Where to Start?
This page is born out of my desire to give the new reader or those just finding FiscalGeek a place to get going so that we are all on the same page. I don’t know where you might be in your financial journey but hopefully we can meet in the middle. So where am I? In January of 2010 my wife and I finished paying off over $63,000 in debt. We’re currently working on building our full blown emergency fund. And we’ll work from there. I’ve got a full blown plan laid out that we are executing month by month. If you are interested in my recommendations the first thing I would do is start.
Step 1: Build your Base with a small Emergency Fund
This is the quickest step if you really focus. Get yourself a good base to build from so you can be secure, reassured and then you’ll be ready to tackle the next goals. No matter where you might be you want to operate from a position of power. I took the approach of saving up $1000 very quickly to be put in a savings account or hidden away so that you only use it in the case of an actual emergency. Credit cards are not an emergency plan, you need cold hard cash for when things go wrong. You may want a bigger cushion to feel more secure, I’m not stopping you. But it’s important to gain some momentum. I think you can totally Find over $1000 in Savings in a Month.
Step 2: Build and Live on a Budget
There are many who hate budgets. That could describe me for most of my adult life but I have discovered a secret. If you spend less money than you make you’ll be able to do some cool things with that extra money. If you don’t operate on some form of a budget how will you ever know if you are doing just that? Look I understand that the budget is not the sexiest of topics, but I believe it’s one of the most important things you can do to your money. Control it, tell it where to go and you’ll never wonder where it went. Think of it as the budget as the leash on your curious toddler at the mall. It will never end up walking away with a stranger at the end of the month if you are at helm. I use the Zero Based Budget. Give every dollar a place to go whether that’s to savings or to debt payment or to pizza. Now teamed with the Zero Based Budget we also utilized the cash envelope system to keep our entire household team on the same plan.
Step 3: Pay Off Debt
When I say debt in this area I mean credit cards, car loans, student loans, personal loans, money loaned from family, back taxes, collections, payday loans and medical bills. Anything where you used money that was not yours with the exception of a mortgage on your home. That’s something that you can attack later. For paying down your debt quickly I have used and recommend the debt snowball method.
Step 4: Pile up Money into a Large Emergency Fund
You might have heard so many times that you should have 3 to 6 months of expenses saved up for emergencies, such as medical issues, kids, job loss, relocation, vehicle calamity, you name it. Since you have and are using a budget (you are right?), you can easily tally up what 3 to 6 months of actual expenses would be and then sock it away in a savings account or money market. There’s nothing magical about this, it’s just saving money.
Step 5: Save and Invest for Retirement
Investing for retirement does not have to be complicated. I will always recommend that you leverage your employers retirement options especially if they provide some form of matching funds. The only problem with most 401k or 403b plans is that they have relatively few options and many of them come with high operating expenses. One of the best ways to get going is with a good mutual fund that models a stock index such as the Standard and Poor’s 500 or one of the many other options. Here’s some information on how to get started.
Step 6: Kids and College
If you’ve got kids, or are thinking about kids then you’ll most probably want to think about their college educations. There are a dizzying array of choices on how to save for them but your two best options are either the Coverdell Education Savings Account or a 529 Savings Plan.
Step 7: Pay off the Mortgage
Get that mortgage gone! Can you imagine what you could do with your income if you didn’t pay half of it out for your housing every month? Hopefully it’s not half but you get the point. I don’t have a specific post for paying off your house early, it’s not rocket science here. Pay as much extra as you can reasonably afford every month and you’ll have that mortgage gone well about the 30 or 40 year life of your mortgage.
Step 8: Become Wealthy!
I don’t mean this to be like a late night infomercial but if you’ve hit this point your paying yourself significantly every month. Here’s to hoping that you can give extra generously and think about the lives you’ll be able to change such as your own!
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(Photo Courtesy pfala)