‘Money Girl’ Laura D. Adams: Follow These 3 Financial Rules To Change Your Life
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Gabrielle Olya
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Molly Sullivan
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With a seemingly endless supply of money advice hitting you from family and friends, social media and more, it can be hard to distill what actions are actually worth the effort. To help you cut through the noise, GOBankingRates spoke with Laura Adams, host of the “Money Girl” podcast and founder of “The Money Stack” newsletter, to get her top money tips.
“Many financial rules of thumb can help guide your money decisions and goals,” she said. “The following are three everyone should follow.“
1. Invest 10% of Your Income
If you’re investing less than 10% of your income — or you’re not investing at all — start upping your retirement contributions now.
“Regularly investing at least 10% of your gross income for retirement as soon as possible is a terrific rule of thumb because it ensures financial security,” Adams said. “If you start investing in a tax-advantaged retirement account early in your career, you can grow much richer than you might expect.”
The longer you wait to start investing for retirement, the less of a chance your money has to grow.
“For instance, if you invest $500 a month starting in your 20s and receive an 8% average return over 45 years, you could have over $2.5 million to kick off retirement,” Adams said. “Waiting to invest means growing enough wealth for a comfortable retirement could become more challenging and expensive.”
2. Maintain Emergency Savings Equal to Several Months’ Income
Aim to build an emergency fund with three to six months’ worth of living expenses.
“With a cash cushion, you avoid debt if you experience a financial emergency, such as a significant car repair, medical bill or job loss,” Adams said. “Maintaining at least several months’ living expenses in an FDIC-insured high-interest savings account is a wise rule everyone should follow. But depending on your income, expenses, family situation and goals, you might need more or less cash in the bank.”
3. Keep Your Housing Cost Below 25% of Your Income
If you’re putting half of your paycheck toward your rent or mortgage, you’re probably spending money that should be put toward other financial goals.
“Since housing is typically your most significant expense, keeping it reasonable, such as under 25% of gross income, is a good rule of thumb,” Adams said. “That should allow you to create a spending plan to fund essential financial goals, like saving for emergencies and investing for retirement.”
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