People these days are managing money like they are still 21. These people aren’t “adulting” well and still haven’t a clue about optimizing their finances. They live paycheck to paycheck and with whatever is left over they carelessly leave it in their checking account or move it over to a lame savings account that pays .01% interest.
Below are some of the minimums you should be doing:
Create A Spreadsheet
If it’s not on paper, I am convinced that you don’t know where your money is going. Making an expense sheet requires that you list every single expenditure and get it down on paper. The more granular the better.
I’ve gone absolutely crazy perfecting my spreadsheet getting as nitty gritty as possible. I opened up all my credit cards and downloaded them to Excel. I then categorized purchases and lumped these categories together. I then averaged out these monthly so I knew what I was spending in which categories.
High Yield Savings Account
If you are still banking at Chase and storing your money in a savings account there, you are leaving money on the table. Push this to a high yield savings account. Some time ago, I listed out the best Online Savings Accounts. Rates have now gone up to 2%.
If you have a credit card balance and you aren’t paying it off in full every month, you are committing a juvenile sin by being charged twenty-something percent in toxic interest. If you are in your 30s and 40s and your credit score is in the 600s, something is seriously wrong. Check out my what makes up your credit score article..
ETFs and Stocks
If you’ve been doing your reading, you saw my article on ETFs. Take a good read and start looking at the best index fund ETFs. Invest for the long term. Also don’t invest anything that you can’t afford to lose.
Debt is bad, and debt with high interest is even worse. Interest rates play a big role in how quickly you can get out of debt. My suggestion is to pay off debt before you invest money. In some cases, I advise the opposite. For example if your company has a strong 401k match, you may want to maximize your contribution. But get rid of that debt quick!
Retirement should be in the back of your mind. You should at least think about how much you need to retire and how much you have. I won’t go into the details as I have a full blown article coming out on this. Understand 401k’s, IRA and Roth IRAs. I’m not a big fan of these instruments as I believe socking away your hard earned dough so that a money manager makes fat fees on your stash while your money remains locked up is not my cup of tea.
You know about emergency funds because you read my article on this right? If not, then have about 6 months of emergency funds that can pay for necessities when you lose your income. Remember, your savings should ideally be separate from your regular savings.