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Basic Advice For Future Millionaires

This article was written by in Saving. Comments Off

We’ve compiled a list of some rules of thumb that you might hold up against your budget, debt, savings, life insurance and net worth.

This article paraphrases most books on personal finance, and manages to do so in just a few short paragraphs. I can do one step better: I’ll now paraphrase the article into just a few points:

  1. Save more than 10% of your take-home salary.
  2. Don’t buy a house priced more than two-and-a-half times your gross yearly income.
  3. Keep your payments to creditors (including mortgage) less than one third of your gross monthly income.
  4. Your net worth should equal your age times your gross income divided by 10.
  5. Your retirement “nest egg” should be 20 times your annual expenses.

I generally agree with the article, though I would stress saving more (20% if possible), owing less, and purchasing a house about twice your yearly salary. And working through some calculations, it seems to me that the net worth formula above makes the most sense for someone who has been in the work force for several years, not someone in the first several years of making their own living.

Published or updated July 22, 2003. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .