Some of the basic concepts of personal finance needs to repeat as often as possible. One of them is to live below your means as written by Jonathan Chevreau of Financial Post. Live below your means is considered as an eternal truth of personal finance. “This is the granddaddy Truth of personal finance. Without it, there’s little point talking about the rest. The only way to become financially independent is to be consistent about spending less than you earn, year in and year out, decade in and decade out.” The formula for happiness, attributed to Charles Dickens, is based on living below your means. If translated into today’s world, in David Copperfield the character Micawber would say: “Annual income $50,000, annual expenses $40,000, result happiness. Annual income $50,000, annual expenses $60,000, result misery.”
The Price of Happiness is confirmed to be $75,000 Per Year by a study from Princeton University. Another article written for About Money delves into the relationship between money and happiness as Joshua Kennon discuss this topic of how much money it takes to be happy. The first step to financial success is to define what you want. Once you narrow down the income the next step is to figure out the safe withdrawal rate to be happy with that income level. By selecting the proper asset classes, you can deride how much money you need in your portfolio to achieve your desired level of happiness.
The White Coat Investor just wrote a detailed guide on how to do a backdoor Roth IRA. It is a must read if your income is over the limit and you need to take advantage of a backdoor Roth IRA. The author shows each step from making the contribution to filling out the tax form 8606. The three main steps detailed as follow: “1. Get rid of any SEP-IRA, SIMPLE IRA, traditional IRA, or rollover IRA money. 2. Make a $5500 ($6500 if over 50) non-deductible traditional IRA contribution for yourself, and one for your spouse. 3. Convert the non-deductible traditional IRA to a Roth IRA by transferring the money from your traditional IRA into your Roth IRA at the same fund company.”