Investing and Getting Your Financial House in Order
Time to get your financial house in order. When you’re young all you care about in your financial life is making the rent and having enough money to party on the weekend while you should buy a home instead of rent since mortgage rates today are extremely low. Well life isn’t only about enjoying now, you need to start planning for tomorrow now, saving your money and invest in certificates of deposit during these times when CD rates are better than most other investments. The best time to start planing was yesterday, the second best time is today and a CD calculator monitorbankrates.com/calculators/cd can help you make informed investment decisions.
How you plan now will determines what future holds for you. You’d be wise to look and see how you’re doing so far with saving and investing. The first step to take is conducting a head-to-toe money checkup that covers everything from saving, investing and everything else because these days CD rates cdrates.me are making harder to earn interest income since CD rates and savings account rates are so low.
Once you have a good idea about the state of your financial health, you will have a starting point to get into the financial shape you need too and then you have to stay on track toward your goals, which can be an early retirement or career change like starting a business.
When you’re just starting out saving and investing the question of how well you’re doing isn’t easy to answer. Who knows how much money you’ll need in retirement in 30, 40 or even 50 years. Several factors come into consideration including the inflation rate, your return on your investments and where and how you want to live.
You have a 401(k) you need to keep track of what the return is annually, don’t stick your head under a pillow. Check all your accounts balances, 401k, savings accounts, brokerage accounts, any account you have, even the account your grandmother setup for you when you were born. As retirement draws closer, you can’t put off creating a concrete savings target and measuring your progress each and very week.
You can do all of this a couple of different ways, one way is to look at this and decide on a big $$ number to retire on. The rule of thumb is to figure you’ll live on 80% of your pre retirement income when you retire. So if you make $200,000, that’s a retirement income of $160,000. If your earnings include interest income, social security and a pension add those up and subtract from the annual number, in this case $160,000. The rest of the money will have to come out of your savings. You can also get a part time job doing something you enjoy to add to your income.
The standard financial planning advice is that you can safely withdraw up to 4% of your savings in the first year of retirement and then you increase that amount each year to match what the inflation rate is.
Decide on your own number you think you can retire on and what the a annual savings goal needs to be. You can use retirement calculator to help you figure this out. You’ll also estimate an annual return on your investments, I’d say these days to estimate conservatively, around 5% is a good number.
Make sure your portfolio is properly diversified, invest more aggressively when you’re young and more conservatively when you’re older. When you retire you should have a sizable chunk of your money in bonds,certificate of deposit accounts and cash to cushion risk should stock prices decrease.
