If you are completely overwhelmed by your finances. Start here!
If there is one thing, ONE THING, I hope everyone does is automate TWO THINGS. Living an automated life takes decision and calculation fatigue off the table. If you are planning on saving at the end of the month you will be less likely to move the money into savings or investments. If you take the money out the second you earn it, you will be more likely to be successful.
I beg you, the second you finish reading this, do two things. This is the bare minimum when it comes to turning your finances from net negative to net positive.
Make sure you are getting at minimum your employer match into your 401k or 403b. If you don’t understand it ask your benefits department the question, “How much do I need to put in to get my FULL match?” Your salary is a portion of your benefits package. If your benefits package includes a match and you are not taking what your employer has determined you are worth, you are leaving money on the table.
Set up an automatic withdraw of $50 into a separate bank account. This bank account should not be linked to other bank accounts and it should not have a debit card. If you have the option of splitting your paycheck into 2 different accounts do that. If you don’t have that option, set an automatic withdrawal every time you are scheduled to receive. a paycheck. Once you hit $1000 you can start working on any debt you might have. If you are debt-free start working on increasing your retirement savings account. One option for an online bank with a higher interest rate is Ally. I personally use Capital One but they have a higher minimum balance to receive an annual 2% on your savings. Both banks are fee-free for their online savings accounts. In 20 months, you will have the minimum recommendation of a $1000 Emergency Account, it is a long time but this is your starting point.
That’s it! Do it tonight, set up your employer match to receive the full amount and start saving $50 a month into an Emergency Account. Once you are able to get $1000 into your Emergency Account your next step is to tackle high-interest debt.
I believe high-interest debt is anything greater than 7%. This assumption is based on the fact that historically the market performed at a 7% rate of return after accounting for inflation. This isn’t to say that is true for the future but we have to have some line in the sand to determine our next steps.