Starting Personal Finance

An overview on how to be responsible with money.

Posted October 8, 2024

Piggy Bank

personal finance

Everyone knows that we need to be responsible with money.

We’re taught the importance of frugality at an early age by our parents, and we work hard throughout school to go to college, get a degree, and acquire a six figure salary post-graduation. But all that education never taught us how to manage the money we’d make, and once the paychecks start rolling in we simply do the best we can with the limited knowledge we have.

I can’t promise that this article will teach you everything about personal finance, but it can be a basecamp for knowledge and resources you can use to start climbing the money mountain. The path is long and riddled with bad advice, scams, and distractions, but know that in the long run there is no shortcut to lasting wealth.

After watching youtube videos, listening to podcasts, and reading books written by successful investors, I’ve managed to compile 6 steps that will help you start your personal finance journey.

Overview

Here are the 6 steps you need to take:

  1. Save

    1. Save 3 - 6 months of expenses in a High Yield Savings Account (HYSA).

    2. Stop banking with Wells Fargo and Bank of America, these banks are riddled with scandals and predatory fees. Switch to more reputable banks like Capital One, Charles Schwab, or Ally.

  2. Manage Debt

    1. Set up automatic payment on your credit card to pay off your full statement balance each month.

    2. If you can’t pay off your credit card, stop using it. It’s not worth going into debt to eke out a few more reward points.

    3. Avoid using Buy Now Pay Later (BNPL) services like AfterPay and Klarna.

    4. Pay off high interest debt (over 5%) as aggressively as possible.

  3. Invest (Part 1 and Part 2)

    1. Open a Traditional 401K account through your employer and set up automatic contributions to max out your employer match (if they sponsor it). Ask HR for more info.

    2. Open a Roth IRA account with Fidelity or Vanguard and set up automatic contributions to max out the contribution limit.

    3. In both accounts, invest your contributions in VOO. If VOO isn’t available, find any index fund that tracks the S&P 500.

    4. Contribute regularly through good and bad times. You will be tempted to stop contributing and sell your investments when the market goes down, but downturns are part of the natural cycle. Time in the market beats timing the market.

  4. Track Spending

    1. Create an account with Empower Personal Dashboard.

    2. Link all your credit cards, banks, and brokerages to track your spending each month and check your net worth.

    3. Use your spending habits to outline a budget.

  5. Budget

    1. Recommended budget breakdown:

      1. 50-60% Fixed Costs: Rent/mortgage, utilities, medical insurance/bills, car, public transportation, debt, groceries, clothing, internet, and anything else that you NEED.

      2. 10% Investments: 401K, Roth IRA, HSA, and other retirement/non-retirement investment accounts.

      3. 5-10% Savings: Gifts, vacation, wedding, house downpayment, and any other big purchases worth saving for.

      4. 20-35% Spending: Restaurants, dates, and other guilt-free spending money.

    2. I made 2 sheets to help you visualize your budget:

      1. Biweekly Paycheck Calculation

      2. Monthly Paycheck Calculation

    3. Continue to track your spending and readjust your budget if necessary.

  6. Pursue good financial advice

    1. Financial advisors

      1. If you already have a financial advisor, ask them how they are charging you. If they are charging you a percentage fee, find a new advisor.

      2. If you need a financial advisor, look for one here: https://www.napfa.org/

      3. Make sure you hire a fiduciary that charges a flat or hourly fee.

    2. Books

      1. I Will Teach You to Be Rich, Second Edition by Ramit Sethi

      2. The Psychology of Money by Morgan Housel

    3. Videos

      1. How tax brackets actually work (3 mins)

      2. “How do I start investing?” (11 mins)

      3. 5 Lessons Credit Card Beginners NEED To Learn (13 mins)

      4. Follow these 7 Steps to Build Generational Wealth… (21 mins)

    4. Podcasts

      1. The Money Expert: “Do Not Buy A House!” 10 Ways To Make REAL Money: Ramit Sethi (1 hr 38 mins)

      2. The Savings Expert: “Do Not Buy A House!” Do THIS Instead! - Morgan Housel (1 hr 57 mins)

      3. Scott Galloway: We’re Raising The Most Unhappy Generation In History! Hard Work Doesn’t Build Wealth (1 hr 50 mins)

    5. Instagram

      1. @calltoleap


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