Even if you’re not thinking about retiring in the near future, chances are you’re still thinking about retiring. According to CNBC.com, it is possible for you to retire with $3 million ready to go, no matter what age you start thinking about it.
If you’re in the market for a new budget, you’ve probably heard of the 50/20/30 method, right? The plan is pretty simple: take your income after taxes and divide it– 50-percent on needs; 30-percent on wants; and 20-percent on savings.
How do you differentiate between wants and needs? Well, that is pretty simple. Needs are the things you must pay for and things necessary for survival like rent/mortgage, car payment, groceries, insurance, and utilities. Unfortunately, Starbucks, Netflix and gym memberships aren’t needs. Wants are the things that you spend money on but don’t have to– like a Bentley when a Honda will do just fine.
Suze Orman knows a thing or two about cash. In 1987, she founded the Suze Orman Financial Group and she had a show on CNBC from 2002-2013. Orman has also written nine New York Times best-selling books, so honestly, when has some advice on personal finance, we’re willing to listen.
3 Things You Should Never Do With Your Money (According to Suze Orman):
1. Never co-sign a loan. When you co-sign a loan, you are personally responsible for it.
2. Never take a loan from your 401K.
3. Don’t miss a student loan payment.
And bonus: don’t do anything you don’t understand with your money.
We all grow up dreaming of a wonderful life (yes, the movie). Family and friends who love us. Good job. Nice house. Plenty of food. Enough money to take care of our needs and even some of our wants. When I got married one of my friends was asked to give us some marriage advice. His advice was classic. “Tim, give Terri everything she wants.” He added, “and Terri, only want what you need.” I can still remember his wife catcalling from the background about his bad advice. But, behind his playful banter was a principle. And the principle is this; for a family to be successful the family has to be on the same page and have a plan. Particularly in the area of money. Nothing will challenge a marriage more than how to manage the family resources.
What does a plan look like you say? We use the word budget, financial plan and spending plans interchangeably. But a good financial plan brings a family onto the same page. You would never run a company or a sports team or a civic organization without a plan and yet we run our family finances without a plan all the time and our families are suffering as a result. A recent Gallup poll said that 1 in 3 have a working budget. That means that two-thirds of us are just winging it. Here are some other characteristics of a good financial plan:
- A Good Plan identifies where the family is going to spend the money they make. In later articles, we will give you some percentages to guide you into developing a holistic spending plan.
- A Good Plan identifies what a family is going to give away. Generosity is a very important way to combat the consumptive lifestyles that many of us live. It truly is better to give than to receive.
- A Good Plan identifies what the family is going to save (short term, mid term and long term). The wise man will have resources to draw from when times get tight and attend to the needs of his family tomorrow as well as today.
- A Good Plan freezes and eliminates debt from the budget. The borrower is the lender’s slave and debt must be managed in order to get ahead.
- A Good Plan makes sure that the family has the right protections in place (insurance, will, etc). The people and things you manage need to be protected. Insurance and estate planning can make sure that your assets are protected in the event that you experience hardship.
We are going to be speaking to each of these topics in subsequent posts. Check back in with us. The wonderful life you are hoping for financially may be a little closer than you think. But you need a plan!