This is the eighth and final post in a multi-part series on how to manage your finances so you can build up your savings, have a safety net, and still live comfortably today without having to live paycheck to paycheck. Click here for part 7, which discusses ways to grow your money for the long run.
Image from kenteegardin / seniorliving.org
Your plan
Over the past 7 articles, we’ve given you a lot of information on how to manage your finances. If it all seemed a bit overwhelming, this article should help clear things up. Below, we’ll provide you with a summary plan that should help you make sense of it all. If you take care of the items below, you’ll be on solid financial ground and you’ll be able to start generating even more money right away.
- Get your insurance needs out of the way
If you’re working for a company, you probably have the option to sign up with its insurance providers to handle almost all of your insurance needs (medical, dental, vision, life, disability, etc). Hopefully, you got everything squared away when you were first hired, but if you didn’t have that chance, contact your HR representative and see what you can take care of now. Go out and buy home owner’s or renter’s insurance if you don’t already have it.If you’re not working for a company, there are a variety of providers that will sell you independent insurance coverage, you may have to pay more than if you were getting it through a group plan, so shop around and find the plans that best suit your needs.
- Figure out your expenses
Calculate what you’re going to need to survive each month. Add to that any monthly debt you need to pay off. This is the minimum amount that you should be depositing into your checking account each month. Ideally, you’ll have quite a bit more than this coming in, but try to shoot for at least 2-3 times your monthly expenses. If you’re having problems scrounging up enough to meet that amount, it’s time to make some changes.
- Deal with your debt and your tax-free retirement accounts
In step 2, you calculated the amount that you’ll need to cover your debts. Pay those off on time every month. With any money that’s left over, figure out how much of it you’d be willing to give up each month and then have it automatically withdrawn from your paycheck and deposited into a tax-free retirement account (401K, Roth 401K, 403B, etc).
- Build up your emergency fund while keeping your checking account healthy
Whatever you have left should go towards building up your emergency fund. It may take you several months to a year of saving before you’re able to build up your account all the way, but stick with it until it’s done. You’ll sleep easier, and that has to be worth it.
- Plan for the future
At this point, you’ll have be on a solid financial foundation. Your next step is to look at what you’re going to need for the future. If you expect to buy a new car, put a down payment on a house, or make another large purchase, you should set up a separate savings account that you’ll contribute to every month as you save up specifically for that purchase. If you don’t see any big expenses coming up, you should start trading or investing. The guides on this site will help you get started with growing your money.
After a year or two of going through this plan, you should be able to reduce your debts, maintain a solid emergency fund, have enough in your checking account to take care of expenses, and be on track for an early retirement. On top of these basics, if you can cover all of your expenses with a good credit card that provides cash back or other rewards while managing to pay off your full balance every month, you’ll be all set.
More resources
- If you want some more help when it comes to money, we’d recommend buying The Wealthy Barber. This is one of the best books on personal finance, and it’s actually a pretty good read (unlike most other financial books). If you’re serious about getting your finances in order, reading this book is mandatory. It’s the best $10 you’ll spend.
- You should also check out Ramit Sethi’s blog, I Will Teach You To Be Rich. It has a whole slew of great articles on personal finance, and if you like a snarky comment here and there, you’ll enjoy his writing style too.
- Passive Panda is also a nice, new(ish) resource that can help you improve your financial situation by providing you with new ideas to generate income and make money.
- Get Rich Slowly is another good resource for personal finance articles.
And finally, if you’re ready to start making extra money every week by trading options, there are a ton of articles on this site just waiting for you to read them, learn, trade, and be free. Good luck with your personal finance goals, and we hope to see you trading soon!
