1. Save at least 10% of your income
Saving 10% of your total income is paramount to your financial health. By saving at least 10% of your income, you are effectively living within your means. Many of the financial struggles that individuals and families face can be attributed to living beyond their means (spending more than they earn).
This is one of the most important aspects of a successful financial life. Saving 10% of your total income is a great method to take you to the next stage in your financial lifecycle.
2. Have sufficient liquidity
Just as a building set upon a weak foundation will collapse under stress, a financial plan without sufficient liquidity is vulnerable to failure under economic hardship. We all face difficult financial times in our lives, and proper liquidity will help us weather a financial storm without irreparable damage. Having the right amount of emergency funds is the keystone of your financial foundation!
Once the proper amount of liquidity is determined, the money should be held in the most tax efficient manner possible. These emergency funds will strengthen your financial foundation and serve as a defense against a true emergency. We define an emergency as a situation that would result in a drop of your tax bracket.
3. Fully Fund Retirement Plans (can be applied to 10% savings goal)
This fundamental of financial success will serve two purposes. First, by contributing and funding a retirement plan, you will be saving towards or above your 10% goal. Second, money applied towards a defined contribution plan is not currently taxed. This tax–deferred money whittles away at the largest expense for Middle Americans: taxes. The government actually will subsidize your retirement by allowing favorable tax treatment of employee contributions into the