Welcome back for Part 2 of our blog series on Financial Rules for your Life. We hope that you got some benefit out of Part 1 and, without further ado, let’s jump right into Part 2. Enjoy.
Rule #6: Don’t purchase “too much” house
Many people today are finding that their McMansion has turned into more of a debtor’s prison because all of their cash is locked up in it and the maintenance and expenses, including taxes, are devouring all of their money. One rule to start with is simply this; do not spend more than 300% of your gross household income on a house or, if you want another guideline, don’t pay more than 200 times the monthly rent of a comparable property. One last rule is to not buy a home unless you plan to live in it for at least 7 years or more.
All #7: Make sure that you have an estate plan and a living will
There are 3 extremely important documents that, should you become sick, incapacitated or die prematurely, will be vital to your family’s well-being. They include a durable power of attorney, a will and a living will. All three documents will make things much easier for your family after you’re gone and are so important that we recommend, especially if you have a substantial amount of money, having them drawn up by an attorney.
Rule #8: Make sure that your beneficiaries are up-to-date
All of the accounts that you have, including your retirement accounts, bank accounts, insurance and all of your assets, must that have a beneficiary. If you don’t have one, a drawn out and complicated legal battle because will ensue because of that, and drag your family down with it. A good rule of thumb is that every time you have a major life event, like a marriage, divorce, parenthood or death, you review your beneficiaries.
Rule #9: Don’t be tempted to cash out your 401(k)
Many people fall victim to the temptation of cashing out their 401(k) when they switch jobs but that’s a very bad mistake. Much better is to roll it over into an IRA which will give you complete control over how to invest that money going forward and keep it where it should be; collecting compound interest.
Rule #10: Start as early as possible
Our last rule is simply this; start saving, investing and putting away money for your retirement as early as possible. We suggest that, once you got through college and are set in your career, you begin. If you didn’t go to college just simply start as soon as you begin working full-time. The longer that you have your money somewhere collecting compound interest, the better. It’s really as simple as that but you’d be surprised how many people fail to do this simple thing.
So there you have them. 10 Rules that will help you to steer your financial ship through any type of weather throughout your entire life. We truly hope that you found them helpful. If you have questions of any kind about personal finances, please let us know by dropping us a note via email or leaving comments here. We promise to get back to you ASAP with answers to your questions and solutions too.