies: The father will ensure a child at birth. The policy is cheap and now the child is covered for life. When the child has children, he or she will do the same for their children. When the eldest in family pass away, the money from the insurance policy is collected and passed back into the family. Hence, you begin a legacy of generational wealth.
4. Build long-term wealth - To meet today's financial challenges, you need to save even
more money, decrease market risk and minimize taxation.
How much is really enough for retirement? That really is situational dependent upon each family. For some it may be a $300 - $400K. For others it may be a $1M or more. But, if we do not start putting money away early and often we may find ourselves working into our retirement years. A company 401K is a good start but it should not be the only savings vehicle for our money. I am not a stock market expert but there are two things I can tell you about the market " It is going to go up; it is going to go down. So, diversify. 10 " 12% of your yearly income should help you retire by 65. I would not recommend maxing out your 401K if the company is only matching 6%. Put the maximum amount of what the company is willing to match and consider an IRA, annuity or an Equity-Indexed product.
Source...