Financial Security is Easy as 1-2-3
Benjamin Franklin once said, “A penny saved is a penny earned.” While the Founding Father has a point, you can’t save money if you owe it to everyone else. Getting out of debt and building wealth in preparation for retirement makes life less stressful and the golden years more comfortable. Living within your means is a core belief of Gail Miller whose convocation address is featured in the summer edition of the magazine.
To help you on follow in Miller’s footsteps, personal finance expert Scott Marsh recommends three steps to financial self-reliance.
1. Purchase a home
According to the National Association of Realtors home prices have appreciated an average of six percent over the past forty years. A home is not only a great investment, it is a key component in financial security. For most Americans, a mortgage is their biggest monthly expense. Paying off the albatross is easier if you purchase modestly. Marsh recommends following this formula to ensure you don’t buy more house than you can afford.
2. Contribute at least 10 percent of your income to a 401K
Setting aside money before taxes is a great way to build wealth. Contributing to a 401K not only enlarges your nest egg, but it also lowers your adjusted gross income—meaning you pay less in taxes. Many employers also offer matching contribution plans making socking away 10 percent even easier. See this article from the Wall Street Journal on how to make your 401K work harder for you.
3. Use an accelerated debt reduction program
Accelerated debt reduction programs, like Utah State University’s PowerPay provide a framework for quickly changing your liabilities into assets. The program encourages individuals to double the payment on their smallest debt. When that debt has been satisfied apply the payment amount to the next debt. The result is lower debt sooner than a regular monthly payment plan—leaving you free to put your money to work for you.