Welcome to the 18th issue of Metrix that Matter, a weekly newsletter from WEALTHMETRIX that helps you focus on what matters most for building and sustaining wealth. Every Saturday, we share an educational essay with actionable takeaways to guide you on your journey to financial independence.
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What you’ll learn in this issue:
- How a $200K income stacks up against the rest of the U.S.
- The dangers of making that much money
- What to do when you get in over your head in debt
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If your household earns over $200,000 of income per year, you are making more than 85% of the U.S. population.
According to the United States Census Bureau, only 14.4% of households earned over $200K of income in 2023.
That level of income provides a comfortable lifestyle. You can afford to take on some debt for a nice house, and a car or two. You can buy what you want at the grocery store. Go out to eat when you want. Take a vacation every year.
You don’t have to worry about paying for your daily wants and needs.
But this comfortable lifestyle can quickly lead you down a dangerous path if you’re not careful. When you get accustomed to buying whatever you want, when you want, it’s easy to go overboard with a series of never-ending purchases.
And when those purchases start finding their way onto credit cards with revolving balances, things can spiral out of hand in a hurry. High-interest debt is hard to eliminate, and so you may find yourself digging deeper and deeper into a financial hole each month.
At that point, the only way out is to stop digging and start climbing.
Face the music
When you feel like you don’t have control over your finances, the best first step to take is to get a clear understanding of your current situation, your current reality.
Start listing all your debts from largest to smallest. List the balance and the monthly payment for each one.
Next, add up all the payments and divide by your total monthly income. This is your Debt Rate.
If that number is over 25%, that is probably what’s preventing you from saving, investing, and growing your net worth.
Create a debt payoff plan
Next, you need a plan to get your debt payments under control.
Focus on the high-interest debts first, such as credit cards and consolidation loans. These balances can grow over time if you don’t attack them aggressively.
Find a debt payoff calculator online, enter your loan details, and commit to paying off individual debts within a specific timeframe (6 months, 1 year, 2 years, etc.).
Rebuild your liquidity
Once you take care of high-interest debts and free up some cash flow, you need to rebuild your cash savings so that you don’t go further into debt in the future.
Open a separate savings account and set up automatic recurring contributions until you save six months’ worth of spending in the bank.
Keeping moving forward
If and when you make it to this point, you should celebrate. It’s not easy climbing out of debt and getting back on strong financial ground.
What’s important now is to keep the momentum going so you don’t go back to where you were. Put safeguards in place. Understand how much you can comfortably spend each month. Don’t take on too much debt. Establish regular savings into the right accounts for your goals.
Just keep moving forward.
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READY TO IMPROVE YOUR FINANCES?
Thank you for reading. If you are ready to take the first step towards improving your finances, I invite you to click the link below to gain access to our financial planning tool, Elements.
After signing up, you will be guided through a series of basic questions about your income, spending, debt, and account values. Once complete, Elements will provide a snapshot of your current financial health, as shown below.
You will then have the opportunity to schedule a complimentary meeting with me (Zoom or in-office), where I will review your current situation and discuss a few ways to make improvements.
CHECK YOUR FINANCIAL HEALTH IN 10 MINUTES
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WEALTHMETRIX
https://www.mywealthmetrix.com/
(972) 267-7526
102 S. Goliad Street, Suite 101
Rockwall, TX 75087
16475 Dallas Parkway, Suite 840
Addison, TX 75001
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For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Wealth Services LLC nor any of its representatives may give legal or tax advice.
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