This is by no means a comprehensive and thorough guide to money. I am no expert. I have definitely made my fair share of money mistakes. But these are the basic things I have taken away from different experts over the years that have worked for me. Take what works, leave what doesn't.
Debt is a 4-letter word. Be very careful about taking out loans, and minimize the amount you need. Then attack your debt like its on fire. The sooner you can get out of debt, the sooner you can start to accumulate wealth and work towards freedom. I love the debt snowball method by Dave Ramsey. Start with your smallest debt. Maximize how much you can put towards that payment each month, while making minimum payments on your other debts. Once the first debt is paid off, take that same amount of monthly payment and apply it to the second smallest debt (adding this amount to its minimum payment). When this is paid off, take that now larger monthly amount and apply it to your next debt. I love this method because it gives you the quickest psychological boost. You can also do this starting with the loan or debt which has the highest interest rate, then progressively move to the lower interest rate loans.
Have a several month emergency fund. Calculate your current monthly expenses, then save up to have ideally a 6 month fund that could cover all of those expenses. According to CNBC in January 2024, "Fewer than half of Americans say they can afford to pay a $1,000 emergency expense from their savings..." Don't let this be you. Calculate and save. Even if it's slow going, save.
Find the right partner. You do not have to agree on everything regarding money, or on every purchase. Its even ok if one of you is a spender and one a saver. But it is vital to discuss money and be with someone with whom you share an overall financial vision. You need someone you can work towards a common goal with. This is your business partner. You will likely own property and large financial accounts together.
You don't actually have to buy a house. You definitely don't have to buy a new car. According to a Bankrate article from July 2024, the top three expenditures for the average American household were housing, then transportation, then food. If you can find a way to save on those three things, this will free up a lot of your money. Comparison is the thief of joy. When you start comparing your house or car to those of others, you will always lose. Focus on your goals and stay in your lane.
For retirement savings, keep it easy. If your employer offers a retirement fund that you can contribute to, maximize your contribution. It's a total bonus if they match your contribution. Then also start a Vanguard Mutual Fund. This is safe, easy, gives a reliable return, and you can do it yourself. https://investor.vanguard.com/investment-products#investment-options. Set up your accounts in such a way that the money is deducted from your account either before you see it, or immediately upon you being paid, so that you only spend what you see. Make retirement savings something you don't even have to think about.
Simplify your credit. Reduce your credit cards to ideally just one good card that gives you points or money back and that you pay off every two weeks or every month. Start to wise up to the tricks of every retail store that tries to seduce you into opening their store credit card. Even if it is a no-annual-fee card with good rewards in that store, ask yourself why they want you to open it. Even if you are someone who religiously pays off your card every month and wouldn't pay interest, there is a reason they want you to open that card. It will most likely prompt you to return more, shop there more, etc. In the end, the stores and credit card companies always win.
Refer back to my previous posts on buffering. Start to recognize your spending patterns. Are you spending more than you'd like to because you are trying to avoid feeling a negative emotion? Are you giving yourself a dopamine boost in order to avoid boredom, sadness, frustration, stress? Every once in awhile, treat yourself! We all emotionally spend. But if you are doing this to an extent that it is leading to a net negative result in your life (debt, clutter, lack of time for other things), start to peel back the layers of the onion to get to your negative underlying emotions. Allow yourself to feel them and address why you are having them rather than continue on a pattern of over-spending.
According to early retirement expert Pete Adeney (a.k.a. Mr Money Mustache), a purchase that removes a negative in your life will give you greater lasting happiness than a purchase that just looks or seems fun. When contemplating a purchase, ask yourself "Do I need this? Is this something that will remove a negative in my life or improve my life in some way?" If yes, you will get more joy from the purchase, and experience a longer period before hedonistic adaptation.
LIke financial guru Ramit Sethi, ask yourself "What is my rich life?" What is it that you specifically and uniquely value? Perhaps you love a good meal out, but you could care less about the car you drive. Maybe you are spending mindlessly on groceries and not finding the money for your art passion- perhaps you can shop at Aldi to direct your money toward art supplies. Direct your savings and your budget towards what specifically brings you joy, and cut back on the things that don't matter that much to you.
Calculate the amount of money you need to comfortably retire. Take your annual expenses (this should include absolutely every expense you would expect to have in one year, including taxes, travel and fun spending) and multiply this total amount x 25. For example, if your annual expenses after all of your debt has been paid off is $40,000, you would need $1M dollars in a retirement account in order to retire. If your expenses are higher, or you'd like to indulge in some more luxuries in retirement, set your annual expense number higher. Maybe you want to live on $100,000 per year in retirement. You would need $2.5M in a retirement fund to support that lifestyle. https://www.bankrate.com/retirement/rule-of-25/
Identify your money values. What is the actual reason you want money? You can get to these by asking yourself why a few times. Why do I want a retirement account? So I can retire. Why? So I don't have to work. Why? So I can pursue the things I'd like to do and design my day the way I'd like (i.e. Freedom). Why are you working two jobs? To save money to send my children to college. Why? So that they may get a good education. Why is that important? So that they can get a financially better job. Why is that important? So that they will be taken care of (i.e. Security). This will be unique to you, but will likely boil down to a few key values. Freedom. Safety. Security. Comfort. Health. Generosity. Let these values guide your overall money planning.
Continue to learn about money. Talk about and read about money. Once a year, pick up a money book. Occasionally listen to a podcast about money. My husband and I were both lucky to grow up in houses where money was discussed and taught. We now regularly talk about money and budgeting with each other and in front of our daughter. Money is an absolutely essential part of life. Read about it, seek advice about it, and talk about it.
My husband and I are currently working out how to best approach money with our 7 year old daughter. I've definitely made my mistakes and am figuring it out as we go. The book The Opposite of Spoiled by Ron Lieber is excellent, and encourages giving young children an allowance so that they may start to recognize how to save and budget for their little discretionary purchases. I recognize my daughter's "I-want-itis" in myself and in all of us. Helping her through it is helping me to face my own wants more clearly.
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