Rule of Thumb - Not One Size Fits All

I met with Seth and Jenny (46/45) to go over a financial recap from last year and target what we need to tackle this year to be successful. They have teenagers and stay busy shuttling them around to practice and events. But with the busyness of life, they often feel they lose sight of what they should be doing with their hard-earned dollars. We all have times of forgetfulness due to the demands our lives put on us. That's why I meet with my financial planning clients in the spring and fall, to catch any changes or conversations such as these.

Here are the main rules of thumb:

• 3 to 6 months of expenses in a savings account
• Run a 50/30/20 budget month to month
• A 30-year term life insurance policy with a death benefit of 10 years' worth of salary
• Take your company match offered through your 401(k) by investing the minimum match
• Debt snowball: overpay on debt, then roll that payment plus the minimum to the next debt line

Secondary rules of thumb:

• Invest $200/month into a brokerage account
• Operate out of four bank accounts: three savings and one checking
• Only make big purchases if you can pay for them twice
• 25% or less in a mortgage payment, including taxes and insurance
• 20/4/10 rule for a car: 20% down, 4-year term, no more than 10% of take-home pay in a payment

In almost every couple's financial situation, we alter or adjust one of these rules of thumb.

One example would be a physician who makes $800,000 a year and takes home $650,000 after tax. They don't need a $60,000+ car payment.

Another example: if a couple has a wife who stays home with the children, we still value her life equal to her husband's, even if she isn't earning an income. In that case, we'd apply a minimum $1,000,000, 30-year term policy, assuming she's in her mid-30s.

With Seth and Jenny, they have different needs than others, so we decided to keep less than 6 months in savings but more than 3 months, and invest the difference into the market.

No matter the topic, every situation has a different need and timing, and we operate by these rules of thumb as great starting points.

As always, I'm here to help start the conversation around your finances, or those of a family member or friend who may want guidance on theirs.

Eager to hear from you soon. Have a great weekend!

– Peyton

P.S. Here are a few things I'm reading/watching/listening to:

- Lord of the Rings - Peaceful Music - Night in The Shire

- Alter Bridge Blackbird Playlist - YouTube

- Charles Payne of Fox News - History says Markets should do very well..