- You’re Prepared for a Financial Emergency
When financial burdens occur, they seem to happen all at once. Unfortunately, one in three Americans have no emergency savings, according to a 2015 survey by NeighborWorks America. The standard is having six months of take-home pay saved. This can be a daunting task, but it is well worth it when a financial emergency hits.
2. Contributing More to Your 401(k) Than the Employer
You can estimate your how much you will have saved by retirement if your employer contributes 3% and your matching contribution. Is that enough to last your retirement & maintain your intended lifestyle? If not, it’s time to start contributing more than the match to increase the likelihood you don’t run out of money in retirement.
3. Debt is Under Control
Your debt is under control if your Debt-To-Income (DTI) ratio is 25% or less. This can be calculated by totaling the bills you pay for the month (mortgage, car, credit cards) and dividing it by your gross income. Example: Each month you have payments of $1,000 mortgage, $200 car loan, and $150 credit card bill, all equaling $1,350. If your gross monthly income is $5,400, then you have a 0.25 or 25% DTI. Since it’s hard to raise your income, lowering your debt will improve your DTI and will get you on the path to financial freedom.
4. Credit Score
The lower your score, the higher your interest rates to borrow are likely to be. So when applying for a mortgage or credit card, expect to pay more in interest than if your score was higher. A great score is higher than 750 and below 620 is considered a low score. You can find out your score on sites like Equifax, Experian, and TransUnion. Also, request a free annual credit report to see what is affecting your score at www.AnnualCreditReport.com.
5. Insurance and Estate Plan are Updated
You have the right insurances to cover your home, auto, life, and disability with the appropriate level of coverage for your specific situation. Also, you have met with an estate planning attorney and have appropriate estate documents.
Content Prepared by Rana Kory, Worley Erhart-Graves Financial Advisors