5 Rules For Financial Success

In every step of our life we have to maintain some set of rules. The rules by which we go forward for success. Whom are strictly follow the rules they never left. So any one must have to set rules to achieve and touch their goals. Here are five rules you may follow or you may apply rules by the category of your business. It is you who manage your business, this is you who feel that what was wrong and what will be right. So you may try if u feel comfort to maintain and follow the rules below: 1. Bump up your savings. The fastest way to riches is to save more money. It's far more effective than chasing higher investment returns. For example, say that you're putting away 1000 a month or may be less or may be more and wanna raise it to 1200. That's a 20 percent gain in your retirement account. Where else can you get a guaranteed increase like that? 2. Use the tax code to ramp up the size of your retirement account. I'm constantly running into employees who save enough to get the company match of 3 or 5 percent of pay, and then quit. Why would you do that? Better to pack your automatic savings into a tax-deferred retirement plan. Tell your company to take more out of your pay, or sign up for automatic annual increases if they're available. Some companies offer Roth retirement plans -- you don't get a tax deduction for your contribution, but the earnings accumulate tax-free. That's a deal I'd take.If your company doesn't offer a retirement plan, create your own. Pick a low-cost mutual fund group and ask about its Individual Retirement Accounts. 3. Switch to index investing. Give up the illusion that you're smart enough to beat the professionals whose trading sets the market's price. They love you to think that way because they charge you high fees to try -- wrap fees, insurance fees, annuity fees, marketing fees, brokerage fees, account fees, etc. You can't help but under perform, after all those costs. Tons of research shows that mutual fund managers don't beat the market either, over time. They might ride some hot stocks for three or five years, which is when they'll roll out the advertising and get you to invest. Then those hot stocks cool and they fall behind. You'll be paying your manager to miss. 4. Divide your money between stocks and bonds in a way that's appropriate for your age. One useful diversification rule is to subtract your age. The number that results suggests how much of your total, long-term investments you could reasonably allocate to stock funds. So for example, say you're 60. Subtracting that number from 110 gives you 50. You might put as much as 50 percent of your money and into bonds. At age 40, you'd put 70 percent in stocks and 30 percent in bonds.Alternatively, invest in a target-date retirement fund, where the asset allocation will be done for you. 5. Re-balance your investments. It's important to maintain your chosen division of stock and bonds. For example, say that your target is 60 percent stocks and 40 percent bonds. If the market rises by so much that you're now 65 percent in stocks, sell some of those shares to bring the percentage back to 60 percent and invest the proceeds in bonds. If the market drops so that stocks now make up only 55 percent of your portfolio, sell some of your bond shares and reinvest the proceeds in stocks. Emotionally, re-balancing is hard because you're going against the herd. But financially, it's a winner. You're always selling high, buying low, and managing your risk. Don't bother re-balancing on small dips, though. Do it only if your target percentages fall 5 percentage points out of line. It's impossible to re-balance intelligently if you own individual stocks and difficult with managed mutual funds, since it's never clear which ones you should sell or buy. So here's another advantage of working with index funds -- they make re-balancing simple. And target-date funds are re-balanced for you automatically. Using this five-point program, you can forget about fickle individual stocks, complicated annuities that carry high fees, wrap accounts and all the other offerings that will make only your broker rich.