Financial Rules of Thumb 4
10) Monthly payments on installment debt shouldn’t exceed 20% of your take home pay
That is pretty confining to look at only installment debt. Look at your total debt and try to stay under 40% of your take home pay.
11) As long as you have a nest egg $1 million, you can retire comfortably
A million dollars is not what it used to be. My personal opinion is that there is not a ROT because your net annual requirement to maintain a standard of living is the goal. Work backwards from this to determine how much income you need then how big a nest egg.
12) Don’t buy a house that costs more than 2.5 times your annual income
Dumb idea. Your home is probably the major investment in your life. It is to big a decision to limit the choice to a ROT. Focus on whether it is good investment. One of the smartest guys I know went years before he bought a home because he did not think it was a good investment. A wife and family made him change his mind.
10) Monthly payments on installment debt shouldn’t exceed 20% of your take home pay
That is pretty confining to look at only installment debt. Look at your total debt and try to stay under 40% of your take home pay.
11) As long as you have a nest egg $1 million, you can retire comfortably
A million dollars is not what it used to be. My personal opinion is that there is not a ROT because your net annual requirement to maintain a standard of living is the goal. Work backwards from this to determine how much income you need then how big a nest egg.
12) Don’t buy a house that costs more than 2.5 times your annual income
Dumb idea. Your home is probably the major investment in your life. It is to big a decision to limit the choice to a ROT. Focus on whether it is good investment. One of the smartest guys I know went years before he bought a home because he did not think it was a good investment. A wife and family made him change his mind.
posted by Chip at 8:52 PM
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