Make A Plan
For a lot of us, we were not taught what to do with our money once we received it other than to work hard and save, however, saving alone will not make you wealthy. Learn how to make your money work for you, and plan how to get the most from your dollars.
Time is money, and any time not spent following a good financial plan can be wasted money.
There are lots of plans out there, and what works for one may not be the best for another.
Do your research and find or make a plan that’s right for you.
The best way to predict your future is to create it.
They say you are 42% more likely to achieve a goal if it’s written down.
Why wouldn’t you want to do that with your finances?
Below are several financial plans that can help you achieve your financial goals.
Use these as a guide, do your own research, and choose or make a plan that you feel fits you best.
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Dave Ramsey's Baby Steps
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The Money Guy's Financial Order of Operations
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Minority Mindset CLIMB to Wealth
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F.I.R.E. Community
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Other Financial Personalities
On average, recessions happen every 6-8 years. Be proactive and not reactive!
When you are planning your finances, you should think about how you will handle any downturns in the economy.
Here are a few tips to help you be more prepared.
Stop bleeding money. Cut back on all the unnecessary spending.
Pay down and avoid any high-interest rate loans, variable interest rate loans, and ARM (adjustable rate mortgage).
Anytime you are thinking about taking on new debt with a pending recession coming up, you should ensure you have ample savings and the ability to repay the debt and/or a contingency plan if you lose your job. Remember not to finance things that will not pay you. If it doesn’t put money in your pocket, then do not go into debt to purchase it.
Create a shield. Ensure you have a solid emergency fund, somewhere between 3-12 months’ worth of expenses. The goal of this money is not to make you rich or fight inflation, but to protect you if an emergency arises.
Example budget 75/15/10. This means 75% of your money should be going to spending, 15% should be going to investing, and 10% should be going to saving. Once you reach your emergency fund goal, then you should not save anymore, and you should then take your saving percentage and add that to your investing amount. This means your new budget plan will be 75/25 (75% going to spending and 25% going to investing).
Automate your money. Build a budget telling every dollar where to go focusing on paying yourself first with saving and investing.
Most wealthy will save and invest first. Most broke individuals will spend first, and then try to save and maybe invest from what is left. What will you prioritize first?
Do not lend money. Per Dave Ramsey, this is the fastest way to ruin a relationship. Only lend what you can afford to lose, and do not expect that money back. Is this amount worth losing your friendship over? If someone asks to borrow $100, instead you can say, “I cannot lend you $100, but I could give you $10 or $20 (or whatever amount works for you), and you don’t have to pay me back.”
Save money and educate yourself on different assets during good times so you can capitalize on opportunities that may arise during recession times. Money can be made during recessions for the ones who are prepared and educated. Find out who/what benefits from recessions and/or inflation. Food, oil, gas, rent prices…? Invest in assets that produce value like rental properties, stocks, and even start-up companies (remember, start-ups are way riskier though) that tend to benefit during these times. Gold, silver, and other precious metals are another great way to store value during recessionary times.
Forget the desire to cash out investments to sit out a recession. This time could be a huge buying opportunity. “Be fearful when others are greedy and be greedy when others are fearful.” Warren Buffet
Financial Checklist for Each Decade
(This was put together by looking at information from Dave Ramsey, The Money Guy Show, Minority Mindset, and others. Be sure to do what is right for you and your situation, and let me know if you have any other suggestions.)
In Your 20s Focus On:
This is the foundation of your financial future. Put a little time in now so you will not have to play catch-up later.
Ensuring you have a cash emergency fund.
Dave Ramsey suggests having $1,000 for this.
Minority Mindset suggests having $2,000 for this.
The Money Guy suggests having at least enough to cover your most expensive deductible, whether that be home, auto, or health.
Others suggest having 1 month’s worth of expenses for this.
Making a Plan for your money.
Take time to read the plans some financial gurus used to help them succeed. Even if you're not following one exclusively, this will help you get an idea of where you need to focus your money.
Here are a few to get you started:
I want to highlight the F.I.R.E. Community. I suggest looking into the F.I.R.E. Community types, strategies, and goals, because if F.I.R.E. is something you are interested in, then it’s important to start early. Finding F.I.R.E. in your 40s is almost too late.
Creating and following a Budget.
It’s been proven when you tell your money where to go, you do better financially.
Getting out of and staying away from Debt.
Dave Ramsey says it’s never okay to have debt, but if you are interested in using “good debt” to make money as other financial professionals speak about, then this would come in the building wealth/hyperaccumulation phase. Be sure to read Dave Ramsey’s Baby Steps and The Money Guy’s Financial Order of Operations to understand when this would be.
Automating your Savings and Investments to build your foundation.
Have a fully funded emergency fund. Life changes, so be sure to review this amount often to ensure you are still adequately funded.
Investing goal should be to reach investing 25% of your gross income consistently by the time you reach 30.
Spending less than you make and trying to live cheaply.
This does not mean only buying cheaply made products, but this means you put value in your guide to spending. Buying the more expensive quality items is okay if you can purchase them with cash and when you limit the amount you may need. For example, buying better quality pants that will last longer may be better in the long run, but you may only need 3 or 4 different pairs and not 15 different pairs. This will help with your saving and investing which will help you not have to play catch up later in life.
Know the difference between needs and wants. Examples: You need water, but you want soda. You need a car, but you want a BMW.
Keep your housing costs (your mortgage/rent along with your insurance and taxes and some even include utilities in this) to no more than 25% of your gross income.
Be sure to check out this Groceries and Gas page for tips to keep your cost of living down.
Buying vehicles correctly (if you need a vehicle) to not derail your future.
Check out this Cars page to learn how much you can afford and tips when purchasing a vehicle.
Getting auto, health, and rental/home Insurance to protect the things you own.
Focusing on maintaining a healthy lifestyle to build a healthy foundation for your body.
Your health is your largest asset.
Learning how money works.
Most people don’t do well with money because they don’t understand the game. While younger, take time to learn how money and economics work, so you will know how to play the game. The earlier you learn, the better you will do. Here is a list of Recommended Books to help you get started.
In Your 30s Focus On:
This is the messy middle. Your income may go up but so do your commitments.
Ensuring you have a cash emergency fund.
Dave Ramsey suggests having $1,000 for this.
Minority Mindset suggests having $2,000 for this.
The Money Guy suggests having at least enough to cover your most expensive deductible, whether that be home, auto, or health.
Others suggest having 1 month’s worth of expenses for this.
Making a Plan or review your plan for your money to ensure it still fits your needs.
It’s been proven when you tell your money where to go, you do better financially.
Take time to read the plans some financial gurus used to help them succeed.
Here are a few to get you started:
I want to highlight the F.I.R.E. Community. I suggest looking into the F.I.R.E. Community types, strategies, and goals, because if F.I.R.E. is something you are interested in, then it’s important to start early. Finding F.I.R.E. in your 40s is almost too late.
Creating and following a Budget.
It’s been proven when you tell your money where to go, you do better financially.
Getting out and staying away from Debt (especially bad debt).
Dave Ramsey says it’s never okay to have debt, but if you are interested in using “good debt” to make money as other financial professionals speak about, then this would come in the hyperaccumulation phase.
Automating your Savings and Investments to build your foundation.
Have a fully funded emergency fund. If you have others in your life that depends on your income, then this is very important to have. Also, be sure to review this amount often to ensure you are still adequately funded as life changes.
Be sure you are investing 25% of your gross income consistently. When your income increases, so should your investing.
Spending less than you make and trying to live cheaply.
This does not mean only buying cheaply made products, but this means you put value in your guide to spending. Buying the more expensive quality items is okay if you can purchase them with cash and when you limit the amount you may need. For example, buying better quality pants that will last longer may be better in the long run, but you may only need 3 or 4 different pairs and not 15 different pairs. This will help with your saving and investing which will help you not have to play catch up later in life.
Know the difference between needs and wants. Examples: You need water, but you want soda. You need a car, but you want a BMW.
Keep your housing costs (your mortgage/rent along with your insurance and taxes and some even include utilities in this) to no more than 25% of your gross income.
Be sure to check out this Groceries and Gas page for tips to keep your cost of living down.
Buying vehicles correctly (if you need a vehicle) to not derail your future.
Check out this Cars page to learn how much you can afford and tips when purchasing a vehicle.
Reviewing Insurance needs.
Ensure you are adequately insured with auto, health, and rental/home insurance.
Start looking into life and disability insurance if you have others in your life that depend on your income.
Looking into Estate Planning and/or Financial Professionals.
This may be the time to consider these services depending on your net worth and if you have dependents.
Focusing on maintaining a healthy lifestyle to continue to build a healthy foundation for your body.
Remember, your health is your largest asset!
Continuing to learn how money works so you can stay on top of what you should do with your money, and so you can start teaching others to help them understand as well. ”Reach one, teach one”. Here is a list of Recommended Books to help you get started.
In Your 40s Focus On:
It’s not too late, but it’s time to buckle down the hatches if you haven’t been saving for retirement yet.
Ensuring your cash emergency fund is still adequate.
Dave Ramsey suggests having $1,000 for this.
Minority Mindset suggests having $2,000 for this.
The Money Guy suggests having at least enough to cover your most expensive deductible, whether that be home, auto, or health.
Others suggest having 1 month’s worth of expenses for this.
Making a Plan or review your plan for your money to ensure it still fits your needs.
It’s been proven when you tell your money where to go, you do better financially.
If you haven’t already made a plan, take time to read the plans some financial gurus used to help them succeed.
Here are a few to get you started:
It may be harder to do F.I.R.E. at this stage, but there may still be great information and tips you can use. I want to highlight the F.I.R.E. Community. I suggest looking into the F.I.R.E. Community types, strategies, and goals, because if F.I.R.E. is something you are interested in, then it’s important to start early. Finding F.I.R.E. in your 40s is almost too late.
Creating and following a Budget.
It’s been proven when you tell your money where to go, you do better financially.
Getting out and staying away from Debt (especially bad debt).
Dave Ramsey says it’s never okay to have debt, but if you are interested in using “good debt” to make money as other financial professionals speak about, then this would come in the hyperaccumulation phase.
Automating your Savings and Investments to build your foundation.
Have a fully funded emergency fund. If you have others in your life that depends on your income, then this is very important to have. Also, be sure to review this amount often to ensure you are still adequately funded as life changes.
Be sure you are investing 25% of your gross income consistently. When your income increases, so should your investing.
Spending less than you make and trying to live cheaply.
This does not mean only buying cheaply made products, but this means you put value in your guide to spending. Buying the more expensive quality items is okay if you can purchase them with cash and when you limit the amount you may need. For example, buying better quality pants that will last longer may be better in the long run, but you may only need 3 or 4 different pairs and not 15 different pairs. This will help with your saving and investing which will help you not have to play catch up later in life.
Know the difference between needs and wants. Examples: You need water, but you want soda. You need a car, but you want a BMW.
Keep your housing costs (your mortgage/rent along with your insurance and taxes and some even include utilities in this) to no more than 25% of your gross income.
Be sure to check out this Groceries and Gas page for tips to keep your cost of living down.
Buying vehicles correctly (if you need a vehicle) to not derail your future.
Check out this Cars page to learn how much you can afford and tips when purchasing a vehicle.
Reviewing Insurance needs.
Ensure you are adequately insured with auto, health, and rental/home insurance.
Start looking into life and disability insurance if you have others in your life that depend on your income.
Reviewing your Insurance policies to ensure you are still adequately insured for this stage of life.
Start finding your retirement number. (The Money Guy offers a Know Your Number course if you need help with this.)
Know Your Why! Why are you planning for retirement, and what do you want it to look like? The stronger the why, the more people tend to stay on track with the goal.
Look into where you are investing and saving your money. Are you saving 25% of your gross income, and are they diversified into the 3-bucket strategy? This may be a good time to start looking for a Financial Professional.
They say the goal is to have enough saved by retirement to replace 80% of your pre-retirement income.
Doing a Net Worth Statement at least annually to ensure you are staying on track.
Focusing on a healthy body to continue to build a healthy foundation for your body.
Remember, your health is your largest asset!
Continuing to learn how money works so you can stay on top of what you should do with your money, and so you can start teaching others to help them understand as well.
Here is a list of Recommended Books to help you get started.
In Your 50s Focus On:
If you are behind, it may be time to look at increasing your income, spending less, or changing your assumptions of retirement. Maybe you need to push back the age you wish to retire, or you might want to consider a hybrid approach to retirement, meaning you will work part-time for a few years before you actually fully retire.
