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Five Essential Financial Guidelines
1) Pay down credit card debt and never, ever borrow from a bank using a credit card. There is no way you will earn as much year after year through investments as you are paying interest on credit card debt. Simply put, pay off the credit card balance in full each month. There is no interest rate to hate as much as credit card interest.
3) Build an emergency fund that will last a minimum of one year. This is a piece of advice I never paid much attention to as I was in a profession that needed my skills during my working career. Those jobs seem to be in decline so guideline #3 is more important than it was thirty or forty years ago.
4) Diversify your investments over a wide range of asset classes. A minimum number for portfolios in excess of $25,000 is at least five. Begin with a total U.S. Equities Market. Then add Developed International Markets, Emerging Markets, REITs, and Bonds. One could delay bonds for a very young investor.
5) Use index funds or index ETFs. Make sure these are not actively managed index funds or ETFs. Plenty of examples are dotted throughout the ITA Wealth Management blog.
If you are not able to save, or follow #1 and #2 guidelines, save your time and find another blog.
How much money will you need in retirement? William J. Bernstein answered this question about as clearly as anyone I know when he wrote, "Each dollar you do not save at 25 will mean two inflation-adjusted dollars that you will need to save if you start at age 35, four if you begin at 45, and eight if you start at 55. In practice, if you lack substantial savings at 45, you are in serious trouble. Since a 25-year-old should be saving at least 10 percent of his or her salary, this means that a 45-year-old will need to save nearly half of his or her salary. Most 45-year-olds will find this nearly impossible, if for no other reason than the necessity of paying living expenses, payroll taxes, and income taxes."
Those are the grim facts. Some families can make up for lack of saving by having the stay-at-home spouse go to work and save that salary. Every family needs to make these choices. Jobs are in short supply so options are limited.