Sunday
03May2009
4 Personal Finance Rules of Thumb
Sunday, May 3, 2009 at 9:37AM Personal finance rules that I try to live by.
- Net worth should be at least equal to (Yearly Gross Income * Age) / 10
- Mortgage (monthly payment plus taxes and insurance) should be less than 1/4 of your monthly net income.
- Retirement savings should be 15% of gross income. Start with maxing out a Roth IRA, then the rest in your company 401k (or equivalent.)
- If you must have a car payment, make sure it's 1/3 of what you spend on your mortgage or rent. When following rule #2.
The first is from the Millionaire Next Door, the rest are my own bent on common rules of thumb.
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Reader Comments (1)
The Net worth things seems a little high to me (unless you buy some really good stocks).
So if you're 25, and make $75,000 a year, then you are expected to have $187,000 in the bank? I don't know about for everyone else, but that's awfully hard to get by that age I think. And double that within 7 or 8 years is even harder - perhaps if you live on mayonaisse sandwiches?