Provocative Wave for Men

Money & Men

Money Guidelines

We’re in an economic mess right now. So, before things get any more confusing for your personal financial picture, here’s some straight talk on money from the experts. These are the guidelines – how much you need to retire, how much you should spend on a house, and the absolute max you should have on your credit cards at any given time.

• Let’s start with those credit cards. Remember this number: 30. That’s the maximum percentage you should owe on any one credit card. So if your credit limit is $10,000, you shouldn’t EVER owe more than $3,000. If you do, your credit score will go down. This is all according to Barry Paperno of Fair Isaac – the company that formulates your FICO score, the most widely used score. Why will more than 30% debt make your score go down? Because historically, people who max out their cards are very likely to start missing payments. Even if you max out your card and then pay it off, it’ll still affect your credit score. So always maintain a balance of 30% or less on your credit cards.
• How much can you safely spend on a house? Roughly 2.5 times your annual income. So if you earn $50,000 a year, you can afford a house that costs $125,000. No more. That amount was formulated by federal regulators right after the Great Depression. That’s an underwriting standard – and it’s only been in the last few years that that standard has been thrown out the window. It’s why we’re in the foreclosure mess we’re in now. The lesson is: DO NOT buy more house than you can afford. Stick to 2.5 times your annual salary and you’ll be safe.
• The amount you need to retire. It’s your annual salary now times 15. So if you earn $50,000, you’ll need at least $750,000 in the bank, and in stocks and bonds, to retire at age 65. That’s according to Dr. Philip Cooley from Trinity University and an expert on retirement strategy. He says even if the stock market tanked, most retirees would NOT lose it all, as they may fear. He still recommends this strategy in spite of what’s currently happening in the market. That number again: 15 times your annual salary to retire at age 65.