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The 411 on 529s

I don’t think I’m saying anything controversial here, but I think giving your children a solid education is the best gift a parent can provide. Despite the nationalistic economic trends emerging throughout the globe, the (high paying) jobs of the future will continue to require a strong education in order to compete globally. Additionally, there is strong research out there forecasting that the economic divide among the millennial and futureĀ generations is going to be much less based on race, and more based on who was able to graduate college without student debt. I owe so much of my current financial situation to the fact that I was able to graduate one of the most expensive schools in the country completely debt free.

As a new parent, saving enough to send my kid to college ranks as one of my top goals. While it doesn’t beat out retirement (you can’t borrow money for retirement but you can for school), it does beat out EARLY retirement. I would view it as a worthy sacrifice to have to work a couple of extra years if it meant sending my child to school debt-free. Though I have learned one thing over the last several weeks: the cost of college is scary high. I mean, it-Halloween-month-so-culturally-relevant-IT-remake scary. read more

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The 4% Rule: What Is It and Why It Matters

A popular rule of thumb for financial planners and bloggers is the 4% rule. This rule states that a diversified portfolio of stocks and bonds will allow investors to withdraw 4% of their portfolio every year without any risk of running out of money. For people trying to find out what their target retirement number is, this can be a very simple, valuable tool. Simply take the amount of income you would need annually to retire (before taxes), and divide it by 4% (or multiply by 25, they equal the same thing).

Spending in Year 1 of Retirement / 4% = My Portfolio Retirement Number read more

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Your Savings Rate and Your Net Worth

Your savings rate, or how much of your income goes into savings and investing, is an incredibly powerful barometer for how well you are doing at growing your net worth and achieving your early retirement goals. In The Basic Equation that Governs Your Financial Life, I wrote out the formula I use to assess how I am doing on my journey towards financial independence and early retirement. In this article, I am going to look at the savings portion of the formula, and evaluate my own performance.

The first part of the equation is known as your savings rate, and it can have a HUGE impact on your journey towards financial independence. To find your savings rate, subtract your taxes and expenses from your income, and divide that by your pre-tax income. read more

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The Basic Equation that Governs Your Financial Life

Building your net worth has a lot of moving parts. Savings, earning, investing, taxes. Sometimes itā€™s hard to know where to start and how all the pieces work together. To help, I developed a simplified equation to provide a framework for thinking about your personal finances. Thinking about your finances in this way can provide a powerful starting point for jumpstarting your journey to financial independence and early retirement.

Net Worth Equation: read more