How Much Money Do I Need To Save To Retire?

poc

This is by far the most popular question that we come across as financial planners. You may have heard some of the "rules of thumb" like “80% of your current take-home pay” or “1 million dollars”.  In reality, the answer varies greatly on an individual by individual basis.  This article will outline the procedures that we follow as financial planners to help individuals answer this very important question.

Step 1:  Estimate Your Annual Expenses In Retirement

The first step is to get a ballpark idea of what your annual expenses might look like in retirement.    The best place to start is to list your current monthly and annual expenses. Then create a separate column labeled “expenses in retirement”.  Whether you are 2 years, 10 years, or 20 years away from retirement the idea is to pretend as if you were retiring tomorrow and determining what your annual expenses might look like.  Some of your expenses in retirement will be lower, others may be higher, but most people find that a lot of their current expenses will carry over at the same level into the retirement years. This is because most people have become accustom to a certain standards of living and they intend to maintain that standard of living in retirement. Here are a few important questions that you should ask yourself when forecasting your retirement expenses:

• How much should I budget for health insurance?

• Will I have a mortgage or debt when I retire?

• Do I plan to move when I retire?

• Since I will not be working, should I budget additional expenses for vacations and hobbies?

• Will I need to keep my life insurance policies after I retire?

Step 2:  Adjust Your Retirement Expenses For Inflation

Now that you have a ballpark number of your annual expenses in retirement, you will need to adjust those expenses for inflation.  Inflation is just a fancy word for “the price of everything that we buy today will gradually go up in price over time”.  If the price of a gallon of milk today is $2 then most likely 20 years from now that same gallon of milk will cost $3.51.  A 75% increase!!   Historically inflation has grown at a rate of about 3% per year.  There are periods of time when the rate of inflation grows faster or slower but on average it grows at 3% per year.

Another way to look at inflation is $20,000 in today’s dollars will not buy the same amount of goods and services 10 years from now because inflation erodes the purchasing power of your $20,000.  If I did my annual expense planner and it tells me that I need $50,000 per year in retirement to meet all of my estimated expenses, let’s look at what adjusting that $50,000 for inflation does over different periods of time assuming a 3% rate of inflation:

Today’s Dollars 5 Years From Now 10 Years From Now 20 Years From Now

$50,000         $56,275                  $65,238                    $87,675

In the above example, if I am retiring in 10 years, and my estimated annual expenses in retirement will be $50,000 in today’s dollars, by the time I retire 10 years from now my annual expenses will increase to $65,238 per year just to stay in the same place that I am in today.  Also, inflation does not stop when you retire, it continues into the retirement years. If I am 50 today and plan to live until 90, I have to apply this inflation adjustment for 40 years.  It’s clear to see how inflation can have a significant impact on the amount that you may need to withdrawal for your account to meet you estimated expenses at a future date.

Step 3:  Gather The Information On Your Current Assets

Once you know your expenses, you now need to gather all of the information on your retirement accounts and pension plans.  You should collect the most recent statement for all of your investment accounts (401K, 403B, IRA’s, brokerage accounts, stocks, etc.), pension statements (if applicable), obtain your most recent social security statement, and gather information on the other sources of income and/or assets that may be available when you retire. Such as:

• Sale of a business

• Downsizing the primary residence

• Rental income

• Part-time employment

Step 4:  Project The Growth Of Your Retirement Assets

There are three main categories to consider when calculating the growth rate of your retirement assets:

• Annual contributions

• Withdrawals

• Investment rate of return

For annual contributions, it’s determining which accounts you plan on making deposits too each year and how much?  For most individuals, their employer sponsored retirement plan is the main source of new contributions to their retirement nest egg.   If your employer makes regular employer contributions to your retirement plan, you should factor those in as well.  For example, if I am contributing 8% of my pay into the plan and my employer is providing me with a 4% matching contributions, I would reasonably assume that I’m adding 12% of my pay to my 401(k) plan each year.

The most popular question that we get in this category is “how much should I be contributing each year to my retirement account with my employer?”  We advise employees that they should have a goal of contributing 10% of their pay each year to their retirement accounts.   This is an aggregate total between your personal contributions and the employer contributions.   Even if you cannot reach that level right now, 10%+ is the target.

Let’s move onto the next category…….withdrawals.  Pre-retirement withdrawals from retirement accounts have become much more common in recent years due largely to the rising cost of college education.  Parents will take loans from their 401K/403B plans or take early withdrawals from IRA accounts to fulfill the need for additional income during the years that their children are in college.  If part of your overall financial plan is to use your retirement accounts to pay for one-time expenses such as college, you will need to factor that into your projections.

The third variable to consider when determining the growth of your assets is the assumed annual rate of return on your investments.  There are many items to consider when determining a reasonable annual rate of return for your accounts.  Some of those considerations include:

• Time horizon to retirement

• Allocation of your portfolio (stocks vs bonds)

• Concentrated holdings (10%+ of your portfolio allocated to a single investment)

• Accumulation phase versus distribution phase

The answer to the question: “what rate of return should I expect from my retirement accounts?”, can really only be determine on a case by case basis. Using an unreasonable rate of return assumption can create a significant disconnect between your retirement projections versus what is likely to actually occur within your investment accounts.  Be careful with this step.

Step 5:  Factor In Taxes

Don’t forget about the lovely IRS.  All assets are not treated equally from a tax standpoint.  For most individuals, the majority of their retirement savings will be in pre-tax retirement vehicles such as 401(k), 403(b), and Traditional IRA’s.  That means when you take distributions from those accounts, you will realize earned income, and have to pay tax.  For example, if you have $400,000 in your 401K account and you are in the 25% tax bracket, $100,000 of that $400,000 will be lost to taxes as withdrawals are made from the account.

If you have after tax investment accounts, it’s possible that you may owe little to no taxes on withdrawals.  However, if there are unrealized investment gains built up in your after tax investment accounts then you may owe capital gains tax when liquidating positons.

Also note, you may have to pay taxes on a portion of your social security benefit.   The amount of your social security benefit that is taxable varies based on your level of income.

Step 6:  Spend Down Your Assets

In the final step, you should run long term projections to illustrate the spend down of your assets in retirement.  Here are the steps:Example

• Start with your annual after tax expense number $60,000

• Subtract social security less taxes: ($20,000)

• Subtract pension payments less taxes (if applicable): ($10,000)

• Annual Expenses Net SS and Pensions: $30,000

In the example above, this individual would need an additional $30,000 after-tax to meet their anticipated annual expenses in Year 1 of retirement.  I stress “after-tax” because if all of the retirement assets are in a pre-tax retirement account then they would need to gross up their distributions for taxes to get to the $30,000 after tax.  If it is assumed that $40,000 has to be withdrawn from an IRA each year, the 3% inflation rate is applied to the annual expenses, and the life expectancy of this individual is 20 years from the date that they retire, this individual would need to withdrawal $1,074,814 out of their retirement accounts over the next 20 years to meet their income needs.

Step 7:  Identify Multiple Solutions

There are often times multiple roads to reach a destination and the same is true when planning for retirement. If you find that you assets are falling short of the amount that is needed to sustain your expenses in retirement, you should work with a knowledgeable financial planner to identify alternative solutions.  It may help you to answer questions like:

• If I decided to work part-time in retirement how much would I have to earn?

• If I downsize my primary residence in retirement how does this impact the overall picture?

• If I can’t retire at age 63, what age can I comfortably retire at?

• What are the pros and cons of taking social security benefits prior to normal retirement age

I also encourage clients to spend time looking at their annual expenses.  If you find that your are cutting it close on income versus expenses in retirement, it's usually easier to cut expenses than it is to create more income in the retirement year. 

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

First Time Homebuyer Tips

home buyer tips

Buying your first home is one of life’s milestones that everyone should have the opportunity to experience if they choose.  Owning a home gives you a feeling of accomplishment and as you make payments a portion is going to your personal net worth rather than a landlord.  The process is exciting but one surefire piece of information that I wish I knew when buying my first home is that you will come across surprises.  Whether it be a delay in closing, an issue with financing, or closing costs being higher than expected, it is important to know that you can do all the preparation possible and still be hit in the face with some setbacks.

This article will not only touch on some of the important considerations when buying your first home but will give examples of possible setbacks and how to avoid them.

Know Your Number

The most important piece of information to have when purchasing your home is how much you can spend.  The purchase of your home should not be the only goal to consider.  All of your other financial objectives such as paying off debt (i.e. college and unsecured) and saving for retirement must be taken into consideration.  Also, it is recommended you have an emergency fund in place that would cover at least 4 months of your fixed expenses in case something happens with your job or some other event occurs.  Knowing your number does not only include what you can afford today but how much you can afford monthly moving forward.  If your monthly cash flow becomes dangerously low or negative with the addition of a mortgage payment (including mortgage/property taxes/homeowners), the house may be too expensive.

NOTE:  Just because you are preapproved for a certain amount does not mean you need to spend that amount.

Choose An Agent You Trust

You will be spending a lot of time with your agent so choose them wisely.  It should be someone you get along with and someone you can trust will look out for your best interests.  If your agent just cares about receiving a commission, they may push you to purchase a home before looking at all of your options or buying a home you can’t afford.  Remember, you are the client and therefore should be treated as such.

NOTE:  Just because you never physically cut a check to your real estate agent doesn’t mean you aren’t paying them.   In a typical transaction the seller will pay the commissions.  An agreed upon percentage will come out of the sales proceeds and go to both real estate agents (the buyer’s and the seller’s) and therefore the cost is built into the price you pay.

Use Your Agent As An Asset

Your agent is likely much more knowledgeable about home buying than you so use that knowledge to your benefit.  The agent should be able to help you value homes and determine whether the house is fairly priced.  Ask them as many questions as possible throughout the entire process.

On The Fence

If you are on the fence whether or not to buy a home then take your time.  If you may relocate because of your job or family don’t jump into purchasing a home.  It is not worth paying the closing costs and going through the hassle of home buying if you may move in the near future.  We typically use the “5 Year Rule” when making the determination.  If you don’t see yourself being in the house for at least 5 years you should consider whether or not you will get your money back when you sell.

Compare Lenders

The banking industry is extremely competitive and it is worth shopping around for the best offer when choosing a mortgage provider.  If you aren’t comfortable with numbers, don’t be afraid to ask for help.  A difference of 0.10% on a 30 year mortgage could be the difference of thousands of dollars wasted on interest.

Don’t Cheap Out On Homeowners

Don’t choose your homeowners policy based on price.  Of course price is one of the considerations but it is not the only one.  Make sure your policy is the most comprehensive you can comfortably afford as the cost of increased premiums is likely much less than the cost of coming out of pocket for something not covered.  Remember, insurance companies, like banks, are in a competitive industry so shop around.

Down Payment

Most lenders require a 20% down payment of the home value to avoid paying additional costs.  This means if the value of the home is $200,000, you will have to pay $40,000 out of pocket!  Most lenders offer Federal Housing Administration (FHA) loans that allow you to put down as little as 3.5%.  If you choose this type of loan you also have to purchase Private Mortgage Insurance (PMI).  This will be a cost added to your mortgage payment until the value of your home is adequate enough to remove the PMI.  It is important to factor this in as a cost similar to interest because a 5% interest rate could quickly look like 6-7% if you have to pay PMI.

Closing And Other Additional Costs

There are a lot of out of pocket costs to consider when purchasing a home.  Examples of these costs are listed below.  An important piece of knowing your number is to consider all the costs that may come up during the process.

• Loan Origination Fee

• Attorney Fees

• Property Taxes

• Home Owners Insurance

• Appraisal Fee

• Inspection Fee

• Title Insurance

• Recording Fee

• Government Recording Charges

• Credit Report Fee

• Flood Determination Fee

How To Help Avoid Certain Complications

Situation:  I bought a house at the top of my budget that I thought was move in ready but needs repairs.

Recommendation:  Choose an inspector that has a great reputation and knows the location.  There may be issues that are common to the area that one inspector may be more likely to identify.  Also, bring a contractor or someone of similar background for a walk through.  Repairs can be extremely costly and if you purchased a home at the top end of your budget you may not be able to afford certain fixes.  It should be known that all issues cannot be foreseen but taking the necessary steps to diminish these situations will not hurt.  Don’t purchase a home that will bankrupt you if repairs need to be done.

Situation:  I bought a home I can’t fill.

Recommendation:  Closing costs and repairs won’t be the only out of pocket expenses.  Complete a summary of items you think you may need to buy after the purchase.  This may include furniture, appliances, décor, and fixtures.  In these situations it is always better to overestimate.

Situation:  My lease is up in a month and I would like to purchase a home.

Recommendation:  Purchasing a home is something that requires time and planning.  The home will likely be the largest purchase you’ve ever made (depending on the college you choose) so it is not something to rush.  If you are thinking of moving after your lease is up or when you relocate jobs, start planning as soon as possible.  Feeling forced into purchasing something as important as a home will likely lead to regrets. 

About Rob……...

Hi, I’m Rob Mangold. I’m the Chief Operating Officer at Greenbush Financial Group and a contributor to the Money Smart Board blog. We created the blog to provide strategies that will help our readers personally , professionally, and financially. Our blog is meant to be a resource. If there are questions that you need answered, pleas feel free to join in on the discussion or contact me directly.

Backdoor Roth IRA Contribution Strategy

backdoor roth ira strategy

This strategy is for high income earners that make too much to contribute directly to a Roth IRA.   In recent years, some of these high income earners have been implementing a “backdoor Roth IRA conversion strategy” to get around the Roth IRA contribution limitations and make contributions to Roth IRA’s via “conversions”.  For the 2025 tax year, your ability to make contributions to a Roth IRA begins to phase out at the following AGI thresholds based on your filing status:

• Single: $150,000

• Married Filing Jointly: $236,000

• Married Filing Separately: $0

However, in 2010 the IRS removed the income limits on “IRA Conversions” which open up an opportunity……if executed correctly…….for high income earners to make “backdoor” contributions to a Roth IRA.

Why would a high income earning want to contribute to a Roth IRA?  Once high income earners have maxed out their contributions to their employer sponsored retirement plans, they usually begin to fund plain vanilla investment management accounts or whole life insurance policies.  When assets accumulate in an investment management account, once liquidated, the account owner typically has to pay either short-term or long term capital gains on the appreciation. For whole life insurance, even though the accumulation is tax deferred, if the policy is surrendered, the policy owner pays ordinary income tax on the gain in the policy.

With a Roth IRA, after tax contributions are made to the account and the gains in the account are withdrawn TAX FREE if the account owner at the time of withdrawal is over the age of 59½ and the Roth IRA has been in existence for 5 years.   A huge tax benefit for high income earners who are typically in a medium to higher tax bracket even in retirement.

Here is how the strategy works

• Rollover all existing pre-tax IRA’s into your employer sponsored retirement plan

• Make a non-deductible contribution to a Traditional IRA

• Convert the Traditional IRA to a Roth IRA

Here are the pitfalls in the execution process

Over the years, more and more individuals have become aware of this wealth accumulation strategy.  However, there are risks associated with executing this strategy and if not executed correctly could result in adverse tax consequences.

Here are the top pitfalls:

• Forget to aggregate Pre-Tax IRA’s

• Do not understand that SEP IRA’s and Simple IRA’s are included in the Aggregation Rule

• They create a “step transaction”

Pitfall #1:  IRS Aggregation Rule

The IRA aggregate rule stipulates that when an individual has multiple IRAs, they will all be treated as one account when determining the tax consequences of any distributions (including a distribution out of the account for a Roth conversion).

This creates a significant challenge for those who wish to do the backdoor Roth strategy, but have other existing IRA accounts already in place (e.g., from prior years’ deductible IRA contributions, or rollovers from prior 401(k) and other employer retirement plans). Because the standard rule for IRA distributions (and Roth conversions) is that any after-tax contributions come out along with any pre-tax assets (whether from contributions or growth) on a pro-rata basis, when all the accounts are aggregated together, it becomes impossible to just convert the non-deductible IRA.

picture

If an individual has pre-tax IRA’s we typically recommend that they rollover those IRA’s into their employer sponsored retirement plans which eliminates all of their pre-tax IRA balance and then open the opportunity to execute this backdoor Roth IRA contribution strategy.

Pitfall #2:  SEP IRA & Simple IRA's count

Many smaller companies and self-employed individuals sponsor SEP IRA’s or Simple IRA Plans.  Many individuals just assume that these are “employer sponsored retirement plans” not subject to the aggregation rules.  Wrong.  In the eyes of the IRS these are “pre-tax IRA’s” and are subject to the aggregation rules.   If you have a Simple IRA or SEP IRA, make sure you take this common pitfall into account.

Pitfall #3:  Beware IRS Step Transaction Rule

This is probably the most common pitfall that we see when executing this strategy.  Individuals and investment advisors alike will make deposits to the non-deductible traditional IRA and then the next day process the conversion to the Roth IRA.  In doing this, you run the risk of creating a “step transaction”.

There is a very long explanation tied to “step transactions” and how to avoid a “step transactions” but I will provide you with a brief summary of the concept.

Here it is, if you use legal loop holes in the tax system in an obvious effort to side step other IRS limitations (like the Roth IRA income limit) it could be considered a “step transaction” by the IRS and the IRS may disallow the conversion and assess tax penalties.

Disclosure: Backdoor Roth IRA Conversion Strategy

It is highly recommend that you work closely with your financial advisor and tax advisor to determine whether or not this is a viable wealth accumulation strategy based on your personal financial situation. 

Michael Ruger

About Michael……...

Hi, I’m Michael Ruger. I’m the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

How Much Life Insurance Do I Need?

How Much Life Insurance Do I Need?

Do you even need life insurance? If you have dependants to protect and you do not have enough savings, you will most likely need life insurance. But the question is how much should I have? Well, your home will be one of your biggest assets, and in some cases the money that it makes from its sale when you have passed away is a significant inheritance for your children.

If you do not have dependents or you have enough savings to cover the current and future expenses for your dependents there really is no need for life insurance. Life insurance sales professional can be very aggressive with their sales tactics and sometime they mask their services as "financial planning" but all of their solutions lead to you buying an expensive whole life insurance policy.

Remember, life insurance is simply a transfer of risk. When you are younger, have a family, a mortgage, and are just starting to accumulate assets, the amount of life insurance coverage is usually at its greatest. But as your children grow up, they finish college, you pay your mortgage, you have no debt, and you have accumulated a good amount in retirement savings, your need to transfer that risk diminishes because you have essentially become self-insured. Just because you had a $1M dollar life insurance policy issued 10 years ago does not mean that is the amount you need now.

Which kind of insurance should you get?

It's our opinion that for most individuals term insurance makes the most sense. Insurance agents are always very eager to sell whole life, variable life, and universal life policies. Why? They pay big commissions!! When you compare a $1M 30 year term policy and a $1M Whole Life policy side by side, often times the annual premium for whole life insurance is 10 times that amount of the term insurance policy. Insurance agents will tout that the whole life policy has cash value, you can take loans, and that it's a tax deferred savings vehicle. But often time when you compare that to: "If I just bought the cheaper term insurance and did something else with the money I would have spent on the more expensive whole life policy such as additional pre-tax retirement savings, college savings for the kids, paying down the mortgage, or setting up an investment management account, at the end of the day I'm in a much better spot financially."

How much life insurance do you need?

The most common rule of thumb that I hear is "10 times my annual salary". Please throw that out the window. The amount of insurance you need varies greatly from individual to individual. The calculation to reach the answer is fairly straight forward. Below is the approach we take with our clients:

• How much debt do you have? This includes mortgages, car loans, personal loans, credit cards, etc. Your total debt amount is your starting point.

• What are your annual expenses? Just create a quick list of your monthly expenses, they do not have to be exact, and our recommendation is to estimate on the high side just to be safe. Then multiply your monthly expense by 12 months to reach your "annual after tax expenses".

• How much monthly income do you have to replace? If you are married, we have to look at the income of each spouse. If your monthly expenses are $50,000 per year and the husband earns $30,000 and the wife earns $80,000, we are going to need more insurance on the wife because we have to replace $80,000 per year in income if she were to pass away unexpectedly. Married couples make the mistake of getting the same face value of insurance just because. Look at it from an income replacement standpoint. If you are a single parent or provider, you will just look at the amount of income that is needed to meet the anticipated monthly expenses for your dependents.

• Factor in long term savings goals and expenses. Examples of this are the college cost for your children and the annual retirement savings for the surviving spouse.

Example:

• Husband: Age 40: Annual Income $70,000

• Wife: Age 41: Annual Income $70,000

• Children: Age 13 & 10

• Total Outstanding Debt with Mortgage: $250,000

• Total Annual After Tax Expenses: $90,000

• Savings & Investment Accounts: $100,000

Remember there is not a single correct way to calculate your insurance need. This example is meant to help you through the thought process. Let's look at an insurance policy for the husband. We first look at what the duration of the term insurance policy should be. Our top two questions are "when will the mortgage be paid off?" and "when will the kids be done with college?" These are the two most common large expenses that we are insuring against. In this example let's assume they have 20 years left on their mortgage so at a minimum we will be looking at a 20 year term policy since the youngest child will done with their 4 year degree within the next 12 years. So a 20 year term covers both.

Here is how we would calculate the amount. Start with the total amount of debt: $250,000. That is our base amount. Then we need to look at college expense for the kids. Assume $20K per year for each child for a 4 year degree: $160,000. Next we look at how much annual income we need to replace on the husband's life to meet their monthly expense. In this example it will be close to all of it but let's reduce it to $60K per year. It is determined that they will need their current level of income until the mortgage is paid in full so $60,000 x 20 Years = $1,200,000. When you add all of these up they will need a 20 year term policy with a death benefit of $1,610,000. But we also have to take into account that they already have $100,000 in savings and their levels of debt should decrease with each year as time progresses. In this scenario we would most likely recommend a 20 Year Term Policy with a $1.5M death benefit on the husband's life.

The calculation for his wife in this scenario would be similar since they have the same level of income.

Michael Ruger

About Michael.........

Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.

Paying Down Debt: What is the Best Strategy?

strategies for paying off debt

Living with debt is not easy. It can be a constant burden and easily disrupt day-to-day life. Having debt will also ruin your credit score too. The worse your credit score gets, the less likely you will be accepted for any type of loan.  One of the fastest ways to get rid of your debt is to pay your debt off in the correct order.

STEP 1: Create a list of all your current debts

The first step is understanding what you owe. To start, make a master list of all your monthly credit card and loan statements. For each bill, include:

• The creditor's name

• The total amount you owe on that bill

• The minimum required monthly payment

• The interest rate (also known as APR)

• The payment due date

STEP 2: List all of your monthly expenses

Add up all your monthly expenses: rent, car, food, utilities, health insurance and the minimum payments on your debts; as well as regular spending on things such as entertainment and clothing. Subtract that figure from your monthly after-tax income. The remaining amount is what you could put toward debt repayment each month-though it may make sense for you to save some.

STEP 3: Call your lenders

Call your lenders and explain your situation. They may be willing to lower your interest rate temporarily or waive late fees. You may also be able to lower your interest rate by transferring some high-interest credit card debt onto a new credit card with a lower rate (though that's not a long-term solution).

STEP 4: Payoff high interest rate or small balances first

You can start with the bill carrying the highest interest, or the one with the smallest balance. Prioritizing the highest-rate debt can save you more money: You pay off your most expensive debt sooner. Paying off the smallest debt can eliminate a bill faster, providing a motivating boost. Whichever you choose, make sure to pay at least the minimum on all your debts.

credit card debt

Pay the monthly minimum on each debt. The exception: your target bill. Put more money toward this one to pay it down faster. Once you pay off that bill, choose another to pay down aggressively. Your monthly debt repayment total shouldn't change, even when you eliminate bills. This way you gain momentum as you go, putting more and more money toward each remaining bill.

STEP 5: Get creative

You can use your annual tax refund or holiday bonus to pay down debt. Look for small ways to save money every day, such as riding your bike to work, or eating in instead of dining out. Another way to make a dent quickly is to sell unused or unnecessary belongings-maybe downgrading your car to a more affordable model with lower monthly payments.

STEP 6: Break the cycle

As you start to escape debt, it can be tempting to reward yourself by splurging on a new smartphone or an expensive dinner but just a few purchases can erase all your hard work. Instead, buy things with cash or your debit card, and think long and hard before taking on any new debt.

Read this book

If you want to live a debt free life, I strongly recommend you read the book "Total Money Makeover" by Dave Ramsey. Ramsey's book really paves the way to get out of debt and stay out of debt.

dave ramsey book

Michael Ruger

About Michael.........

Hi, I'm Michael Ruger. I'm the managing partner of Greenbush Financial Group and the creator of the nationally recognized Money Smart Board blog . I created the blog because there are a lot of events in life that require important financial decisions. The goal is to help our readers avoid big financial missteps, discover financial solutions that they were not aware of, and to optimize their financial future.