Bogleheads, Baby Steps, and Other Personal Financial Strategies You Should Know

Bogleheads, Baby Steps, and Other Personal Financial Strategies You Should Know

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With so much conflicting financial advice available, it can be hard to keep it straight, let alone know what works best for you. Some of the methods are old, tried, and true; Others are popular – popularized by financial experts with large media platforms. You may have heard of some of these crises-About strategies, but what do they actually mean? We will disassemble it.


Named after Vanguard Group founder John Bogle, this strategy advocates saving at least 20% of your income, investing early and often, never trying to “time the market”, and having a risk profile that isn’t too high or extremely low, investing in low-cost (low-cost) and widely diversified index funds, and staying on track during the ups and downs of the stock market (eg, Don’t sell the moment you smell a bear market.)

in his speech”Simply investBogle said, “Simplicity is the main key to financial success.” Instead of doing extensive research on and tracking individual stocks, Bugleheads Advocating for portfolio diversification by following a simple investment philosophy: Create a “lazy” portfolio of three funds that includes the Total Stock Market Index Fund, the Total International Equity Index Fund, and the Total Bond Market Fund (the percentage that Bogle recommends being equal to your age – if you’re 40, set aside 40% of your portfolio for bonds.) Then, far from periodic rebalancing, adjust it, forget about it, and watch your money make returns with the market over time.

FIRE (financial independence early retirement)

You may be a candidate for this aggressive strategy if you 1) Put a high priority on retiring early 2) Earning a high income and 3) Have the discipline to invest 50-75% of your income annually. (Good-bye-Bye, microbrews and Starbucks.) While the idea behind FIRE isn’t new—it first came from a 1992 book. Your money or your life By Vicki Rubin and Joe Dominguez – The strategy has gained popularity recently thanks to bloggers like Peter Adeney, the former software engineer behind the Mr. Money Sharpwho retired at the age of thirty.

Basically, FIRE is due to maximum budgeting, controlled spending, and low cost investing –Live frugally and ditch the luxuries in order to put at least 50% of your income into inexpensive index funds. (instead of 10-15% of our income before taxes which experts typically recommend putting into retirement annually.)

Adeney wrote on his blog, however, that “financial independence does not It means the end of your career,” and it means “complete freedom.” He told financial times which – which,retirement“It means different things to people. For some, it can be enough savings to get a greater work-life balance by switching to part-time work, or choosing a more rewarding but lower-paying career.”

50/30/20 rule

This budget strategy, Popularized by Senator Elizabeth Warren in her book Everything You Deserve: The Ultimate Financial Plan for Life It turns your after-tax income into three main categories: 50% on needs, 30% on Wants, and 20% to save or pay off debt.

In this model, half of your income is devoted to necessities such as rent, mortgage payments, groceries, utilities, and gas. thirty percent He goes towards things like entertainment, self care, Restaurants, shopping, gym, or vacations. 20% is directed to savings, retirement, investment or debt repayment. We wrote here About creating a detailed budget 50/30/20.

As a simpler alternative, some We recommend simplifying this to the “80/20” rule. It automatically takes 20% of your salary and converts it into savings, leaving you free to do whatever you want with the remaining 80%. (This only works if you trust me taking Take care of all your essential expenses before spending on entertainment.)

Seven Steps Baby Dave Ramsey

No roundup of financial strategy would be complete without mentioning Dave Ramsey. Love him or hate him, his reach and influence as a bestselling radio show author and host is undeniable. Here are Ramsey’s “Seven Baby Steps” to Living Debt Free:

1. Save $1,000 for a start-up emergency fund.

2. Pay off debts (except for your home) using “snowball method“By attacking smaller debt first (regardless of interest rates on larger debt amounts).

3. Build your start-up emergency fund enough to pay 3 to 6 months’ worth of expenses.

4. Invest 15% of your income in an employer’s 401(k) plan and Roth IRAs.

5. Save “as much as possible” for your child’s college, in educational savings accounts (ESAs) and 529 tax-advantaged savings plans.

6. Pay off your mortgage.

7. Build wealth and donate.

banking speed

Also known as a “HELOC strategy,” this somewhat risky approach involves using a line of credit – usually a home equity line of credit (HELOC) – as a savings or checking account to pay your monthly expenses And the Pay off loan installments, usually a mortgage. according to cashThe basic idea is to strategically distribute your money across different debt products in order to minimize interest payments and increase the amount that will be paid for your mortgage principal.

This strategy will only work when you spend less than you earn, have enough available income to make your monthly principal payments (not just interest) on a mortgage or other loan — and you can trust yourself to responsibly manage debt and excess cash flow. (This approach is not For people with a track record of spending more than they earn and amassing more debt.)

Some argue that with lower mortgage interest rates, a more profitable approach is to use a HELOC to pay your monthly expenses, and then investment Your disposable income in the stock market and other retirement accounts.

Warren Buffett’s Investing Style

While Buffett’s investment advice doesn’t have a catchy name like the Buffettheads, who have a net worth of $112 billion, when you talk about the Oracle of Omaha, pay attention. One of the most famous aphorisms of the owner of Berkshire Hathaway is, “Rule #1: Never lose money. Rule #2: Don’t forget Rule #1.” The investing legend revolves around modest living (he was famously still living in the $31,000 home he bought in 1958) and “Buy high quality merchandise when discounted. Buffett calls for buying high-value investments at low prices, and building strong financial habitsAlways have cash, and avoid debt (especially credit card debt).

Like Bogle, Buffett believes in index funds. In a letter 2013 He wrote to Berkshire Hathaway shareholders, “Put 10% of the liquidity in short-term government bonds and 90% in a very low-cost S&P 500 index fund.”

at least this One The common thing between all these different philosophies.

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