Top Rules to Save for a Comfortable Life

Here are some great tips from the blog 25 Rules to Grow Rich. I don’t think the rules will make you rich per se, but they will make sure you don’t get in over your head or spend money needlessly.

  • Spend no more than 2 1/2 times your income on a home. For a down payment, it’s best to come up with at least 20%
  • Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%
  • For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
  • It’s worth refinancing your mortgage when you can cut your interest rate by at least one point.
  • All else being equal, the best place to invest is a 401(k). Once you’ve earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
  • To figure out what percentage of your money should be in stocks, subtract your age from 120.
  • Invest no more than 10% of your portfolio in your company stock – or any single company’s stock, for that matter.
  • Aim to build a retirement nest egg that is 25 times the annual investment income you need.
  • If you don’t understand how an investment works, don’t buy it.
  • If you’re not saving 10% of your salary, you aren’t saving enough.
  • Keep three months’ worth of living expenses in a bank savings account or a high-yield money-market fund for emergencies. If you have kids or rely on one income, make it six months’.
  • Aim to accumulate enough money to pay for a third of your kids’ college costs. You can borrow the rest or use some of your income to help out when your child is in college.
  • You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts.
  • When you buy insurance, choose the highest deductible you can afford. It’s the easiest way to lower your premium.
  • The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high-interest rates will wipe out the benefits.
  • The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
  • The best way to save money on a car is to buy a late-model used car and drive it until it’s junk. A car loses 30% of its value in the first year.
  • Lease a new car or truck only if you plan to replace it within two or three years.
  • Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
  • Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
  • When you shop for electronics, don’t pay for an extended warranty. One exception: It’s a laptop and the warranty is from the manufacturer.
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