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Keep Financially Fit With Numbers

Keep Financially Fit With Numbers


Whether you’re starting out into the real world or have been in it awhile, many of us have similar goals. One is staying healthy and another is having enough money to reach our goals. Eating healthier or becoming physically fit is often a numbers game – how many calories to consume in a day, how many hours of exercise are recommended each week and even how many hours to rest at night. When you make a commitment to improve your financial fitness, do you know what numbers to aim for?

As a Certified Financial Planner™ focused on helping people start and stay on their path to financial fitness, here are some common measures of financial security to keep you moving in the right direction:

  • 3 to 6: Have an emergency fund equal to three to six months of nondiscretionary expenses to help withstand a sudden financial disruption such as a layoff, an untimely death or a disability.
  • 10: Evaluate your long-term savings rate. A common target used to determine an adequate rate is 10 percent. However, if your time horizon to certain goals such as retirement or college is close, it may be necessary to save at a higher rate, such as 15 percent or even 20 percent.
  • 28: Review your monthly housing costs. Typical monthly housing costs (principal and interest payments, real estate taxes, homeowner insurance premiums and homeowner association fees) should not exceed 28 percent of your gross (before taxes) monthly income. Also be sure to factor in utilities and maintenance costs.
  • 36: Remember that it’s important to not be stretched beyond your means with excessive debt. Your combined monthly housing costs and personal debt payments (car loan payments, tuition loan repayments and personal loan obligation payments) should not exceed approximately 36 percent of your gross monthly income.
  • 66: Changes in family circumstances can reorder your priorities and redefine long-term goals. As 66 percent of family caregivers are women, investing in your family can be extremely rewarding but requires careful planning. This includes planning financially for yourself, spouse, children, grandchildren and your parents.
  • 80: Plan for longevity and to leave a legacy for the people you love. The average life expectancy for a woman today is just over 80 years. Proper estate planning can help make certain your assets are used as you intended them to be, unnecessary estate taxes are avoided and your heirs are informed of your wishes. Your to-do list might include updating or creating a will, financial durable power of attorney, living will and health care directive, as well as identifying beneficiaries. Explore a revocable trust to avoid probate and how you could implement a gifting program for people and causes that are dear to your heart.

Just as there are good habits associated with staying physically fit, there are best practices involved with keeping financially fit. Simple strategies such as using debt wisely, contributing to tax-advantage investment vehicles and monitoring spending habits all go a long way toward helping you achieve your financial goals.

kristen-fricks-romanKristen Fricks-Roman CFP®, CRPS®, is a financial advisor and senior vice president at Morgan Stanley Wealth Management, Atlanta. She can be reached at kristen.fricks-roman@morganstanley.com.

The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, or its affiliates. Morgan Stanley Smith Barney LLC and its Financial Advisors do not provide tax or legal advice. Individuals should seek advice based on their particular circumstances from an independent tax advisor. Morgan Stanley Smith Barney, LLC, member SIPC.

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