I am retired and take educated guesses on all things financial.

October 30, 2006

October 30, 2006: Rules to Grow Rich?

As a follow up to yesterday's post, I will summarize the new MONEY magazine's 25 Rules to Grow Rich By. I cannot quarrel with most of them. Common sense prevails. You may wish to share this with your kids - or spouse.

1. For the best return on a home upgrade, renovate an old bathroom. The kitchen will come in second.
2. It's worth refinancing your mortgage if you can cut your interest rate by at least one point.
3. Spend no more than 21/2 times your income on a home. For a down payment,it's best to come up with at least 20%.
4. Your total household payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
5. Never hire a roofer, driveway paver or chimney sweep who is going door to door.
6. All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Afterwards put more into your 401(k) or traditional IRA.
7. To figure out what percentage of your money to put in stocks, subtract your age from 120.
8. Invest no more than 10% of your portfolio in your company stock - or any single stock.
9. The most you should pay in annual fees for a mutual fund is 1% for a large-company fund,1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
10. Build a retirement nest egg that is 25 times the annual investment income you will need.
11. If you do not understand how an investment works, don't buy it.
12. Save at least 10% of your gross salary.
13. Keep three months' expenses in a bank savings account or money market fund. If you have children or rely on one income, make it six months'.
14. Aim to accumulate enough money to pay for 1/3 of your children's college costs.
15. Buy enough term life insurance to cover at least five years of your salary, or as much as 10 years if you have young children or significant debts.
16. Choose the highest deductible insurance you can afford to live with to lower premiums.
17. The best credit card is a no-fee rewards card that you pay in full every month.
18. Raise your credit score by paying your bills on time and borrow no more than 30% of your available credit.
19. Anyone who calls or e-mails you asking for your social security number or any financial data is a scam artist.
20. Buy a late-model used car and drive it until it is junk.
21. Lease a new vehicle only if you plan to replace it within two or three years.
22. Wait at least three months before buying the "latest" electronic gadget or computer.
23. Don't redeem frequent-flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
24. Buy airline tickets early. Most seats go on sale 11 months in advance.
25. Do not buy an extended warranty on electronics, except if it is a laptop and the warranty is from the manufacturer.

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