S&P 500   4,410.13
DOW   34,364.50
QQQ   353.30
S&P 500   4,410.13
DOW   34,364.50
QQQ   353.30
S&P 500   4,410.13
DOW   34,364.50
QQQ   353.30
S&P 500   4,410.13
DOW   34,364.50
QQQ   353.30

Life Steps: Small Steps for Overall Financial Health

Wednesday, May 12, 2021 | Melissa Brock
Life Steps: Small Steps for Overall Financial Health

When my husband's 401(k) mailings show up in the mail, I love it because the company that takes care of his 401(k) makes all of it very interesting to read. Boy, have companies come a long way from the prospectus-like summaries of your investments. They make saving for retirement sound like a gigantic adventure. Heck, the title of his latest 401(k) summary says, "Dreams — Make it Real!" 

Of course I'm going to read it. 

An extra guide that came in the mail yesterday was called "Corona Crash" and it was a quick guide to budgeting, debt load, emergency funds, unexpected death, retirement planning and getting organized. It was full of suggestions about how much he could save based on his salary. So, let's make up a fictitious salary: $90,000, and take you through the steps I read in this really handy pamphlet my husband gets.

First, Let's Set Up a Family Budget

The pamphlet challenges you to break down your expenses into four different categories: "must haves," "should haves," "could haves" and "wants": Of course, you can't function without "must haves." "Should haves" also involve items you need, and as you can imagine, "could haves" and "wants" shouldn't show up on your "essentials" list.

The pamphlet got really cool at this point. It calculated budget basics based on my husband's current income. Let's use our fictitious salary of $90,000. For budget purchases, these expenses should take up no more than 50% of your after-tax income, or approximately $3,750 per month.

It says, "You should strive to save 15% of your pre-tax income ($13,500) in your retirement plan and save 5% of your post-tax income ($4,500) in an emergency fund." 

See how it makes the numbers a no-brainer?!

Now, Let's Look at Debt Load

Your mortgage or rent payments, car payments, student loan payments and credit card debt should not exceed 36% of your pre-tax income. Based on your salary of $90,000, your payments should total no more than $2,700.

The pamphlet warns that banks will often approve loans even if it drives your debt load higher, and might even approve your loans even if it drives your debt load up to 50%.

A few quick notes not in the pamphlet: If you want to get a loan, your lender will calculate a debt-to-income ratio (DTI) for you. You want to shoot for as low a DTI as possible. A DTI ratio of 43% is generally the highest mortgage lenders will accept for a qualified mortgage, which is a loan that includes affordability checks.

Curious about how to calculate your DTI? Simply put together a list of the payments you owe. This could involve your mortgage and rent payments, student loan and auto loan payments, credit card minimums, alimony, child support or other regular payments. 

Then, divide that total by your gross monthly income — your income before taxes.

Let's say you have $1,000 mortgage payment, $300 in student loans and $400 in auto loan payments. Let's say your gross monthly income is $3,000 per month. In this case, the DTI sits at 56% — high by any lender's standards.

Establish an Emergency Fund

Putting together an emergency fund for events like COVID-19 or a health emergency goes a long way toward financial health. You should keep at least three months of total expenses in an emergency fund, then build that to six months' worth of income as you save.

Three months' worth of income (recommended minimum): $22,500

Six months' worth of income (goal): $45,000

You can start by saving a small amount and build from there, a little from each paycheck.

Protect Against an Unexpected Death

Nobody really wants to talk about life insurance (at all, ever) but industry guidelines recommend having life insurance that covers five to 10 times your annual income, plus an additional $100,000 per dependent child. Breadwinners should always aim toward the higher end of the spectrum.

Death benefit (recommended minimum): $450,000 

Death benefit goal: $900,000, plus an additional $100,000 per dependent child

Plan for Retirement

This was my favorite part because everyone always wonders how much they should have saved for retirement at any given age. Naturally, anyone can look it up online but this pamphlet was custom tailored to my husband's exact salary. What a wake-up call if you don't quite have this down pat! You can consider yourself on track with your retirement savings if you have the following: 

Age 30

1x Annual Wages


Age 35

2x Annual Wages


Age 40

3x Annual Wages


Age 50

6x Annual Wages


Age 55

7x Annual Wages


Age 60

8x Annual Wages


Age 67

10x Annual Wages


I can only imagine the scrambling at various homes when people got this little reminder in the mail. 

This section ended with a small caveat: A more comprehensive financial plan would also take into account your spouse's annual income and all your outside assets and liabilities. It would also include analysis of college funding strategies, investment management, employee benefit elections, tax planning, estate planning and charitable giving strategies. In other words, the company wants you to drop by and invest more! 

Put Everything into Practice

So, what numbers do you have? Just remember, to calculate your percentages, you take your pre-tax salary and multiply it by the percentage you want to calculate. 

In other words, to calculate the amount of money you want to save in your retirement account (a recommended 15%), your calculation would look like this:

$90,000 x 0.15 = $13,500

Do you have a budget put into place, figure out what your debt load is, established your emergency fund, bought life insurance and planned for retirement?

You might feel as if you have to steer your money in so many different directions, and yes, you do! However, when you break it down into sections like this, based on your exact income, you can visualize how much you need to allocate to different areas of your financial life. 

7 Great Biotech Stocks to Buy in Expectations of Better Days Ahead

The biotechnology (biotech) sector was one of the best performing sectors in 2020. Many companies saw their stock prices rise as the race was on for a Covid-19 vaccine.

However, many of these companies were pre-revenue companies. Or they were companies that only had one or two in-market products or therapies. And as the calendar turned to 2021, investors took notice. And what went up quickly went down. And in the case of the biotech sector, it came down hard.

One way to tell is to look at biotech ETFs. One of the most popular ETFs, the VanEck Vectors Biotech ETF (NYSEARCA:BBH) is down more than 15%. So you can imagine what it’s been like for many individual biotech stocks. If you’re a buy-and-hold investor, you’re licking some wounds right about now.

But investors who knew what companies to buy have done well. And many of those names will continue to lead the biotech sector in 2022. In this special presentation, we give investors seven biotech stocks that represent different aspects of this diverse sector. We’re confident there’s something for investors of all risk tolerances.

View the "7 Great Biotech Stocks to Buy in Expectations of Better Days Ahead".


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