It is simple and straight forward. Yet very few people can seem to do it. The key that isn’t mentioned here is to not buy things you can’t afford! We chose to buy a house early and I would recommend waiting until you can afford it on top of saving 20% of your income. So before you are stuck in a home try and get your finances to the point where you can live comfortably while saving 20%. This means your mortgage shouldn’t be more than 30-35% of your income (depending on your other expenses).
1. Make a will
2. Pay off your credit cards
3. Get term life insurance if you have a family to support
4. Fund your 401k to the maximum
5. Fund your IRA to the maximum
6. Buy a house if you want to live in a house and can afford it
7. Put six months worth of expenses in a money-market account
8. Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
9. If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio
