In the realm of financial coaching, a common chorus of questions resounds: “Where should I begin?”, “What merits my focus?”, or “What should be my next financial stride?”
With so much advice and different opinions out there, it’s no surprise that we can feel overwhelmed, confused, or even stuck. Here are some of my top suggestions that have helped many people I’ve talked to. These suggestions are based on the three main stages of your financial journey.
| Life Stage | Priorities | Low Risk | Moderate Risk | High Risk |
|---|---|---|---|---|
| Starting Point | – Build 3-6 months’ emergency fund – Utilize employer retirement match – Pay off debt with >6% interest – Establish baseline retirement savings | – Prioritize stable investments – Continue paying down debt – Focus on retirement savings | – Explore moderate-risk investments – Adjust timelines for goals – Pursue wealth-building opportunities | – Consider high-risk investments (hedge funds, etc.) – Allocate funds for accelerated returns – Caution: Expert guidance required |
| Moving Beyond the Basics | – Customize goals based on personal preferences – Adjust timeframes for goal achievement – Explore investments | – Research stable growth investments – Continue debt management – Consider real estate investing | – Explore diverse investment vehicles – Monitor market trends – Evaluate wealth-building strategies | – Explore high-risk investments carefully – Allocate small portion for high-return prospects |
| Optimization | – Prioritize mortgage payoff for long-term homeownership | – Optimize mortgage payoff strategy – Continue stable investments | – Optimize goal achievement timeline – Consider wealth-building investments (real estate, alternatives) | – Optimize high-risk investment strategy – Seek expert advice |
What you'll learn:
➤ Starting Point
Whether you’re starting your financial journey or giving your finances a fresh start, here are the first steps to take with your money:
Build an Emergency Fund
Begin by looking at how you spend your money, whether by using an expense tracker app or just writing it down. Make sure you have some money left after expenses. If not, explore simple ways to save money. Then, create a separate savings account for emergencies. Look into options on sites like Bankrate or DepositAccounts. Make saving automatic to reach your goal quickly.
Get Your Employer’s Match
If your employer offers a retirement savings match, take full advantage of it. This match is like free money, so make sure you’re contributing enough to get it.
Handle High-Interest Debt
If you have debt with an interest rate higher than 6%, focus on paying it off. You can use tools like a debt payoff plan to help you. If you have multiple debts, consider paying off the smallest ones first for quick wins, and then tackle the high-interest ones. Whenever you have extra money, consider putting it toward your debt.
Secure Your Future
Once you have saved 3-6 months’ worth of expenses in your emergency fund and have a clear debt payoff plan, turn your attention to building a solid retirement foundation. Use retirement calculators available online or through your retirement plan provider to figure out how much you need to save for your retirement goals.
If large contributions are hard right now, use the auto-escalation feature in your retirement plan to gradually increase your contributions.
Remember, there’s flexibility in these steps. Adapt them to fit your situation and keep yourself motivated and on track. Lastly, set up automatic payments. This simple trick can help you improve your financial life.
In the end, it’s about taking steps that suit your current circumstances and help you make steady progress toward your financial goals.
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➤ Moving Beyond the Basics
All of us have different things we really want to achieve. Some people dream of buying their first home, while others plan to get married or start a family – and for some, it could be all of these things happening at once. Here’s how you can figure out what’s most important in these situations and some smart ways to stay on the right path:
List Your Top Priorities
Think about the things that matter the most to you financially. If you want to buy a home, you might need to save around 20% of the home’s price for the down payment. Starting a family could mean saving $5,000 to $10,000 for things like maternity expenses and getting ready for the baby. If you’re planning a wedding, it might be somewhere in between these amounts. You can find more ideas from Erik Carter here.
Get a Clear Idea of the Time
Use a tool like this calculator to see how long it could take to save up the total amount you need for your goals.
Decide Which Goals Come First
Think about how important each goal is to you. If you don’t have enough time or money to reach all of them, you’ll need to make some decisions. This might mean being more creative with your plans (like for a wedding), giving yourself more time (like for buying a home), or postponing a goal for later (like buying another property).
➤ Making the Most of Your Finances
Now that you’ve got your basics covered and you’ve gone beyond the starting point, there’s even more you can do to make your money work better for you. Depending on how comfortable you are with taking risks, here’s what you can consider:
Playing it Safe
If you’re planning to live in your home for a very long time, like forever, or a really long time, you might think about paying off your mortgage faster. Think of this like getting extra money back because of the interest you save. This depends on how much your mortgage costs you. For most people, it’s around 3% to 6%.
Balancing Act
If you’re okay with a bit more risk, you could focus on reaching your money goals quicker. If you’re able to save more, you can adjust how long it takes to reach each goal. Then, decide on the best way to invest for that time frame. If you’re interested in growing your wealth, you might think about investing in real estate or other ways that can help your money grow.
Taking Some Bigger Risks
If you’re feeling even more daring and after thinking about the other options, you might take a part of your extra money and look into more daring investments. These could be things like hedge funds, private equity, or investments that focus on specific businesses or industries. Think of this like an extra side investment.
But remember, this part is different from your main investments, so you’re not putting all your money at big risk. This part can help your wealth grow faster, but your main savings stay safe. It’s important to mention that these ideas are usually for people who know a lot about investing.
Make sure to talk to someone who’s an expert in investments and who you trust before you go ahead with these ideas. They can help you understand better and decide if they’re right for you.
➤ Final Thoughts
After setting up your financial basics, take time to make your other goals fit your personal preferences. This way, you can shape a financial life that truly matters to you. Once you’ve got this foundation and some room to grow, think about how to make things even better based on what’s right for you and how comfortable you are with risks.
And remember, don’t forget about estate planning. This helps protect all your hard work for you and your family, so you leave behind a legacy of financial well-being. If your situation is a bit tricky or you need extra guidance, don’t hesitate to ask a professional financial planner for help.
They can provide you with the right advice, no matter where you stand financially. Some employers even offer free access to financial planners through workplace programs that help with financial well-being.
