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Basic Steps to Financial Fitness

Your finances and the decisions you make about them change over time and are different from your neighbor's, your boss', or your parents'. Still, some broad guidelines may help you get a handle on your financial plans.


* For mortgages, lenders expect your payments to amount to no more than 28% of your monthly gross income (income before taxes, Social Security, and other deductions). Another method says that your PITI--the phrase for principal, interest, property taxes and insurance--plus your total long-term debt (say, for car payments, college loans, installment payments) should not exceed 36% of your gross income.


* How much should you be saving? The conventional wisdom is to accumulate three to six months' take-home pay (income after taxes, Social Security, and other deductions) in a liquid savings vehicle. That can take time to build up, and you may need to raid your account even while you're adding to it. Still, if you consistently put aside 5% of your take-home pay, using payroll deduction, you'll reach your goal.


* For long-term retirement savings, at minimum put a percentage into your 401(k) that equals what your employer will match. Anything less and you're actually giving up free money. Ideally, contribute the maximum your employer allows, typically 15%, into your 401(k). Can't swing that much while you're saving for your child's future education expenses? Keep this in mind: You can borrow to meet higher education expenses, but you can't borrow for retirement expenses.


Talk to the professionals at your credit union to learn about all the services available to help you meet your goals.


Copyright 2007 Credit Union National Association Inc. Information subject to change without notice. For use with members of a single credit union. All other rights reserved.