How Reverse Budgets Increase Savings Rate

Since 2004, Dean Vagnozzi has advised his clients on several wealth-building strategies to increase financial security. Dean Vagnozzi’s company, A Better Financial Plan, implements the 1346 Plan that emphasizes prudent investments and a savings rate of at least 10 percent.

Putting aside at least 10 percent of one’s income creates a financial safety net that allows individuals to avoid going into debt or having to lose their home or assets in case of job loss. One of the best ways to maintain a savings habit is by creating a reverse budget.

Rather than calculating expenses first and saving the leftover amount, a reverse budget puts savings on top of the priority by setting aside a percentage of income before allocating the remaining amount on expenses.

For example, a person with a set savings rate of 15 percent should keep all living costs within 85 percent of his/her take-home pay. If current expenses exceed what is left over after savings, then variable, non-essential expenses such as entertainment or eating out should be reviewed and reduced.

What Is Disability Insurance?

 

Disability Insurance
Image: investopedia.com

At his advisory firm, A Better Financial Plan, Pennsylvania financial advisor Dean Vagnozzi offers advice on low-risk investment strategies with high-growth potential. One pillar of the Dean Vagnozzi method of ensuring long-term financial security is obtaining adequate life insurance and disability insurance.

Disability insurance pays a portion of a policyholder’s salary if he/she becomes too ill to work. While this insurance is more commonly associated with physically intensive or dangerous jobs, any employee can obtain a disability policy.

Disability insurance can be purchased through an employer or as a stand-alone policy. Coverage can differ widely based on the policy. For example, some insurers will replace income only if the policyholder cannot perform any job.

Additionally, payouts are generally capped at 60 percent of earned income. Employees can calculate their ideal coverage amount by considering their line of work, their age, their recurring expenses, and their access to sources of replacement income, such as Social Security and savings.