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A lot of people come to me totally at a loss of where to begin.  They carry a bit (or a lot) of debt, are unsure of how to budget properly, or simply feel overwhelmed by their finances.  My hope is that this page will create a framework for you to help get you on the right path.

 

 

  1.  Create a Personal Capital and/or Mint account.  
    • If you are in debt, I encourage you to use Mint because of the budgeting features associated with it.  If you are in debt, creating a budget is a must.
    • For those of you who are past budgeting (i.e., you have a great handle on your expenses), Personal Capital is the preferred tool since it offers much more robust features around investing.  Personal Capital will also still aggregate a great financial snapshot once you input all the necessary items (e.g., bank accounts, credit cards, etc.).
    • For more information about Personal Capital, read my Personal Capital review.
  2. Create a budget.  

    • Again, this is not a must if you feel like you have an excellent grip on your expenses, but otherwise, use Mint to input any and all credit card bills, car loans, mortgage, student loans, etc., and utilize their budgeting tools. 
    • For more information about budgeting, click here
  3. Build up an emergency fund.

    • This should be around $1000 that is left untouched and used only in an emergency.  It should be housed in a high-yield interest bank account.
    • For more information on emergency funds, click here
  4. Start paying off (non-mortgage) debt.

    • You can choose to tackle the smallest debt first, or the debt with the highest interest rate.  Pick whichever helps you sleep better at night.
    • For more information on types of debt, click here.
  5. Build up 3-6 months worth of living expenses.

    • This is to safeguard against losing your job or any other similar event.  It should be left untouched, much like the emergency fund, until it is really needed.  Also, like the emergency fund, this money should be placed into a high-yield interest bank account.
    • You should conduct a “Financial Check Up” regularly to ensure that you still have this amount of living expenses still at your disposal. 
  6. Max out 401K and IRA with low-cost passive index funds.

    • Once all of your non-mortgage debt is gone and your savings accounts are funded, start focusing on building your retirement accounts.  Compounding interest is the best!
    • For more information on maxing out your 401K, click here
  7. Start tackling mortgage debt.

    • Create a Loan Amortization Spreadsheet (through Excel) to figure out how long it will take you to pay off your mortgage.  Any additional raises or bonuses you receive at work should go towards this debt, instead of lifestyle inflation.
    • For more information on my thoughts as to why you should pay off your mortgage, click here
  8. Start investing until you have 25 times your yearly expenses.

  9. Reach Financial Independence and Retire Early.