Getting Started

Step 0: Start Budgeting & Cut Expenses

The first move in mastering your money is setting up a budget. This will show you where your money is going and help you cut back on unnecessary expenses. Once you get control of your spending, you can start freeing up cash for the next steps.

Your budget should cover these basics:

• Rent/mortgage

• Groceries

• Utilities

• Health & personal care

• Transport (for work/school)

• Taxes

• Minimum payments on any debt

Step 1: Build an Emergency Fund

An emergency fund is your safety net. It’s cash you keep in an easily accessible account, like a savings account, for unexpected expenses (like losing your job or a car breakdown). Once you dip into it, always top it back up before moving to the next steps.

How much should you save?

• Aim for 3 to 6 months' worth of living expenses.

• If your income is unpredictable, save up to 9 to 12 months' worth.

Where to keep it?

• Stick to safe, easy-to-access places like a savings account—nothing risky like stocks, and definitely not a credit card.

Step 2: Max Out Employer-Matched Retirement Contributions

If your employer offers a retirement match (free money!), make sure you're contributing enough to get the full match. It's basically free cash for your future, so take advantage of it.

Step 3: Tackle High-Interest Debt

Next, focus on paying off any high-interest debt (usually anything with 10% interest or higher). Once that's cleared, you can bump up your emergency fund to cover a full 3 to 6 months if you haven’t already. Then, tackle moderate-interest debt (around 4-5% interest), but leave out your mortgage for now.

Step 4: Save for Big Purchases

If you’ve got a big purchase coming up—like a car or college tuition—now’s the time to start saving for it. Put this money into a high-interest savings account so it’s there when you need it.

Step 5: Start Serious Retirement Saving

Now, aim to save at least 15% of your pre-tax income for retirement. You’ll probably want to invest these savings in something like a retirement account. If you’re behind on saving for retirement, bump this percentage up.

Step 6: Pay Off Low-Interest Debt

Any other low-interest debts, like a mortgage, can be tackled at this point. You can either pay them off completely or move to the next step while continuing regular payments on this debt.

Step 7: Save for Other Goals

Now that you've got the basics covered, you can start saving for other life goals! Some ideas might be:

• Saving for your kids’ education

• A down payment for a house

• A dream vacation

• Boosting retirement savings to retire early

You've now reached financial stability—it's up to you where you want to go next!

tags: getting started, basics, 101