When I first meet with clients, especially young ones in their 30’s and 40’s, who have all of their financial life ahead of them, they’re wondering what they need to do to be successful.
They think it’s harder than it really is or at least more complex. I can understand why. I’ve read a million articles and heard a million pundits talk about detailed things they need to do with their money in order to be successful.
A 15 year mortgage, not a 30. Term, not Whole Life. ETFs, not mutual funds…on and on and on.
But in reality, there’s only a few simple steps you need to follow in order to be financially successful, and here they are.
Step 1: Save at least 15% of your gross income. This will account for retirement, weddings, second home, and education for your children. All of those future needs can be paid for if you’re saving 15% of your gross income.
Step 2: Insure your life for at least 10 times gross annual earnings, and perhaps more based on personal goals and needs. Remember to account for all the expenses that you had planned to provide for your family, like education, a second home, weddings etc.
Step 3: Look closely at your situation regarding a loss of income, particularly due to disability. If you work in a decent-sized company, you may be provided with a disability plan. Read it carefully to understand how much benefit you would get, when you would get it, how long you would get it for and whether it’s taxable or not before comparing that income source against your income needs. Again, remember your kids education and future goals like weddings etc. would need to be paid for regardless of whether you’re healthy enough to work or not. If the group benefits do not meet your needs, because of the definitions, or the payment terms, or both, consider a personal insurance plan to supplement the work plan.
That’s it! It’s that simple!
Make sure you are protected in the case of a disability or death.
The rest is details. Now those details have to be handled well and I highly recommend that you work with professionals to get those details handled well, but it can be done. It is done consistently, by many people throughout this country.
You can do it too!