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Looking for some sort of path or direction to get your finances in order? Or are you simply unsure of where to even begin on your financial journey?
For most of us, having uncertainty can be stressful and uneasy. I absolutely hate feeling that and worrying about “what if…” scenarios.
One of the biggest ways to remove uncertainty in life is to take control of things you can change. Most people don’t realize that they have much more control over their lives then they are lead to believe.
The key is to recognize that you have the ability to change yourself and your situation. You don’t have to accept your current financial situation. You should also stop comparing yourself to others who are in better situations.
Your mindset should be focused on following the right path to financial success. Stop thinking you aren’t able to follow that path “because you are too old” or “because I grew up poor” or “the timing isn’t right” or “X person had so many advantages so I cannot attain my goals”. Ok, enough channeling my inner Gary Vaynerchuk
Why I created this checklist
Great personal finance requires hard work, patience, time, discipline and continued understanding of money management. The thing is, there are dozens of books, podcasts, and resources online that say different things. It’s easy for anyone to become paralyzed with knowledge that creates a lack of action.
I want to fix that by creating an ultimate personal finance checklist. My goal isn’t to overwhelm you with hundreds of checkboxes. Though I’ll admit that this post is well over 4000 words. Instead, I wanted to lay out a realistic foundation of understanding finances, planning, and taking action based on your financial situation.
I came from an incredibly poor childhood and was terrible with finances until my mid-20s. Remember, you can change and you don’t have to digest everything in one sitting. Take action on what’s applicable and then digest more.
In a hurry? Download the checklist!
Feel free to download the checklist if you want to print it out and use it later. However, if you have some extra time and want to dive in then grab a drink, sit back and enjoy this pretty long read about improving your money management and financial planning abilities. Feel free to bookmark this page as I’ll continually be updating it over time.
Assess Your Current Financial Standing
Before you do anything else, I want you to take a minute and ask yourself, “How am I doing RIGHT NOW?” Are you stressing at the moment regarding your financial situation? Are you unsure of how you are supposed to feel? Or are you frustrated that you might be making ‘good money’ but for some reason, it doesn’t equate to a bigger savings account?
Get a general sense of where you think you are at and take a look at the 6 stages of financial freedom. I won’t dive too much into the details of the article, but based on how you assessed your current situation, you can start pinpointing your current stage.
If I had to guess, most people that read this blog often fit in stage 2 or stage 3. Obviously, the goal is to improve your financial standing over time but at least now you will have a starting point of where you are currently at.
Again, it’s going to take time and discipline. While I don’t think there are shortcuts to financial freedom, there are certainly more efficient paths to take over time (I’ll dive more into that later).
Get On Your Feet / Basic-Living Setup
I really don’t get why most financial blogs pretend that this doesn’t exist. You can’t do any of other step or take any meaningful action if you don’t have a sustainable living situation. Chances are you either have a set amount of money and don’t have a home/place to stay if you are here, or you are someone in stage 1 of financial freedom.
Have you ever heard the phrase “It’s expensive to be poor?” I really believe that to be true. It’s incredibly hard to do any of the next steps if have no means of transportation, no basic roof over your head, no prospects and no mailing address.
I’ll dive deeper at another time, but here are basics to-do’s to start taking action at getting back on your feet.
- Go to the local library (or use your smartphone that can connect to the internet) and look for nearby homeless shelters.
- Speak with the staff at the shelter to assist in finding job and living prospects. They should have knowledge of government or private programs to help you out.
- Alternatively, seek out friends or family that is willing to let you live with them for a couple months.
- If you have a car but are homeless, get a gym membership and live in your car for the time being. You can at least keep groomed day to day while looking for jobs
- Reach out to temp agencies or walk to nearby establishments and ask for work (note: don’t think you can’t get a job by asking. I’ve seen it 2 times where someone walks into a small store and asks for a job and usually the owner/manager talks to them on the spot for a position).
The overall goal here is to make sure you establish an income stream that can be used as a baseline. Now I understand that this step applies to a very small percentage of people, but I don’t want to neglect them.
Track Your Income
I’m sure you have heard that ‘you need a budget’ thousands of times and have cringed at the prospect of taking that action. Well, don’t worry about that yet. I mentioned that you need to establish a baseline of income before you do anything else.
I want you to track all of your income that you make on average monthly. Anything money comes in your life should be counted if it’s spendable. It will look like the following
- Job: $1,500 (after taxes)
- Food Stamps: $150
- Donating Blood $100
- Total: $1750
Track Your Expenses
I mention this in pretty much every budgeting article I’ve written. The cornerstone of budgeting requires to understand how you are spending money.
Income is easy to track as you might only see 2 or 3 paychecks each month. Spending can be a different beast. I always recommend that you track your spend for 7 to 14 days.
If you are a fan of visualizing your spend over time or want to use a free tracker, then Mint would be your go-to. If you are someone that lives in the world or spreadsheets or simply prefers the spreadsheet route without overthinking, then Tiller is the way to go.
Note: Tiller is about $5/month but I can easily imagine you’ll save much more money once you track spending.
Your mind will be blown when you start tracking expenses. I almost believe that this is probably the 2nd most effective method in controlling your finances next to budgeting. That was the biggest game changer for me when I was able to cut off over $40,000 in student loans in 18 months.
Cut Costs From Wasteful Spending
Hold the phone — now hand me the phone. Notice that we haven’t set a budget yet? Once you start tracking expenses you can categorize them how you see fit (I generally recommend 3-4 main buckets starting out).
At this point, you should have enough data on your spend you can start to notice trends on where your money is getting allocated. For me personally, I found out I was spending hundreds extra on lunch with coworkers when I first started analyzing my spend. And don’t get me started on my $500/month alcohol spend (I really love going to bars).
Honestly, this is both fun and frustrating part of the personal finance checklist because you can find obvious spots of foolish spend and then laugh at those mistakes (followed by a sigh and a facepalm).
Now you can take action
- Decide if there are specific areas you can cut cost (Go out 2x a week instead of 5x a week).
- Evaluate if there are some expenses that might be unnecessary ($180 cable/internet bill vs a more basic plan).
- Remove any expenses that are a complete waste ($200/month gym membership vs. a $40 alternative).
Obviously, these are one-off examples. But the point is that you want to have areas of focus regarding cutting expenses and saving money. You don’t have to cut off everything at once (nor do I recommend that, you’ll likely resent yourself by making too many changes at once).
I go over many cost-cutting actions (some aren’t so squeaky clean) when paying down my debt. If you really have some extra time, feel free to check out some additional articles that might be relevant/interesting to you.
- These 4 Job Perks Could Save You Thousands Of Dollars
- 10 Simple Money Saving Tips In Summer 2018
- 6 Quirky Ways To Save Money While Dating As A Man
- These 6 Savings Accounts Pay 50x More Than Big Banks
Determine Your Goals
Do you want to save up for a vacation? Do you want to see if you can save money at all? Maybe you want to put extra money aside for retirement or simply pay off a high-interest debt. Whatever it is, pick any goal as that will be your guiding star.
You want to be achieving your goals. I recommend goal setting before creating a budget because I’m a firm believer that envisioning success is paramount to keeping motivated. Whenever you feel lost you can always ask yourself, “is this action in line with my goal?”
Your goals can change over time. For me, my initial goal was to focus on paying down my debts slowly. Then it became to pay down my student loans before the end of 2018. Now it’s becoming a full-time content creator that can make a sustainable income.
Create & Stick To A Budget
I talk about budgeting, a lot. You are probably kicking yourself after looking at your expenses and are ready to take action. But to me, that’s the equivalent of looking at yourself in the mirror and saying, “boy I’m out of shape, time to lose weight”. Sure, you might go to the gym 4 times a week for 2 weeks but then eventually stop.
Often motivation itself is not enough to stick to a habit. You need to build discipline. That’s where creating and sticking to a budget provides the most value. It helps create and build strong financial and money management habits.
Not to mention, by tracking your income and expenses ahead of time you make budgeting significantly easier. I created a basic spreadsheet for the everyman that can get you started. You can also check out Mint or Tiller as well as you can set budgets as well.
I’m not going to make claims that I’m the budgeting king, because I’m not (although feel free to give me that label, I need to boost my street cred in the world of personal finance). That said, creating a budget is the biggest hurdle for most people learning finance.
I’ve created some more in-depth articles on budgeting and budgeting expectations. Check them out if they fit your needs.
- How To Create A Budget Living Paycheck To Paycheck
- 8 Tips For Stress-Free Budgeting (That’s Fun!)
- How To Keep Track & Budget For Balance Transfers
- 6 Tips To Successfully Budget As A Couple
Find Your Credit Score & Build Your Credit
Depending on who you ask, some people claim that this isn’t a priority. I strongly disagree as throughout life you will be dealt with many opportunities that will enable you to have better interest rates and will possess the ability to make debt work for you. The last thing you want is a low credit score that could cost you thousands of dollars in interest payments.
Building your credit score will take some time. But if you are already focusing your time and energy on budgeting, you should already be practicing good money management so simply paying your credit cards on time with proper utilization should put in in the good credit score category.
Most bureaus follow this scoring method to determine your credit rating.
- <500: Very bad
- 500-549: Bad
- 550-599: Poor
- 600-649: Average
- 650-699: Good
- 700-749: Very good
- >750: Excellent
If you aren’t sure on where to begin on finding the right credit card, check my articles on getting your first credit card as well as learning how to use your first credit card. They give a brief overview of what idea behind credit scores and learning the fundamentals of using your credit card.
Rekindle Your Relationship With Debt
I spent 12+ years with a massive chip on my shoulders in the form of student loans (shoutout to my debt story). And I’ve always hated the idea of owing someone money. Actually, I’ll be specific, I hate the idea of owing money and paying back interest.
I will be the first one to tell you that student loans are terrible and they are crippling millions of young adults and many other individuals. Not to mention other forms of debt that exist in our lives (mortgage, car loans, personal loans, credit card debt).
Now, I don’t want to scare you and I know many of you (and my mid-20s version of me) are already thinking “nope, not today I don’t deal with that asshole”. Well, assholes are a part of life and you are going to have to make peace with it.
Create a spreadsheet that lays out each loan + the interest rate + monthly statement. I know you will hate it, as I hate talking about it right now (and I have my debt under control). But it’s needed since you will now be able to kick debt in the ass.
Also, the foundation of taking down debt taking your extra money and putting in towards your debts. So in regards to budgeting, it’s a pretty big deal to include it. It will look something like this:
- Student Loan #1: $12000 – 5.8% Interest – $230/mo
- Student Loan #2: $6000 – 8.4% Interest – $130/mo
- CC #1: $4000 – 18.95% Interest – $80/mo
- Car Payment: $16000 – 9.9% Interest – $400/mo
I won’t include a mortgage here as it’s not really a depreciating asset (fight me) and IMO there are other bigger fish to fry.
Remove Your High-Interest Debts
You should now know where you stand in regards to your debt standing. Obviously, we would love having 0% interest rates on all of our debt (especially student loans) but there are some ways you can do to reduce your interest rates (NOTE: SOME OF THESE METHODS ARE UNORTHODOX AND OFTEN REQUIRE A GOOD CREDIT SCORE WITH A DECENT CREDIT LINE)
LOWERING STUDENT LOANS DEBT
There are a few ways to go about lowering your student loan interest rates
- Check out refinancing your student loans. There are three popular options that I recommend. #1 is SoFI, Citizen One, and Credible. There are plenty of lenders out there, but SoFi and Credible are highly rated across the board and offers very competitive rates. While Citizen One is the company that I personally have used and loved them.
- Note: Depending on if you have private or federal loans, you might want to tread cautiously. Federal student loans offer more flexible payment plans and benefits to eliminate your loans.
- Balance Transfer Your Loans to A Credit Card. Now before you all gang up on me and throw me off a bridge, consider this: What if you realize that you can save an extra $500/month after cutting expenses and put it towards a $20K loan that has 6% interest. Now, if you had the option of moving those loans to a 0% Fee NO APR credit card? You get between 12-18 months in most cases of 0% interest. Assuming you can pay off your 20K loan in 2+ years you’ll still be paying at least $1500 in interest. If it’s on a credit card, you can strictly focus on saving money before you charged an interest rate and pay $0 in interest. I go incredibly in-depth on using balance transfers for student loans.
LOWERING HIGH-INTEREST CREDIT CARD DEBT
I have a couple of ways to go about resolving this.
- Get a 0% Balance Transfer Credit Card – The reason why I mention focusing on your credit is that balance transfers are the biggest way to dramatically lower/eliminate interest on your debt if you have good credit. Think of balance transfers as a way for you to correct your mistakes and no prevent any more financial bleeding. There are several no fee no APR transfer cards you can use. Traditionally they are used to move balances on your credit card but I prefer to use them as a way to eliminate interest rates as a whole.
- Get a personal loan – this is a pretty decent middle ground for those with decent credit that don’t want to deal with paying 20%+ interest on credit cards. While this isn’t as dramatic as getting a transfer card, it’s a good middle-of-the-road option.
- Try to get 0% APR Intro Credit Cards – Now, this only works if you have been making strides in cutting expenses, but you can always get a 0% APR card (usually for 15-18 months such as Chase Freedom or Discover IT) and do the following:
- Make all your new purchases on the new card.
- Make minimum payments on your new card.
- Aggressively pay down any outstanding debt on your credit cards that have interest
- Once you pay down your high-interest credit card, focus on paying the 0% APR card down before it collects interest.
- Note: This method isn’t optimal in minimalizing interest compared to other methods.
Create A Safety Net / Emergency Fund
I know it seems like I’ve been talking a lot and that there is a crapload of tasks that need to be accomplished, but the reality is that we have only begun. You can spend 8 hours (probably 4 hours honestly) total to do all of the other tasks above. All you are doing up to this point is figure out your financials and develop a plan to become financially free.
This is where patience and discipline come into play. As you cut cost and save money, you’ll need to start thinking about two things:
- Paying down debt
- Saving an emergency fund
Anyone that tells you that one is more important than the other is a damn fool. There is “financially sound” advice and “keeping sane” advice. You are your own individual with your own goals and needs. It is up to you to decide what’s important for your well being in finance and in life.
Some people say it’s better to pay down a high-interest debt even though if an emergency happens you might incur more debt (risky, but at the same time the sense of progress of paying down debt is worth it). Others say keep an emergency fund of X before focusing on debt (the feeling of some financial backup is worth more than the feeling of increasing debt). Both have their own pros/cons. Do what makes you happy.
As long as you are focusing on one or the other (preferably both) you are making financial progress and that is what’s important.
THAT BEING SAID – You will need to keep an emergency savings fund. When starting out, it’s recommended that you save at least $1,000 for an emergency as it should be enough to help you out in a pinch.
I will admit, the moment I had $1,500 saved up for an emergency I felt that I could handle most things financially and I was less driven to make decisions that were based on survival.
I was able to finally sleep at night without worry of “what if…” once I reached that milestone. I want to point out that having some side hustles or making extra money on the side can easily be used to fund your emergency fund. Check out these ways to make some cash.
Pay Down Your Debts With The Right Plan
Aside from my rant in the previous section. Even though you have lowered your interest rates and your month to month expenses, you still need to focus on your debts. This portion is crucial in my personal finance checklist.
How do you know what debts to pay down? Which ones should be the most important?
There are probably dozens of questions you might have on choosing the best path to tackle your debts. Unfortunately, there are so many unique situations that determining the best course of action is dependant on the scenario. Fortunately, there are two popular debt payment methods that exist.
- Avalanche Method – Your focus is strictly on paying down the highest interest rate.
- Snowball Method – Your focus is strictly on paying down the smallest debt.
Both have their pros and cons. Generally, if you want a better psychological feeling of paying down debt, I recommend the snowball method.
Don’t worry, I won’t leave you hanging without a resource. My favorite site to use to calculate payments is called Unbury.me as it provides a beautiful interface that is easy to use.
Personally, I think there is a more optimal method that no one discusses. I cannot discuss this method yet as I’m working on a tool that will completely shift the mindset on how we pay down debt (yup, big claim, but give me 6 months).
Net Worth: $0
Bold thought – I was always jealous of people with a net worth of $0. Imagine at the age of 22 you wake up one morning and check your bank account. You see that you have $2,000 to your name, cool! You hop on Mint and you see that you own $80,000 in student loans, not cool.
Your buddy works a regular office job makes $2K/month and will occasionally save money. He wakes up with $500 to his name and owes $0 in student loans. His net worth is $500 while yours is -$78,000. It’s a shitty hypothetical those thoughts plagued me for so many years.
The biggest sign of progress for me was to finally reach a net worth of $0. This means if I were to sell all of my assets for what they were worth and compared it to my debt, I’d have $0 to my name and I would own nobody anything. You know how happy that made me?
Obviously, it’s just a hypothetical number, but that was the first real sign that I was climbing out of debt.
I really like Mint because you connect all of your bank accounts, assets (car/house) and debts all in one place to calculate your net worth.
Emergency Fund of 3-Month Savings
As you continue to pay down your debt and realize that you are developing a positive net worth, it’s time refocus and build yourself up for the long term.
This one is totally up to you, the initial emergency savings fund was specifically focused on a worst-case scenario. Now it’s time to build a nice buffer zone (getting fired or laid off, unplanned medical expenses, last minute flight, etc). You want to set yourself up to handle situations that can affect your day to day over longer periods of time.
Usually, at this point, your debt situation is in control and you can become more flexible on how you want to allocate extra money each month.
This rule is simple, take the minimum cost of expenses and stretch it out to 3 months. It can vary between $5-$15K for most people (dependant on the cost of living in the city).
Make More Money / Increase Your Income
Technically this part of my personal finance checklist could be used right away, since making more money is likely to improve anyone’s financial situation. But you run the risk of not learning basic personal finance and money management principles. That would end up negating any progress made.
There are countless ways to make money, from getting a salary increase to switching jobs to even focus on side-hustling. All of these options are great ways to make extra income to pay off debt faster or focus on long-term savings plans.
Check out some articles I’ve written that can help give you the edge in making more money in various aspects of life.
- Make $1000 Month Doing Surveys: The Ultimate Guide
- Make Money Class Action Settlement Ultimate Guide
- Increase Your Salary in 6 Hours: Resume Tips & Tricks
- 5 Underrated Tips To Crush Your Next Interview
- 4 Ways to Make $50+ Per Hour Right Now
I know I’m only scratching the surface on this one. Not only is saving money a key component in paying down my student loans, I went above and beyond and took the dive into consulting where I was able to significantly increase my income for several months to massively pay down debts.
When you hear someone say, “I paid down $60K in debt in 9 months here’s how I did it” and your first thought might be, “wtf I don’t even make 60K in two years”. The only thing I can say is don’t limit yourself. I’ve always made it a mission to improve my financial situation, it took me several years of small progress before I was making significant strides.
“I still have no clue on how to make more money for my job!”. PATIENCE. I’ve only written 50 articles so far I’ll get to a, “breaking in X” series soon enough that will guide you on increasing income.
Add $$$ To Your Retirement & Life Funds
Alright, this is probably the most boring, yet fulfilling part of my personal financial checklist. I won’t go over too many details regarding this portion as I’m not in retirement. But that doesn’t mean I can’t mention best practices!
- Max out your company matched 401K (assuming you have employer matching).
- Then max out your Roth IRA or Traditional IRA each year up to $5,500 combined.
- Max out your non-company matched 401K amount (up to $18K total each year).
- Put other funds in savings/investments such as an index fund or bonds.
- Figure out how much you need to be saved for retirement, check out this retirement calculator.
- Save all the monies and become financially free.
And that’s it! Easy as pie! Although pie really isn’t easy and pretty complicated, similar to life.
Keep this checklist handy as it will be a reminder to set goals and mark progress. I really hope you enjoyed this! I didn’t really expect this turn into a 4,000 word beast of an article but no complaints on my end.
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