Guide to save money in all-time life
You will find lots of rules of thumb but there is no universal truth to how much you should save. There are factors you DO need to consider though: you should start as early as possible to set money aside for retirement. You should then use a retirement calculator to at least get an understanding of the amount you need to set aside each month to achieve the desired retirement income; your default should be not to spend money and only spend money when you must. Leisure, travel and eating out should come last after you have saved up; you should have funds for different terms. For example, my wife and I have an emergency fund for unexpected expenses or losses in income. The rule of thumb here generally is to have 3-6 months of salary saved up. A longer term fund should be created for larger expenses like buying a car or preparing the cashdown on a property. Finally, the retirement fund which should cover your needs after you have retired.
"I take it you have nearly zero expenses, since you don't mention any savings and with your income you wouldn't have much left over for investing. At your level of income, any actual investing is either going to unwisely reduce your cash available should you need it (such as investment in mutual funds, which often have minimum investment periods of 2-6 months or more to avoid fees), or cost you a high percentage of your income in commissions (stock trading). So, I wouldn't recommend investing at all — yet. I find Dave Ramsey's baby steps to be very good general money management advice.  Here is how I would adapt the first three steps to your income and stage in life. Beyond this, Dave recommends saving for retirement, college (for kids) and paying off your house early.  These things are a little beyond your stage in life, but it would be good to start thinking about them. For you, I recommend following DJClayworth's advice to ""invest in yourself"".  Specifically, plan to get through college debt-free.  Put away money so that you have a head start once you do have living expenses — save for a car, save money for rent, etc. so that you don't have to live month to month as most people do starting out. So, what this boils down to: Put away every cent you have, in a savings account." Wow! First, congratulations! You are both making great money. You should be able to reach your goals.  Are we on the right track ? Are we doing any mistakes which we could have avoided ? Please advice if there is something that we should focus more into ! I would prioritize as follows: Get on the same page. My first red flag is that you are listing your assets separately. You and your wife own property together and are raising your daughter together. The first thing is to both be on the same page with your combined income and assets. This is critical. Set specific goals for the future. Dreaming and big-picture life planning will be the foundation for building a detailed plan for reaching your goals. You will see more progress with more sacrifice. If you both are not equally excited about the goals, you will not both be equally willing to sacrifice lifestyle now. You have the income now to be able to set yourselves up to do whatever you want in 10 years, if you can agree on what you want. Hire a financial planner you trust. Interview people, ask someone who is where you want to be in 10 years. You need someone with experience that can guide you through these questions and understands how to manage your income stream. Start saving for retirement in tax-advantaged accounts. This should be as much as 10%-15% of your income combined, so $30k-$45k per year. You need to start diversifying your investments. Real estate is great, but I would never recommend it as this large a percentage of net worth. Start saving for your child's education. Hard to say what you need here, since I don't know your goals. A financial planner should assist you with this. Get rid of your debt. Out of your $2.1M of rental real estate and land, you have $1.4M of debt. It will be difficult to start a business with that much additional debt. It will also put stress on your retirement that you don't need. You are taking on lots of risk here. I would sell all but maybe one of the properties and let it cash flow. This will free up cash to start investing for retirement or future business too. Buy more rental in the future with cash only. You have plenty of income to do it this way, and you will be setting yourself up for a great future. At this point you can continue to pile funds into any/all your investments, with the goal of using the funds to start a business or to live on. If all your investments are tied up in real estate, you wont have anything to draw on if needed for a business opportunity. You need to weigh this out in your goal and planning. What should we do to prepare for a comfortable retirement and safety You cannot plan for or see all scenarios. However, good planning will give you more options and more choices. Investing driven by fear will set you up for failure.  Spend less than you make. Be patient. Be generous. Cheers! "I would be more than happy to find a good use for your money. ;-) Well, you have a bunch of money far in excess of your regular expenses. The standard things are usually: If you are very confused, it's probably worth spending some of your windfall to hire professional help. It beats you groping in the dark and possibly doing something stupid. But as you've seen, not all ""professionals"" are equal, and finding a good one is another can of worms. If you can find a good one, it's probably worth it. Even better would be for you to take the time and thoroughly educate yourself about investment (by reading books), and then make a knowledgeable decision. Being a casual investor (ie. not full time trader) you will likely arrive, like many do, at a portfolio that is mostly a mix of S&P ETFs and high grade (eg. govt and AAA corporate) bonds, with a small part (5% or so) in individual stock and other more complicated securities. A good financial advisor will likely recommend something similar (I've had good luck with the one at my credit union), and can guide you through the details and technicalities of it all. A word of caution: Since you remark about your car and house, be careful about upgrading your lifestyle. Business is good now and you can afford nicer things, but maybe next year it's not so good. What if you are by then too used to the high life to give it up, and end up under mountains of debt? Humans are naturally optimistic, but be wary of this tendency when making assumptions about what you will be able to afford in the future. That said, if you really have no idea, hey, take a nice vacation, get an art tutor for the kids, spend it (well, ideally not all of it) on something you won't regret. Investments are fickle, any asset can crash tomorrow and ruin your day. But often experiences are easier to judge, and less likely to lose value over time." Advantage of cash: You can spend the money without having to pay any fees or taxes to get it out. Disadvantage: When inflation is greater than zero, which it has been for many decades, your cash is continually losing value. Advantages of an IRA (Roth or classic): Your money will usually grow as the investments return a profit. You get special tax benefits. Disadvantages: There's risk -- you may lose money. There are tax penalties for withdrawing the money before retirement. In general, you should only put money in an IRA if you expect to leave it there until you retire. Or at least, for a long time. Whole life is a combination of a life insurance policy and an investment. Advantages: Combines insurance and investment into one convenient monthly payment. Disadvantages: The investment portion typically has lower returns than you could get elsewhere. If you have no need for life insurance -- if you're not supporting anyone or you're confidant they could get along without you or you don't like them and don't care what happens to them when you're gone or whatever -- then there's no point buying life insurance, whole or term. You're paying for a product that you don't need. It's pretty common advice to tell people that instead of buying a whole life policy, they should buy a term policy with the same coverage, and then invest the difference in the premium. For example, if you were considering getting a $100,000 whole life policy that costs $50 per month (just making up numbers, of course it depends on your age, health, etc), and you see you could get a $100,000 term life policy for $30 per month, you will almost certainly do better in the long run to buy the $30 term policy and put the other $20 into investments. The catch to this plan is that there are usually transaction costs to investing. Even a discount broker like Ameritrade or Scott Trade charges around $10 per transaction. So if you tried to invest $20 each month, you'd lose half of it to transaction fees. Which means that in practice, you'd have to save that money up until you had at least a few hundred. And at that point many people find other things always seem to come up to spend the money on, so that while they start out with every intention of investing this money, they don't. Start with his website, specifically his seven steps. Most everything else is around motivating people to actually do the plan. As he often says personal finance is 80% personal and 20% finance, by which he means that things that make sense financially (paying off high interest debt first) don't necessarily motivate action (so instead pay off the smallest debt first to get motivation). Really the rest is details around those seven concepts. On his site there is a link to a free one-hour podcast for the iPod, and you can pay for the full three hours of his radio show on podcast. He started on radio, and it is probably his best format. The reason Dave Ramsey has limited appeal beyond the US is that he is explicitly evangelical. He views his system as an extension of his Christian beliefs. That sells very well in parts of the US, but doesn't port very well. There is actually nothing religious in his program, other than the occasional reference to biblical verses in an attempt to tie his program into his religion, but people who are really interested and want to teach his program, not just practice it, are going to find they need to be an Evangelical (or at least a Christian) to fit in. Addendum: I should mention that Dave Ramsey is changing the FPU program (and I expect it will trickle into other things) to be more explicitly (although apparently not overtly) religious and have a stronger emphasis on budgeting. See here. You're being too hard on yourself. You've managed to save quite a bit, which is more than most people ever do. You're in a wonderful position, actually -- you have savings and time! You don't mention how long you want/need to continue working, but I'll assume 20 years or so? You don't have to invest it all at once. Like Pete B says, index funds (just read what Mr. Buffett said in recent news: he'd tell his widow to invest in the S&P 500 Index and not Berkshire Hathaway!) should be a decent percentage. You can also pick a target fund from any of the major investment firms (fees are higher than an Index, but it will take care of any asset allocation decisions). Put some in each. Also look at retirement accounts to take advantage of tax-deferred or tax-free growth, but that's another question and country-specific. In any case, don't even blink when the market goes down. And it will go down. If you're still working, earning, and saving, it'll just be another opportunity to buy more at lower prices. As for the house, no reason you can't invest and save for a house. Invest some for the long term and set aside the rest for the house in 1-5 years. If you don't think you'll ever really buy the house, though, invest the majority of it for the long-term: I have a feeling from the tone of your question that you tend to put off the big financial decisions. So if you won't really buy the house, just admit it to yourself now! "I've seen various blog posts (mostly from Penelope Trunk) refer to ""optimizers"" versus ""settlers.""  The optimizers are the go-getters, the ones always on the move, trying to optimize their time, their life, their experience, etc.  They tend to be younger, on average, live in bigger cities, and on the whole, tend to be less happy.  The settlers are the ones who settle for what is, live in smaller cities, and tend to be happier, albeit ""less interesting"". Assuming that your idea of ""slowing down"" refers to moving away from that maximizer lifestyle, yes, I think you'll probably save money.  Apparently it costs money to be unhappy!  Going out for meals everyday, going out with friends every evening, shopping for the latest and greatest whatever, buying the newest gizmo, trading up your car every 3 years, traveling every other weekend to far-off places, making your life ""interesting"" - these all cost, and far more than their opposites. Take time to be happy with what you have - enjoy your comfortable and broken-in shoes, enjoy your paid-off car, enjoy some quiet alone time with a good (library) book, appreciate the delicate tastes of a homecooked meal over the in-your-face greasebomb of restaurant food, take a walk, shut off the latest Apple iDevice, and just be.  You'll save money, find calm, and feel refreshed. *Apologies for waxing philosophical - though the connotations of ""slowing down"" sort of insist on it :)." "+1 on all the answers above. You're in a great position and have the right attitude. A good book on the subject is A Random Walk Down Wall Street - well worth a read. Essentially, go for low tax paying in, low tax taking out approach (in the uk that's a SIPP or ISA), a low cost well diversified unit fund (like a Vanguard LifeStrategy 100), on a low cost platform (""Annual Management Charge"" in be UK). Keep paying a regular amount and let compound interest take care of things. I'd also add that you should think about what lifestyle you would want at specific ages and work out what you need to save to achieve these - even though they are probably a long time in the future, it makes your goals ""real"". Read Mr Money Moustache for some ideas http://www.mrmoneymustache.com"