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1.
Save at least 10% of your annual income
Begin saving to build a liquid cash reserve. Once you have achieved
sufficient liquidity, direct savings toward balancing and building
your portfolio. Savings also include retirement plan contributions.
2. Have sufficient liquidity
Most wage earners should have 10% of their annual income in a primary
cash reserve (A1) and another 20% in a secondary reserve. Self-employed
and retired individuals should build their cash reserves to an even
greater level.
3. Fully fund your pensions
Take advantage of tax deferred savings plans, especially if your
employer matches contributions.
4. Have the right size house
For most middle income Americans, your home is the most significant
investment you will ever make. Buy a home 2 or 2 1/2 times your
annual income, with a mortgage of 50% or more of its value. If the
value of the home reaches 100% to 125% of your income, sell it and
trade up again.
5. Pay off all credit cards and consumer debt
Learn the difference between bad debt, good debt, and acceptable
debt. Avoid the bad, use the acceptable debt wisely, and take advantage
of the leverage of good debt.
How Are You Doing?
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"The
difference between the impossible and the possible lies in
a person's determination." --Tommy Lasorda, "Hall
of Fame” Baseball Manager
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