Six Numbers that Tell Your Fortune
By Saghir Aslam
Rawalpindi, Pakistan
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the Ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities.)
These measures of financial health can help guide you to long-term security.
Just as monitoring your cholesterol and blood pressure can contribute to your physical health, paying attention to a half dozen numbers related to your money can assist in improving your financial well-being. A little time spent seeing where you land along the following financial yardsticks can either reassure you that you’re in good shape or give you both the guidance and the motivation you need to improve your situation. “Breaking down your financial picture into smaller pieces helps you look at your finances objectively”. “It shows the first step you can take to help you achieve your goals”.
Your Monthly Cash flow
Why you need it . This is the single most important number for you to know, Howerton and other experts say. One look can tell you whether you’re living within your means and have some financial stability.
How to find it: First, calculate all the money that’s coming into your household by adding up your monthly income from social security and any other sources, such as work, rent and the amount you can safely withdraw from your retirement savings. Second, figure out your cash outflow by listing your monthly expenses: housing, health care, food, debt payments and more. (Reviewing recent bank statements, credit cards bill and other financial statement will make the task easier.) Subtract expenses from income to get the final figure.
What to do with it: If the number is negative-your spending is higher than your sustainable income-you’ll know exactly how many dollars you need to stop the slide. “You have two levers: You can make more or spend less,” how much you can set aside for longer-term goals, such as making a major purchase. “I’ve rarely, if ever, seen someone look at their inflows and outflows and not change some behavior.”
Health Care costs
Why you need it: it’s a big and growing part of your budget, accounting, on average, for nearly 16 percent of spending among households headed by people 75 and older.
How to find it: Total up your Medicare premiums, including for Medicare Supplement (Medicap) if you have it. Then add in your typical out-of-pocket expenses-perhaps drug copays, dental care or hearing aids. (Still on an employer plan? Add up your premiums, deductibles and out-of-pocket costs for your usual medical and drug costs, and note your plan’s out-of-pocket maximum.) The Kaiser family foundation reported that in one recent year, people on Original Medicare without additional coverage paid an average of $7,500 annually on premiums and services, while those who added Medigap paid $6,600 in all-more on premiums but less on services.
What to do with it: Study your options during open-enrollment season (Medicare’s runs through December 7). If you’re looking at compare premiums and out-of-pocket cost for your typical expenses, and see if an employer or Advantage plan’s network includes your preferred doctors and hospitals.
Retirement savings
Why you need it: Along with Social Security and any pension you’re receiving, this is where your financial support comes from.
How to find it: Add up the value of any retirement accounts you might have __ 401(k)s, IRAs or investment accounts at brokerages or mutual fund companies.
What to do with it: If you’re younger than 72, divided the amount by 25. That’s roughly how much you can safely withdraw from these accounts in your first few years of retirement without worrying that the money will run out. If you’re older than that, you can estimate a safe withdrawal for the year by plugging your retirement savings and date of birth into a required minimum distribution calculator (go to aarp.org and search for “RMD calculator”).
Although such a tool is normally used to determine how much you have to withdraw from an IRA or 40 (K) in a particular year-and remember, those RMDs are waived for 2020-you can use it to roughly calculate how much you can safely withdraw from those and other retirement accounts.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, nor does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr Aslam does not have anything for sale.)
