We all have our own unique personal finance journeys. However, no matter where you want to end up, there are a lot of things you will have to do. Some of this will be unique to your plans, but everyone has a surprising amount of overlap. Once you build the foundations to your personal finance journey, it is much easier to tweak it as you need or want to. Without further ado, let’s dive into the personal finance roadmap for everyone!
Identify Your Primary Goals
Figuring out your primary goals will help you get where you want to be. On top of that, generally people who don’t set goals fall into bad habits. To stay on top of things, you should constantly have some goal to work towards. If you don’t, you may let something like lifestyle creep work its way in and ruin your financial security. These goals and good financial habits will help you grow your wealth, and can save you in a recession. They also serve as a good first step on your personal finance journey.
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Find Mentors
Whenever possible, try to find mentors. This doesn’t mean you need to look or ask for handouts. Rather, as the opportunity presents itself, try to find people who can teach you more. In this case, I’m talking about personal finance, but it applies to all aspects of your life.
Need help with career development? Find a mentor. Are you a new spouse or parent? Find a mentor. There are tons of people out there who can teach you about a myriad of things. Of course, when it comes time and you’re ready – be sure you’re generous enough to mentor someone too.
Cut Expenses
Budgets should be the backbone of your financial habits, to help you stay on track to reach your goals. Not everyone uses them, because they find them to be too tedious, but you have tons of budgeting techniques at your disposal. If you need help and want a basic overview of how to start a budget, check out my guide for beginners. If you actually do want a more defined budget, to maximize your savings, check out my article on zero-based budgeting.
Now a few minor expenses may not add up to much. So, when you’re trying to cut expenses that may not be the right place to start. Everyone’s spending is different, but the biggest places you can cut are usually related to housing, food (e.g. eating out), and transportation. More often than not people have a car or house they can’t afford, or they eat out constantly. If you want to cut a significant amount of your monthly expenses, start there.
Save For Emergencies
To make yourself more stable and financial secure, you’ll need to set up an emergency fund. How much you may need to put in your emergency fund varies, but six months worth of expenses is a good starting point. Depending on your precise circumstances there are cases where you may want to save even more. It’s important to be honest with yourself about your financial security and save the right amount for your own peace of mind.
If you need more help on figuring out how much to save or how to actually start saving for an emergency fund, check out my article on emergency funds. For a good emergency fund option, check out Axos Bank. They have some of the best interest rates in the market right now, making them a great choice for an emergency fund.
Build Credit
If you have no idea what a credit score is, or just need more details on how it is calculated, check out my breakdown of the topic here. If you don’t have a way to check your credit score, try using myFICO. Your credit score is basically a snapshot of your finances from the perspective of lenders. The better your credit score, the better interest rates you’ll get. A good score can open a lot of doors, and a bad one will keep many shut. Your score doesn’t need to be perfect, but make sure you start building credit now so that you have it when you really need it.
Eliminate Debt
Debt with a lower interest rate than something like a credit card debt isn’t necessarily an emergency. However, any high-interest rate debt should definitely be a huge concern for you. For me, if an interest rate is over 5%, it’s a top priority for me to get rid of that debt. Don’t delay, don’t take it lightly, do everything in your power to help you get rid of it. Being free of debt is a huge achievement and will do wonders for your personal satisfaction and financial security. So, pick the method that works for you, and start knocking the debt out.
Invest Like A Maniac
The earlier you start investing, the more you’ll earn in the long run. Make concessions in your budget now so you can maximize your investments as early as possible. The power of compound interest is truly astounding when it comes to building wealth. Find a good strategy and stick to it. If you’re just getting started, meet your employer’s 401k match and do your best to max out a Roth IRA.
If you need more help, I have a guide on investing in index funds and ETFs. Investing in index funds and ETFs may not sound as cool as day trading, but you’re far more likely to out-earn day traders over the long run. For a good brokerage, try M1 Finance or Vanguard. If you’re a true beginner and need a lot of help, Acorns is a great solution.
Work Less With The Same Or More Pay
I know this sounds like a stretch, but it isn’t. Once you’re established in your career, this is easier and easier to make a reality. As time goes on, and your salary increases, higher pay eventually (in many fields) becomes less of a concern. Once you reach the point where your needs are met, your major wants are taken care of, and you’re still able to invest consistently, then it may be time to reevaluate.
You may decide that you want to make more money regardless of how much more you’ll have to work, which is fine. However, I’ve noticed that a lot of people prefer having more freedom and time with their family. In that case, see if you can work remote and shift into a position with fewer overall hours (or more flexibility). This could make your pay get a little stagnant for a while, but it may be worth it to you.
Physical Health Is Just As Important
I’ve talked about physical health, and I’m a huge proponent of home gyms. You don’t have to be in perfect shape, or obsess about it, but it’s good to stay healthy. Your physical – and mental – health are just as important as your finances. While you’re accomplishing all of the things on this roadmap, make sure you’re taking the time to take care of yourself as well.
Round Yourself Out With Hobbies
I’ve talked about several different amazing and productive hobbies before. Hobbies can definitely have their uses. They can cut costs, make you money, and teach you valuable skills. All of those things are great and if you have a hobby that does them – that’s even better. With that being said, it’s also okay to have a hobby purely for fun. This goes along with my previous point on health, but it’s perfectly fine to have something you do where you can just have fun and relax. So, remember to have something that helps you take a breather.
Do Estate Planning
At the end of this personal finance roadmap, the perfect capstone is estate planning! Making an estate plan sets up your family and is a good way to get your finances in order. On top of that, it gives you a clear insight into the current state of your finances and can give you a good idea about where you need to end up. So, once you’ve made it to this stage, if you’re having issues figuring out new financial goals, this is a great step to take.
Conclusion
Hopefully you’ve already started the beginning stages of this roadmap. If you haven’t, it’s never too late! Start now and enjoy the journey. If any of you have tips of your own, be sure to leave them in the comments. If you want more articles on personal finance, you can read them all here.
