SACRAMENTO, Calif. — Improving your finances doesn’t have to be complicated. In fact, some of the best advice can fit on a little index card.
“We all have bills to pay. We’re all working on a budget on a weekly, monthly basis,” said Towerpoint Wealth president Joseph Eschleman. “But, you have to pay yourself first.”
Most of the rules fall into two buckets — saving and investing.
The rules are:
- Maximize your 401(k).
- Buy inexpensive mutual funds.
- Never buy or sell an individual security.
- Save 20% of your money.
- Pay your credit card balance in full each month.
- Maximize tax-advantaged savings vehicles.
- Pay attention to fees.
- Make financial advisors commit to a fiduciary standard.
- Promote social insurance programs.
Eschleman says companies will often match your 401(k) contributions.
“We eloquently call that free money because that’s exactly what it is, and if you don’t participate in a 401(k) plan, oftentimes you’re not eligible to receive these matching contributions,” he said.
Save 20% of your money and set up other kinds of savings accounts that grow tax-free like Roth IRAs and 529 College Savings Accounts.
“The higher percentage you save, the more quickly your net worth is going to grow,” said Eschleman.
Saving your money is great, but you’ll want to invest it too. Eschleman recommends being diverse, spreading your investments in different areas and including inexpensive mutual funds.
Rule #3 means you could better position yourself for consistent and reliable financial growth if you utilize the expertise of professional investors.
Eschleman says this about why it’s important to pay your credit card balance in full.
“When you carry a balance on your credit card, you’re paying interest to the credit card company,” he said. “If you’re paying it off every month, you’re not paying interest so, hopefully that means more money in your pocket to build and save and grow your net worth.”
You can also grow your wealth by paying attention to fees. High fees can cut into your gains when you invest.
Fees are hard to avoid completely, but experts say prioritizing low-fee investments is a smart thing to do for long-term financial success.
Rule #8 means your financial advisor should be committed to what’s called the "fiduciary standard." It’s an important term in the finance world meaning the advisor is legally obligated to act in your best interest.
Rule #9 encourages us to promote social insurance programs, like Social Security, unemployment and disability insurance to help people when things go wrong. The idea here is the programs help with social and economic stability, which ultimately benefits everyone.
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