1. What part of your mortgage payments should actually go to your mortgage or rent? Should it be 25%? 50%? According to experts, you will hurt your ability to pay your regular obligations and bills if your mortgage payments exceed 31% of your monthly income. When you keep your mortgage or rent at a relatively low level, you actually free up some money to pay for other debt obligations like medical bills or credit card.
2. What is the fastest way to improve your credit? Some people consider debt consolidation while others pay off their credits and close the corresponding accounts. In reality, neither of these approaches is helpful to your credit in the long run. Debt consolidation only reduces the credits into a single account but do not guarantee improved credit. Closing old accounts would decrease your available credit. The best way to boost your credit rating is to pay existing debts until it reaches 25% lower than the credit limit. Credit facilities are awesome but to have them at amounts higher than 25% of the limits are damaging.
3. How much should your emergency fund be? Financial experts say the emergency fund should be equivalent to at least six months worth of your family’s monthly expenses. In the event you lose your job or suffer from an injury that would cause you to stop working for your recovery, this amount would be enough to cover your family’s needs until you find a new job or recover completely from your injury. However, having a small amount of money in your emergency fund is better than having no emergency fund at all.
4. How big should your insurance coverage be? Regardless of your marital status, you should be covered by a life insurance. On the average, funerals cost around $8,000. If you are married, especially those with kids, should take out enough life insurance that would replace at least two years of your income. This amount would be enough to help your spouse and children to survive your loss while recuperating.