This is a collection of financial suggestions I intend to provide a good starting point for generalized advice. It's not a complete guide, tailored advice, or anything like that. Please look up and use other resources, and if you need to reach out for help find a fiduciary, which I am not.
- Overall Flowchart
- Helpful Wiki (/r/personalfinance)
- This is where a lot of this information grew from (including the flow chart), and how to continue investigation as well, these people know far more than I do
Just to be clear I'm not a financial planner or a fiduciary, and these are just generalized suggestions I've come up with by doing research online and my own personal life experience. You should only take financial advice from fiduciaries as they are the only ones with a legal responsibility to serve your financial interests.
Check the license.
Depending on your job you may make it through to different portions of this plan. That's perfectly fine, and attempt to get through as much as you can. When doing that, be reasonable; you can't get to the ideal state instantly. Start working through what you can one day at a time, and improve as best you can little by little.
Many things in this guide are at odds with each other. That isn't to say that they are contradictory, but they are competing interests, e.g. good vs fast vs cheap, pick 2 of those options. There are several optimization problems here and only you (or a fiduciary) can really make those decisions.
Start using budget management software like Mint or YNAB. When budgeting you give every dollar a job. Take your income and portion it out the best that you can.
Pay the basics:
- Rent
- Food
- Utilities
- Toiletries
- Things needed for work (car maintenance, gas, internet, etc)
- Health care
- Minimum payments on existing debts
First and foremost, you have to pay to stay alive. You can choose cheaper housing, food, etc, but you still have to account for those first.
- Budget
- Reduce Expenses
- Set Realistic Goals
This $1000 goal is the start of your emergency fund and should be prioritized after paying the bills that keep you alive. This doesn't have to be immediate, but should be as soon as you can reasonably afford it.
This emergency fund needs to be liquid: it should be checking or savings, NOT CDs, ETFs, 401k, NFTs, etc.
Use budget management software mentioned in Stay Alive.
Don't try to make too drastic of changes. Changing lifestyle is hard; it's better to be realistic and stick to it, than to set lofty goals that are unattainable.
You can't improve what you don't measure. To fix anything, you have to keep track of it. For your first budget don't limit, just measure. Just see where you are at now. You will find things you want to fix, but as said before be reasonable about them.
If your employer is matching any money (usually a 401k, HSA, or other benefits), then you should invest whatever it takes to get that match. In most cases it's a 50%-100% gain; think of it as a money doubler. You put $1 in and get $2 out, you'd want to put in as much as you can -- DON'T LEAVE MONEY ON THE TABLE.
If your employer offers any kind of match on any financial product, you should PROBABLY take as much money as they offer.
PERSONAL NOTE: As a guideline you should only consolidate debt when it either:
- First brings the payment down to an amount you can reasonably pay per month
- Second reduces the interest rate of the debt.
- Both should serve a Psychological Payoff
The first condition is baseline, you need it. You should reduce spending everywhere else you can to make minimum payments on debts. After reducing spending you can consider consolidation. While it increases the total amount paid over the life of the loan, it can make payments more affordable. You should consider the second condition when you are consolidating debt to pay it off faster. The exception to both of these conditions is psychological payoff: picking something means nothing if you can't stick to it. THIS IS THE SNOWBALL vs AVALANCHE METHOD CHOICE.
This choice is an optimization choice that involves three primary factors:
- What you can afford
- Interest rate
- Personal psychology
You need to be able to afford your choice. You should pick as low of an interest rate as possible. Finally, you need to maximize your psychological payoff for following your plan.
Paying off debt has a few strategies as mentioned in debt consolidation. Basically, this consists of:
- Paying off small things vs large things
- Paying off high interest vs consolidation
- General prioritization in reference to utility to your life
These decisions are another optimization problem that only you can answer. However, once you decide what is important, there are optimal strategies for reaching that, e.g. snowball vs avalanche (or some combination of both).
If it's high interest debt (>= 10%) you want to pay that off as soon as possible after employer matches on benefits.
If it's low interest debt (<= 5%) you want to pay that off when it has the most psychological payoff, i.e. makes you happy. Minimum payments on these debts make sense, if you are working on maxing out your investments.
Medium interest debt (between 5% and 10%) is harder to determine a strategy for, and basically comes down to math. If you don't want to do the math, reduce risk by paying off the debt.
This topic is somewhat fluid but the basics are the same. I can't do better than this wiki. It really depends on if you have credit or not; and if you do, whether it's high or low. Basic advice is:
- Settle outstanding debt
- Have accounts
- Keep usage low
- Make on time payments
This topic is somewhat fluid but the basics are the same. I can't do better than this wiki. It follows the same basic tenants of investment, but with the added bonus of tax benefits. You should max out your retirement before considering investment without very good reasons to do it the other way around.
This topic is somewhat fluid but the basics are the same. I can't do better than this wiki. Basically, invest long term in low cost index funds (with a company like Vanguard). If you aren't a magician you can't beat the market. If you are one you are probably delusional. If you aren't delusional you don't need my advice.