PATHWAY TO FINANCIAL SUCCESS
1) You need to spend less money than you earn. (if you can't do that, none of the advice below matters.)
2) Pay off your debt, focusing with the debt with the highest interest rate, minimum payments on all the rest.
3) All high interest debt gone? You are cleared to proceed to investing stage:
Take full advantage of your company's 401k Matching (if offered).
Max fund your ROTH with inexpensive, well-diversified mutual funds such as Vanguard Target 20XX funds.
If your income is too high to contribute to a ROTH, consider a "backdoor" ROTH (non-deductible traditional IRA contribution which is immediately converted to a ROTH)
4) After your ROTH is max funded.
Choices:
A) Gamble more in the stock market (again, I recommend no load mutual funds or index tied funds), though gambling on individual stocks can work out if you are lucky. The stock market has trended positive over the years, though we are probably due to a major market correction (drop) soon. Don't invest more than you can afford to lose.
B) Keep money in bonds/money market accounts/savings, which have lower rates of return but should not lose money besides losing slowly to inflation.
C) Consider investing in real estate/real goods/businesses.
D) Consider investing in life insurance (a industry largely established as a wealth preservation tool).
In general:
Have 3-6 month emergency fund in liquid assets available.
Avoid buying and selling individual securities.
Save at least 10% of your money every paycheck.
Pay your credit card balance in full every month.
Make sure your earthquake/disaster kit is fully stocked (you should have at least 2 weeks of food and water supply stored)
Make sure your family knows emergency meeting and contact procedures.
Pay off your mortgage: Your mortgage is debt, ideally you should be debt free.
Invest in YOUR home: improve your own living space. This is an investment you will never regret. (note: get multiple bids/do it yourself)
Estate planning:
Make sure your retirement plans have beneficiaries set up.
Set up a living trust and make sure real estate and stock accounts are titled in trust name to avoid probate fees.
Make sure your beneficiaries have a copy/know where the copy of the trust is.
Set up advance health care directive and make your funeral plans known to your heirs.
Promote social insurance programs to help people. If we had universal health care, free high quality education (including university), and a strong social safety net, many of the financial stresses of life would be removed. Universal basic income would fix a lot of social problems.
1) You need to spend less money than you earn. (if you can't do that, none of the advice below matters.)
2) Pay off your debt, focusing with the debt with the highest interest rate, minimum payments on all the rest.
3) All high interest debt gone? You are cleared to proceed to investing stage:
Take full advantage of your company's 401k Matching (if offered).
Max fund your ROTH with inexpensive, well-diversified mutual funds such as Vanguard Target 20XX funds.
If your income is too high to contribute to a ROTH, consider a "backdoor" ROTH (non-deductible traditional IRA contribution which is immediately converted to a ROTH)
4) After your ROTH is max funded.
Choices:
A) Gamble more in the stock market (again, I recommend no load mutual funds or index tied funds), though gambling on individual stocks can work out if you are lucky. The stock market has trended positive over the years, though we are probably due to a major market correction (drop) soon. Don't invest more than you can afford to lose.
B) Keep money in bonds/money market accounts/savings, which have lower rates of return but should not lose money besides losing slowly to inflation.
C) Consider investing in real estate/real goods/businesses.
D) Consider investing in life insurance (a industry largely established as a wealth preservation tool).
In general:
Have 3-6 month emergency fund in liquid assets available.
Avoid buying and selling individual securities.
Save at least 10% of your money every paycheck.
Pay your credit card balance in full every month.
Make sure your earthquake/disaster kit is fully stocked (you should have at least 2 weeks of food and water supply stored)
Make sure your family knows emergency meeting and contact procedures.
Pay off your mortgage: Your mortgage is debt, ideally you should be debt free.
Invest in YOUR home: improve your own living space. This is an investment you will never regret. (note: get multiple bids/do it yourself)
Estate planning:
Make sure your retirement plans have beneficiaries set up.
Set up a living trust and make sure real estate and stock accounts are titled in trust name to avoid probate fees.
Make sure your beneficiaries have a copy/know where the copy of the trust is.
Set up advance health care directive and make your funeral plans known to your heirs.
Promote social insurance programs to help people. If we had universal health care, free high quality education (including university), and a strong social safety net, many of the financial stresses of life would be removed. Universal basic income would fix a lot of social problems.
