💸 personal finance
disclaimer: i am not a financial professional. this is just how i manage my own money. i highly recommend you do your own research.
personal finances doesn't have to be difficult or intimidating. by having a simple plan, you set yourself up better than the majority of people, no matter your situation.
here's the plan/routine i've been following for myself since getting my first job:
building a foundation
- start with a budget
- truly understand how much money you actually make, not how much you think you make
- plan where you want your money to go, prioritizing what's necessary
- track all of your expenses
- pay for the absolute essentials
- rent/mortgage + utilities
- groceries
- utilities
- requirements to maintain your income (necessary transportation, etc.)
- health care
- pay the minimum required payments on debts (credit cards, loans, etc.)
- forgetting to do this can do catastrophic damage to your credit and build significant debt
escape high interest debt
- build a small emergency fund that you can fall back to in dire times
- something like $1000 or a month's worth of expenses
- keep this money in a free high yield savings account (HYSA) to make the most of it
- pay for non-essential but important expenses that improve your quality of life
- phone, internet, cable, etc.
- pay off all your high interest debt and loans (>= double the prime interest rate)
- prioritize debts with the highest interest rate
- see if you can reduce your high interest rates
looking toward the future
- increase the size of your emergency fund
- 3 months worth of expenses if your job is stable
- 6-12 months worth of expenses if your job is not stable
- if your employer offers a retirement account with employer match, contribute the minimum amount needed to get the full match
- this is free money for your future!
- pay off all your moderate interest debt and loans (>= prime interest rate)
- open and contribute to a retirement account
- max out a Roth IRA if you're able to
- max out a Traditional IRA if you're able to
- contribute >=10% of your income to an employer retirement account
if you satisfied everything on this list, there's a good chance you're on track to retire early. but a few factors to keep in mind:
- you may need to scale your goals to how many people you are expected to care for. financial goals for just yourself and goals for a family of 4 will be very different!
- don't try to beat the market, and avoid investing into individual stocks. i highly recommend running a three fund portfolio.
- actually plan for how much money you need for your retirement goals. while it isn't a bad thing to saving absolutely every dollar, you may realize you can spend a bit more on yourself today and still have plenty for retirement.