75 Personal Finance Rules of Thumb

January 13, 2021 by Russell Henderson Posted in Loans, Money Basics Tagged $1000, 401k, All, big, Budget, Budgeting, Buy, Buying, car, Children, Credit, credit card, credit score, Deals, Debt, Direct Deposit, Extra Money, Family, Family Finances, Finance, Financial Goals, financial planning, Financial Wize, FinancialWize, home, income, index funds, Insurance, Interest Rates, Invest, Investing, investment, Life, Lifestyle, Loans, Main, Make, money, Money Basics, More, Mortgage, mortgages, Personal, Personal Finance, Planning, property, Retirement, rules of thumb, Salary, Saving, savings, second, Spending, spouse, Stocks, Student Loans, Taxes, under, Vs.

A “rule of thumb” is a mental shortcut. It’s a heuristic. It’s not always true, but it’s usually true. It saves you time and brainpower. Rather than re-inventing the wheel for every money problem you face, personal finance rules of thumb let you apply wisdom from the past to reach quick solutions.

I’m going to do my best Buzzfeed impression today and give you a list of 75 personal finance rules of thumb. Some are efficient packets of advice while others are mathematical shortcuts to save brain space. Either way, I bet you’ll learn a thing or two—quickly—from this list.

The Basics

These basic personal finance rules of thumb apply to everybody. They’re simple and universal.

1. The Order of Operations (since this is one of the bedrocks of personal finance, I wrote a PDF explaining all the details. Since you’re a reader here, it’s free.)

2. Insurance protects wealth. It doesn’t build wealth.

3. Cash is good for current expenses and emergencies, but nothing more. Holding too much cash means you’re losing long-term value.

4. Time is money. Wealth is a measure of how much time your money can buy.

5. Set specific financial goals. Specific numbers, specific dates. Don’t put off for tomorrow what you can do today.

6. Keep an eye on your credit score. Check-in at least once a year.

7. Converting wages to salary: $1/per hour = $2000 per year.

8. Don’t mess with City Hall. Don’t cheat on your taxes.

9. You can afford anything. You can’t afford everything.

10. Money saved is money earned. When you look at your bottom line, saving a dollar has the equivalent effect as earning a dollar. Saving and earning are equally important.

Budgeting

I love budgeting, but not everyone is as zealous as me. Still, if you’re looking to budget (or even if you’re not), I think these budgeting rules of thumb are worth following.

11. You need a budget. The key to getting your financial life under control is making a budget and sticking to it. That is the first step for every financial decision.

12. The 50-30-20 rule of budgeting. After taxes, 50% of your money should cover needs, 30% should cover wants, and 20% should repay debts or invest.

13. Use “sinking funds” to save for rainy days. You know it’ll rain eventually.

14. Don’t mix savings and checking. One saves, the other spends.

15. Children cost about $10,000 per kid, per year. Family planning = financial planning.

16. Spend less than you earn. You might say, “Duh!” But if you’re not measuring your spending (e.g. with a budget), are you sure you meet this rule?

Investing & Retirement

Basic investing, in my opinion, is a ‘must know’ for future financial success. The following rules of thumb will help you dip your toe in those waters.

17. Don’t handpick stocks. Choose index funds instead. Very simple, very effective.

18. People who invest full-time are smarter than you. You can’t beat them.

19. The Rule of 72 (it’s doctor-approved). An investment annual growth rate multiplied by its doubling time equals (roughly) 72. A 4% investment will double in 18 years (4*18 = 72). A 12% investment will double in 6 years (12*6 = 72).

20. “Don’t do something, just sit there.” -Jack Bogle, on how bad it is to worry about your investments and act on those emotions.

21. Get the employer match. If your employer has a retirement program (e.g. 401k, pension), make sure you get all the free money you can.

22. Balance pre-tax and post-tax investments. It’s hard to know what tax rates will be like when you retire, so balancing between pre-tax and post-tax investing now will also keep your tax bill balanced later.

23. Keep costs low. Investing fees and expense ratios can eat up your profits. So keep those fees as low as possible.

24. Don’t touch your retirement money. It can be tempting to dip into long-term savings for an important current need. But fight that urge. You’ll thank yourself later.

25. Rebalancing should be part of your investing plan. Portfolios that start diversified can become concentrated some one asset does well and others do poorly. Rebalancing helps you rest your diversification and low er your risk.

26. The 4% Rule for retirement. Save enough money for retirement so that your first year of expenses equals 4% (or less) of your total nest egg.

27. Save for your retirement first, your kids’ college second. Retirees don’t get scholarships.

28. $1 invested in stocks today = $10 in 30 years.

29. Inflation is about 3% per year. If you want to be conservative, use 3.5% in your money math.

30. Stocks earn 7% per year, after adjusting for inflation.

31. Own your age in bonds. Or, own 120 minus your age in bonds. The heuristic used to be that a 30-year old should have a portfolio that’s 30% bonds, 40-year old 40% bonds, etc. More recently, the “120 minus your age” rule has become more prevalent. 30-year old should own 10% bonds, 40-year old 20% bonds, etc.

32. Don’t invest in the unknown. Or as Warren Buffett suggests, “Invest in what you know.”

Home & Auto

For many of you, home and car ownership contribute to your everyday finances. The following personal finance rules of thumb will be especially helpful for you.

33. Your house’s sticker price should be less than 3x your family’s combined income. Being “house poor”—or having too expensive of a house compared to your income—is one of the most common financial pitfalls. Avoid it if you can.

34. Broken appliance? Replace it if 1) the appliance is 8+ years old or 2) the repair would cost more than half of a new appliance.

35. Used car or new car? The cost difference isn’t what it used to be. The choice is even.

36. A car’s total lifetime cost is about 3x its sticker price. Choose wisely!

37. 20-4-10 rule of buying a vehicle. Put 20% of the vehicle down in cash, with a loan of 4 years or less, with a monthly payment that is less than 10% of your monthly income.

38. Re-financing a mortgage makes sense once interest rates drop by 1% (or more) from your current rate.

39. Don’t pre-pay your mortgage (unless your other bases are fully covered). Mortgages interest is deductible, and current interest rates are low. While pre-paying your mortgage saves you that little bit of interest, there’s likely a better use for you extra cash.

40. Set aside 1% of your home’s value each year for future maintenance and repairs.

41. The average car costs about 50 cents per mile over the course of its life.

42. Paying interest on a depreciating asset (e.g. a car) is losing twice.

43. Your main home isn’t an investment. You shouldn’t plan on both living in your house forever and selling it for profit. The logic doesn’t work.

44. Pay cash for cars, if you can. Paying interest on a car is a losing move.

45. If you’re buying a fixer-upper, consider the 70% rule to sort out worthy properties.

46. If you’re buying a rental property, the 1% rule easily evaluates if you’ll get a positive cash flow.

Spending & Debt

Do you spend money? (“What kind of question is that?”) Then these personal finance rules of thumb will apply to you.

47. Pay off your credit card every month.

48. In debt? Use psychology to help yourself. Consider the debt snowball or debt avalanche.

49. When making a purchase, consider cost-per-use.

50. Make your spending tangible with a âcash diet.â

51. Never pay full price. Shop around and do your research to get the best deals. You can earn cash back when you shop online, score a discount with a coupon code, or a voucher for free shipping.

52. Buying experiences makes you happier than buying things.

53. Shop by yourself. Peer pressure increases spending.

54. Shop with a list, and stick to it. Stores are designed to pull you into purchases you weren’t expecting.

55. Spend on the person you are, not the person you want to be. I love cooking, but I can’t justify $1000 of professional-grade kitchenware.

56. The bigger the purchase, the more time it deserves. Organic vs. normal peanut butter? Don’t spend 10 minutes thinking about it. $100K on a timeshare? Don’t pull the trigger when you’re three margaritas deep.

57. Use less than 30% of your available credit. Credit usage plays a major role in your credit score. Consistently maxing out your credit hurts your credit score. Aim to keep your usage low (paying off every month, preferably).

58. Unexpected windfall? Use 5% or less to treat yourself, but use the rest wisely (e.g. invest for later).

59. Aim to keep your student loans less than one year’s salary in your field.

The Mental Side of Personal Finance

At the end of the day, you are what you do. Psychology and behavior play an essential role in personal finance. That’s why these behavioral rules of thumb are vital.

60. Consider peace of mind. Paying off your mortgage isn’t always the optimum use of extra money. But the peace of mind that comes with eliminating debt—it’s huge.

61. Small habits build up to big impacts. It feels like a baby step now, but give yourself time.

62. Give your brain some time. Humans might rule the animal kingdom, but it doesn’t mean we aren’t impulsive. Give your brain some time to think before making big financial decisions.

63. The 30 Day Rule. Wait 30 days before you make a purchase of a âwantâ above a certain dollar amount. If you still want it after waiting and you can afford it, then buy it.

64. Pay yourself first. Put money away (into savings or investment accounts) before you ever have a chance to spend it.

65. As a family, don’t fall into the two-income trap. If you can, try to support your lifestyle off of only one income. Should one spouse lose their job, the family finances will still be stable.

66. Every dollar counts. Money is fungible. There are plenty of ways to supplement your income stream.

67. Savor what you have before buying new stuff. Consider the fulfillment curve.

68. Negotiating your salary can be one of the most important financial moves you make. Increasing your income might be more important than anything else on this list.

69. Direct deposit is the nudge you need. If you don’t see your paycheck, you’re less likely to spend it.

70. Don’t let comparison steal your joy. Instead, use comparisons to set goals. (net worth).

71. Learning is earning. Education is 5x more impactful to work-life earnings than other demographics.

72. If you wouldn’t pay in cash, then don’t pay in credit. Swiping a credit card feels so easy compared to handing over a stack of cash. Don’t let your brain fool itself.

73. Envision a leaky bucket. Water leaking from the bottom is just as consequential as water entering the top. We often ignore financial leaks (e.g. fees), since they’re not as glamorous—but we shouldn’t.

74. Forget the Joneses. Use comparisons to motivate healthier habits, not useless spending.

75. Talk about money! I know it’s sometimes frowned upon (like politics or religion), but you can learn a ton from talking to your peers about money. Unsure where to start? You can talk to me!

The Last Personal Finance Rule of Thumb

Last but not least, an investment in knowledge pays the best interest.

Boom! Got ’em again! Ben Franklin streaks in for another meta appearance. Thanks Ben!

If you enjoyed this article and want to read more, Iâd suggest checking out my Archive or Subscribing to get future articles emailed to your inbox.

This articleâjust like every otherâis supported by readers like you.

Source: bestinterest.blog

By the numbers: My spending for March 2019

January 13, 2021 by Russell Henderson Posted in Budgeting, Loans Tagged $1000, big, Budget, Budgeting, Buying, chase, Credit, credit card, Financial Wize, FinancialWize, Groceries, investment, Make, money, More, Real Life, Spending, spending report, stock market, surgery, Taxes, Travel

March was a mixed month in my financial world. I ended March with a slightly higher net worth (up 0.6%) but my spending was the highest it’s been this year: $5989.10. Yet, that spending was mostly mindful. I wasn’t frittering away money on silly things.

If I wasn’t buying dumb stuff, then where did my money go? A few worthwhile places:

I spent $653.31 on the yard and garden. Specifically, Kim and I tore out a big cedar tree in the corner of the yard, then converted that space to a small orchard. I use the word “orchard” loosely here. We planted three fruit trees, four blueberries, four grape vines, and a bunch of strawberries. I hope to write about this more in the near future.
I spent $625.72 on health and fitness. In the middle of the month, I had quite a scare. Out of nowhere, I had chest pains, so I visited the local hospital ER. My co-pays and prescriptions are reflected in March’s spending — and there’s more to come. (We’re about to have a l-o-n-g article on the $6800 hospital bill I received in the mail yesterday. That’ll happen in April or May.) Meanwhile, Kim had knee surgery at the end of the month. I paid for some of her stuff out of my pocket.
I spent $579.36 on gifts in March, which is very very unusual.
I paid the $450 annual fee on my Chase Sapphire Reserve credit card. (Yes, I know this seems like a lot. But remember the card comes with a $300 travel credit, which means my effective annual fee is $150. I believe I receive $150 in value from the card’s other benefits.)

I don’t consider any of that spending frivolous although I recognize that some of it isn’t necessary. (Do we need an orchard? Do I need to give gifts?)

That said, I did have some weak spots in my spending. I bought several movies on iTunes. In fact, I spent $72.63 on iTunes in March. I need to be careful lest I return to my former profligate ways. No more looking in the iTunes store! I also spent $230.15 on alcohol during the month (most of which was beer).

How did I do with groceries? As you know, my food spending had grown out of control, which is one of the primary reasons I’m tracking my spending in detail this year. Last year, I spent over $1000 per month in food. This year, I’m spending less than $700 per month.

I was very proud of my food spending for most of March. I spent a total of $658.21 during the month: $468.27 on groceries and $184.24 on dining out. That’s my lowest monthly food total in two years (excepting months during which I’ve been on the road).

Going into the last week of March, I’d only spent $241.87 on groceries. That’s amazing! Things fell apart, however, when I stocked up on food for Kim’s convalescence. Meanwhile, we only had three restaurant meals during the month. For one of those, I paid for two guests. Not bad. Not bad.

Quarterly Spending

Now that we’ve made it through the first three months of 2019, I was curious how my quarterly spending compared to last year. Monthly spending can fluctuate quite a bit. You can get a better idea of your actual habits by looking at a bigger picture.

Here are some highlights:

I spent $116.56 at the iTunes store during the first quarter of 2019. That’s less than I spent on movies and TV shows during any single month last year, so that’s a win.
I spent $2076.54 on food for the quarter, which is lower than any quarter in 2018. I spent $1179.53 on groceries, $323.52 on HelloFresh, and $542.29 on dining out. That restaurant spending is another big win. The grocery spending was good — better than any quarter in 2018 — but I feel like I can do better.
I spent a lot on health and fitness during the first three months of the year: $1752.60. And the thing is, it’s not going to get much better.
This year, I decided to separate hot tub expenses into its own category. I spent $151.88 on hot tub stuff (chemicals, etc.) during the first three months of the year. And, no, that doesn’t include electricity.
Our zoo — three cats and a dog — cost us $447.54 during the first quarter of 2019.
You know where I could save big bucks? By drinking less. I spent $586.36 on alcohol during the first three months of the year (and that includes four weeks during which I didn’t drink a drop!). That’s $6.44 per day. Time for me to cut back on my craft beer obsession…

I spent a total of $15,364.85 during the first quarter of 2019, an average of $5121.62 per month. That’s not a great number, to be honest. It’s pretty much what I was spending last year. Still, I’m trying not to get too stressed about things…yet.

The whole point of this exercise is for me to figure out where I’m spending my money and why. Once I have a clear picture, I can make some course corrections.

April is the Cruelest Month

Unfortunately, April is going to have some crazy, crazy spending numbers. My accountant called yesterday to give me my tax bill. I owe $20,000. (I’m not joking.) The hospital called too. They wanted to let me know that I owe them $6800 for the ER visit in the middle of March. To cap things off, payment is due on the vacation that Kim and I booked a year ago. We’ll be headed to Greece and Italy in August — but we’re paying for it today.

Fortunately, I knew that some of these expenses were looming, so I have cash set aside to pay for taxes and our trip. (The ER visit was a surprise, obviously, and I don’t have money set aside for that.) That doesn’t change the fact that April’s expenses are going to be insane, though. It just means I’m somewhat prepared for the insanity.

The upside to having a $6800 hospital bill so early in the year? It gives me a chance to make maximum use of my health insurance! My max “out of pocket” is $7900 annually. Since it looks like I’m going to hit that, it makes sense to address all medical issues that are bugging me in 2019.

At the end of 2018, I had a net worth of $1,334,227.20. At the end of March, my net worth was $1,397,545.18. That’s a leap of more than $63,000 (or 4.75%). That’s great! In reality, this simply reflects a hot stock market. My investment accounts are up $77,933.04 this year (11.45%).

A hot stock market can cover a multitude of sins…

Source: getrichslowly.org

5 Best Short Term Investments to Grow Your Money

January 13, 2021 by Russell Henderson Posted in Home Design, Investing, Personal Finance Tagged $1000, All, big, Buy, Buying, Buying a house, CD, Checking Account, color, Debt, down payment, FDIC, Financial Advisor, Financial Goals, Financial Wize, FinancialWize, Grow, home, Invest, Investing, investment, money, Money Market, mutual funds, Personal Finance, Planning, Popular, principal, Retirement, Saving, Saving for Retirement, savings, short term investing, short-term investment, Stocks, Uncategorized

Short term investments are those investments that can yield their returns within a short period of time — usually within 1 to 3 years. (contrary to a long term investment such as saving for retirement).

In other words, short term investing are typically used to meet short-term financial goals (such as buying a house or go on a vacation).

A bank checking account is one of the best known and popular ways to save for such a goal.

But your traditional checking account only pays a meager return, if at all.

If you can’t find an alternative to a checking account, no need to fret.

There are plenty of short term investments that will help keep your money safe and earn a good return at the same time.

Below, we’ve curated the best short term investments to help reach your investment goals.

Get Matched With 3 Fiduciary Financial Advisors
Answer a quick question to start your matching process with advisors in your area.
When would you like to retire?
Select an answer

Things to consider:

First thing first, before you make any short term investments, you should know about the risk, return and investing time frame of short term investments.

Average return to expect: 1 to 4% per year;
Risk: very low to low risk of losing money;
Time frame: 0 to 3 years

Best short term investments:

If you’re saving and investing money for the short term, i.e., to use it as a down payment on a house, you will not invest that money in stocks or mutual funds, right?

That’s because, stocks are high risk investments. And if you need the money for a certain time, it might not be available due stock market volatility.

Instead, a smart choice is to save that money in a low-risk investment where you can protect the capital invested and earn interest/income at the same time.

If you have a different investing goal, such as saving for retirement, it’s best to look at stocks or mutual funds. Investing in stocks or mutual funds is considered a long term investment as opposed to short term investing.

If you’re interested in investing for the long term, here’s how the stock market works.

So, what are your options? Here are some of the best short term investments to consider to earn some interest on your money.

1. Savings account.

A savings account at a bank is an excellent choice. And they usually pay more interest than a regular checking.

They are quite safe. Savings account are insured by the FDIC, but only for up to $250,000.

That means if a bank goes bankrupt, the government will step up and give you your money back.

In addition, they are very liquid. You have access to your money fairly easy.

SAVINGS ACCOUNT CIT Savings Builder – Earn 0.85% APY. Here’s how it works: Make at least a $100 minimum deposit every month. Or Maintain a minimum balance of $25k. Member FDIC. Click Here to Learn More.

2. Certificate of deposit (CDs).

If you want a good rate of return on money that you don’t plan on using within the next couple of years, CDs is a safe place to do invest it.

Banks sell certificate of deposit for a specific dollar amount and length of time. As an investor, you agree to leave a certain amount of money with the bank for a specific time.

When the time is up, the CD matures. Then, you get your money back, plus interest.

CDs are also FDIC insured for up to $250,000. They provide a safe and competitive yield. That makes them some of the best short term investments to consider.

The minimum deposit requires to open a CD depends on the bank. But it usually ranges from a few hundred dollars to thousands.

The CIT Bank is paying 1.30% for an 11-month CD. There is an opening minimum of $1,000. With most CDs, if you tap into your money before maturation, you will get hit with an early withdrawal penalty.

However, with this CIT Bank CD, there is no penalty if you withdraw early.

CIT Bank has various types of CDs. If you prefer longer terms CDs, check them out now at the CIT Bank website.

3. Money market fund

While you can keep your cash at a bank in a savings account because they’re safe there, you don’t have to.

You can try a money market fund. They are safe as well.

A money market fund is a type of mutual fund (but thy don’t focus on stocks or bonds).

Mutual funds companies such as Vanguard offer money market funds.

Money market fund is not insured by the government, so there is a possibility you can lose money. However, they are quite safe.

They’re safe, because they have a dollar invested in securities for every dollar you deposit in your fund.

The principal money you invested does not change in value. When you invest in a money market fund, you earn dividends. That’s a good advantage.

Another advantage of a money market fund as a short term investment is that it provides higher yield than bank savings account.

It also allows you to write checks without incurring any charges.

So, if you’re saving money for a home that you’re going to buy soon, a money market fund is a safe place to grow your money.

4. Short-term corporate bond funds.

Bonds, in general, are similar to CDs. An exception is that they, just as stocks, are securities that trade in the market.

So, they may fluctuate in value, but not as much as stocks.

Bond funds are a collection of bonds from companies (large, medium, or small) from different industries. Hence, the name “corporate bond funds.”

Investing in bond funds can be used as a short-term investment. Sometimes, investors consider corporate bond funds to diversify their investment portfolio.

Just like a money market fund, corporate bond funds are not FDIC insured. But they are just as safe as a money market fund.

Plus, you don’t just invest in one bond or two bonds. If one bond in your investment fund takes a hit, it only affects a small amount of your money.

So while they are riskier than money market funds saving accounts, CDs, short term corporate bonds pay you more. That makes them one of the best short-term investments out there.

5. Treasury bonds.

One of the best ways to invest money in the short term is to buy treasury bonds. Treasury bonds are issued by the U.S. government.

There are three types: treasury bills, treasury notes, and treasury bonds. They are like CDs. Once the bond matures, you get the full money invested, plus interest.

Treasury bonds may provide the same or a better interest rate than CDs. But a big advantage is that, while they’re not FDIC insured, they are backed by the U.S. government.

In other words, the government promises to repay your money, which is considered to be very safe.

So if you have more than $250,000, you should consider a treasury bond.

Another advantage is that while interest on a CD is fully taxable, Treasury’s interest is state-tax-free.

In conclusion, short term investments are those in which you make for a certain and short period of time for a specific goal.

Short term investments aren’t the best if you’re seeking high returns.

But if you’re a beginner investor you should consider placing some of your money into these best short term investments.

Remember: don’t invest your money in stocks when you plan to use it within the next five years, because a stock market drop can dry out your investment portfolio.

The Best Ways to Invest $1000 For Good Return
How to Invest With Little Money (Even With $5)
How to Invest 100k to Build Real Wealth

Speak with the Right Financial Advisor

If you have questions beyond short-term investments, you can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.

*TOP CIT BANK PROMOTIONS*
PROMOTIONAL LINK	OFFER	REVIEW
CIT Bank Money Market	1.00% APY	Review
CIT Bank Savings Builder	0.95% APY	Review
CIT Bank CDs	0.75% APY 1 Year CD Term	Review
CIT Bank No Penalty CD	0.75% APY	Review

The post 5 Best Short Term Investments to Grow Your Money appeared first on GrowthRapidly.

Source: growthrapidly.com

How to Remodel your Bathroom for Under $1000

January 13, 2021 by Russell Henderson Posted in DIY, Home Decor, Home Improvement, Taxes Tagged $1000, bathroom, big, DIY, Financial Wize, FinancialWize, Home Decor, Home Improvement, How To, project, remodel, renovation, under

Bathrooms can be one of the best rooms to bring in a big ROI, so updating it is important â but it doesn’t have to be expensive.

The post How to Remodel your Bathroom for Under $1000 appeared first on Homes.com.

Source: homes.com

Dick Scott Nissan

Tag Archives: $1000