Wanted to put together this post as a general discussion. First and foremost I'm trying to better understand how many of the experts or experienced individuals in this subreddit might go about financial planning for less-than-average Joe. Many people have zero experience in investing, saving effectively, long-term financial planning...etc. So I'd like to get some input to weigh in on this question.
Ok, so lets say I have the "maybe unrealistic" goal of getting to $5 million over the next 10, 15, or 20+ years. Realistic or not, I want to temporarily put aside windfall, lottery wins, huge salary increases, or any type of 'lucky break's'. I'm mainly interested the "directional how" of financial planning.
Many people might only earn $65,000 / year. ($5,000 / 4 wks) for income. Cost of living varies, but presume about $2,000 / mo in fixed costs on average. Maybe 20~25 years old, so starting young.
- Disposable income $3000/month
- Zero current investments
- Lets say just a low savings account of $10,000.
- Average Credit
- No 401k
- No house, just renting....
So basically: No real assets other than savings and monthly income. For alot of people, this is a relatively common scenario...
Where do you safely start? If you lost your job tomorrow, then you'd only have 5 or 6 months cash to find new employment...which unfortunately sometimes takes awhile. At the same time; just saving alone won't offer much financial freedom for a long time; as eventually most people get married, have kids, buy a house, unexpected costs occur..etc
My basic inquiry is - how do you financially plan from here to better accrue wealth over time? To get to a point where your time and money is better invested toward your future; to build a diverse portfolio that tempers potential losses in the market or elsewhere...to work toward achieving that $5 million and how should a $5 million portfolio networth in assets reasonable look and function?
As well - how long should this take? I get that the planning strategy and personal situations changes over time; but how does one generally want to evolve their financial plans for better security long-term? I'm not interested in high-risk investments or lucky stock picks...I'm interested in what are the smart approaches that may help work toward the above goals, despite whether it's ever actually fully realized - make sense?
Starting out I can see putting a $500 or $1000 monthly contribution somewhere; putting the rest in savings to have a better emergency fund. beyond that, I'm using a working assumption that many people never earn more than $100,000 annually. Either way, just working doesn't really allow for true financial freedom - at least not for many people.
I often read people advising index funds with the S&P 500 - ok. How much should be contributed to that monthly... and how to you protect against downturns in the market. Should one invest in there own 401k or pray that their company offers a good 401k plan with matching contributions do or both? How much should you set aside for saving up for a house down-payment? Or how can I ensure my savings account can beat inflation rates when most banks offer less than that currently?
Remember: you only have $10,000 in savings and $3000 monthly in disposable income currently. How do you navigate for the most security and ability to grow your wealth to real financial freedom?
I realize this is a bit of a loaded post - but having zero background in financial planning, I'm genuinely curious how to make smart financial moves; especially when in a position with little to no security.
Submitted August 03, 2017 at 01:47PM by GuiBuDe http://ift.tt/2unTWET
