If you are looking for some relatively simple concepts for Direct your moneyThink about the following three rules for the coming year. They touch on budgeting, investing, and withdrawing retirement plans.
As general rules, they will not apply to everyone’s situation. But at least they can provide that Starting point To deal with issues that have always puzzled many people.
This framework can help define How and where you spend your money. Under this rule, as NerdWallet explained, you can allocate 50% of your after-tax income to pay for necessities including groceries, housing, utilities, transportation, insurance, and any child care expenses required until you can work, in addition to required minimum loan and credit card payments.
Another 30% will go toward “wants” such as restaurant meals, gifts, leisure travel and entertainment. The remaining 20% will go toward more debt repayment, establishing an emergency savings fund, and then to other types of savings and investments.
“Over the long term, a person who follows these guidelines will have manageable debt, room to indulge occasionally and savings to pay for irregular or unexpected expenses and retire comfortably,” according to NerdWallet, which recommends the system.
This is the appeal. The challenge is to make this system work in practice, as allocating only 50% to necessities will not be easy for many people. Separating needs from wants can also be difficult. As mentioned, NerdWallet divides credit card and debt payments into two categories: paying the minimum due would be essential, but applying extra money would fall into the 20% category for debt payments and savings.
If you cannot meet the standards on a regular basis, adjustments may be necessary. For example, if you can’t stick to a 50-30-20 mix, try 60-30-10. Adjusting the budget would be better than giving up entirely. As much as possible, automate the various deposits and payments so you don’t need to think about every decision.
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One of the most difficult challenges of investing is knowing how and where to distribute your money. Over time, a diversified stock market portfolio will almost always outperform bonds, for example, but at the expense of risk along the way.
He enters The 60-40 rulewhich calls for putting 60% of your long-term investments in stocks, stock funds, and other riskier investments. The rest will go into bonds, bond funds, and perhaps bank certificates of deposit and other conservative holdings.
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