Today’s Friday Top Five is dedicated to finance, more specifically retirement. Disclaimer: this post is for information purposes only and does not constitute financial advice. I’m no expert, I’m just a listener, and this week I had the opportunity to listen to an actual financial advisor, so I’m giving you the scoop.
- 50/15/5. They start with the meat, so here it is. Fidelity Investments recommends that 50% of your paycheck goes toward essential expenses (rent, utilities, transportation, groceries), 15% goes toward your retirement (401K or Roth), and 5% goes toward your short term savings. Great, right? I thought I was being pretty zealous about my 401K contributions, but I guess not…Apparently, you can work your way up to 15% by upping your contribution 1% every year. It seems legit to me though because we can’t count on social security in this day and age and because of #2.
- “The first person who will live to be 150 has already been born.” Check out this article. It never occurred to me that our life expectancy would be going up over time. People are still being taken out the game left and right, and I think most folks today assume they’ll go about the same time their parents did. If what they say is true, you’re gonna may a lot more money in your retirement account. But that’s somewhat okay because #3.
- Your retirement account can still grow in your retirement. For some reason this never crossed my mind. I imagined that the thousands I’d accrued at 65 would be all I had, but false! At retirement, you’ll just need enough to live to be 66 and then so on and so on. That means whatever you don’t spend immediately can still grow. That’s a relief!
- There’s good debt and bad debt. Attack the bad debt faster. Good debt is an investment in anything that appreciates in value. Generally, mortgages and student loans are considered good debt. Bad debt is anything that loses its value from the moment you spend it. This includes credit card debt and auto loans. Unfortunately, the bad debt often comes with ridiculous interest rates, so you end up paying an solid chunk of change in addition to what was originally charged. Be smart about your bad debt and get rid of it. Get rid of it all if you can.
- Update your beneficiaries. When I was talking to the lady about retirement she made me stop what I was doing to add a beneficiary. I honestly thought I had already done it since so many places require it, but my sizable 401K had been blank until this week. I finally started to think about who I wanted to be sure I pass my money on to, and having been in a situation where things weren’t outlined as clearly, I get the importance of following through here. Make sure your money is going to the people you care about, or at least people who can make financial decisions that aren’t gonna drive your entire family crazy.