By Kara I. Stevens
We all have a “magic number.” Maybe even more than one: the age that we want to complete graduate school, the number of years that we want to stay in that position, the maximum amount of months that we’ll wait before broaching that conversation with him or her about the direction of our relationship.
But what’s your “money magic number?” In other words, what specific goals and targets do you have around your personal finance? If you don’t have at least one, here’s how to start thinking about what these numbers should look like in the following areas:
- Savings: By the end of each month, you need to be squirreling money away for an emergency fund. The rule of thumb is 10%-15% of your take-home pay. If you can stand to stash away more, please do so. The closer and faster you get to have between 6-12 months of your living expenses in the bank, the better off you’ll be down the road.
- Retirement: I know you are young, confident, and wanting to take over the world, so with youth and the blessing of compound interest on your side, think about how much money you are earmarking for retirement. Speak to your human resources representative about the details. If your company offers matching funds, your money magic number should be at least the percentage that guarantees you the free money.
- Debt Reduction: Liberate yourself from debt with realistic magic numbers. The first money magic number is the amount of time in which you want to be debt free. The second number is the amount of money that you will need monthly or annually (depending on the amount of debt) to pay off the debt consistently.
Once you crunch the numbers to find out what your money magic numbers are, it is imperative that you measure the importance of each of your subsequent financial and social commitments in terms of their ability to help you reach these financial targets in a timely manner.
NYULYP’s: Have you sat and crunched your money magic numbers? What did you find out? What shifts do you have to make in order to achieve your money magic numbers?
About the Author, Kara I. Stevens
Kara I. Stevens is super stoked to be a member of the NYULYP Communications Committee. By day, she is an educational administrator. By night, she attends to her blog, FabulousNFrugal, an online home for “financial empowerment, mindful spending, and juicy living.”