A) Commit to no more credit card debt.
B) Establish percentages for the following:
- Retirement. What percentage of income do you want to save for retirement? Use a compound interest calculator to figure out how much you will need to save each year to reach your target goal at your target retirement age (e.g., www.moneychimp.com).
- Emergency Fund. How much do you want to have saved in an emergency fund (typically three to six months’ worth of expenses)? NOTE: Until Brian gets a job and Rita and Brian have paid off their credit card debt, they are in a state of emergency and funds should be used to pay off their credit card debt.
- Savings. How much do you want to put in savings for bigger items (e.g., vacation, automobile, etc.)?
- Education. How much do you want to save each year for both of your daughters’ educations?
By committing to those larger goals first, Rita and Brian are more likely to stick to a budget that helps them get there.
B) Establish percentages for the following:
- Retirement. What percentage of income do you want to save for retirement? Use a compound interest calculator to figure out how much you will need to save each year to reach your target goal at your target retirement age (e.g., www.moneychimp.com).
- Emergency Fund. How much do you want to have saved in an emergency fund (typically three to six months’ worth of expenses)? NOTE: Until Brian gets a job and Rita and Brian have paid off their credit card debt, they are in a state of emergency and funds should be used to pay off their credit card debt.
- Savings. How much do you want to put in savings for bigger items (e.g., vacation, automobile, etc.)?
- Education. How much do you want to save each year for both of your daughters’ educations?
By committing to those larger goals first, Rita and Brian are more likely to stick to a budget that helps them get there.
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