Important Numbers to Manage Your Finances
Finance | September 4, 2009 at 3:04 amNowadays personal finance advice abounds the internet and even other media. When I walk by the streets I come across numerous banners saying “Best personal finance consultancy for the last 50 years”. One thing that beats me is that despite such a lot of knowledge available around us, why are quite a number of us inefficient at managing our finances? Even those who have taken professional advice or have tapped the online resources are not better off with their money management skills. Why is it so? Are we not getting that most effective tip that we want, or are we non-learners, or are our circumstances not allowing us to follow what we know to be the most appropriate?
Till a few days ago the economy slump wounds were pretty ripe. It’s only now they seem to be healing and all of us are busy bandaging the wounds. So well, I must say that due to external conditions we aren’t able to manage our monetary resources as well as we could if things were normal. Don’t worry; in a few days it looks as though things will come back to normal and you can use all your money management knowledge.
Apart from external conditions which you can do little about, there are some wise techniques that you should learn to successfully manage your finances. You might have been advised over and over again to maintain a good credit score or make fewer investments after retirement, but did anybody tell you the exact credit score that you should maintain or the exact percentage of your income you should invest after retirement? I guess, very few people know the exact numbers. Even, many financial advisors tell you what to do, but how much of what to do for an effective solution is not told. It’s like saying for growing slim, exercise and eat healthy. But if you don’t know how much of what to eat and how much to exercise, you’ll most probably not get that beautiful physique that you were aspiring for. So here are some exact numbers for your personal finance planning that you should always follow for effective saving.
750- Ideal Credit Score Number
What’s your credit score -300, 400, 500, or 800? Your credit score can be
anywhere between 300- 900. You might have been advised to maintain a credit score above 600. That’s good. But have you achieved your targets? Well, if you haven’t, try to maintain a score of 750. Well, if you can, go up to 800. But if it looks impossible come down to 725 but not lower than that. So 750 should be your target credit card score that you should strive to achieve at any cost. I suppose you know how your credit score is calculated. It’s based on your credit history, your current debt amount, mortgages, and the duration of time the credit’s been in use etc. work up on all these factors to maintain your credit score. At the end if you want to now what a great credit score is going to do for you, this is what it does. First you are going to get a better credit rating. You get insurance, personal loans and mortgage benefits also.
100 – Age = Resource Allocation Amount
You might have heard your doctor say that 90 + your age should be your ideal B P reading for a good health. Now financial doctors are also saying something in the same lines that for good financial health your percentage of resource allocation should be 100- your age. So if you’re 60 years old, just go for a 40 percent allocation in equities, otherwise you’re going to suffer badly. I feel it’s a matter of common sense that when you are young and earning you should invest more in equities and as you grow old you should lessen it, as your earnings also wane by then. You don’t want to have a big investment overhead on you by the time you retire don’t you ?
9- Realistic Stock Returns
Always remember that stock returns revolve around 9 %. Many times the stock vendors might have told you that you are going to get a double-digit average market return. Don’t be over enthusiastic about the two digit number because though you might touch that figure during favorable times, you might not actually touch it always. Especially during the current period when the stock markets are just recuperating, expecting a single digit return is the wisest thing for you to do. Also this 9 % is not inclusive of management fee which might actually bring it down a wee bit more.
70- Ideal Retirement Revenue
An ideal rule of thumb is when you are 70; you should be having 70 % of your gross income with you i.e. 70 percent of what you earn through out your life should be what you save during retirement because then you’ll not be having any income, you’ll be old and you’ll still have to meet your expenses.
10 – Retirement Saving
To get revenue of 70 percent of your gross income during retirement always save about 10 percent of your income for
retirement, this will see through your daily expenditure during old age. You might think that you’ll be spending less during old age as you’ll be staying at home and not going out spending on food and entertainment etc. but don’t be mistaken, because old age brings with it a lot of handicaps and disease for which you’ve got to pay for. Also you never know how times can be. God forbid another recession during your old age can play havoc on you.
72 – The Number Years Your Investment Doubles In
This time you need not associate 72 with old-age or retirement. Here it’s to see how many years it’ll take for your investment to double. Suppose, you’ve invested $5000 at an annual yield of 4 %, lets see how long it’ll take for that amount to double. Divide 72/4, you’re going to get 18. So in 18 years your invested amount is going to double itself.
25- Your House Rent
You might dream of staying in palaces, but remember that your house rent should never exceed 25 % of your house rent. Otherwise you’ll only have four walls with no furniture, food or anything else in the house!
These numbers seemed to have worked in most cases. Just try out and see if they work for you.
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