1. Create a budget based off of your take-home pay.
Many banking apps like Chase and Bank of America's app can show you your budget in a couple of clicks or I can help you get a budget and plan (contact me). There's also mint.com but they sell your info just to let you know.
2. Calculate your money available after expenses.
The higher you can make this number, the better. You can earn extra money through a side hustle. You can also cut down on eating out, buy cheaper food, go out less, cut cable, cut the gym membership, get a cheaper phone plan etc.
3. Make sure you have at the very least the equivalent of 1 month's take-home in a savings/money market account at the bank.
(More about this later, 1 month's take-home pay is absolute minimum to get to ASAP)
4. Increase 401k/IRA retirement savings, so that you're saving at least 10%.
Example: You can elect a 7% contribution, if you get a 3% company match. If your company matches 4% then you can do 6%. Ideally you want to get to 15% retirement savings rate total. That is the A+ in this area.
WHEN you increase your savings rate you do 3 THINGS: A. Increase your FORCED savings. Automatic savings before you even get your paycheck! B. Create an extended emergency fund! A 401k is not just for retirement you can loan from it for emergencies (you should receive the money in about 1 week), loan from it toward a home down payment, and even a child's educational expenses! GET that 401k savings rate to 10% total minimum! It's a critical tool! People often see retirement so far off so they don't care to put much in their 401k now. If you really think about the aforementioned pre-retirement options to access your 401k, you will have more motivation to contribute at least 10%! C. Avoid becoming a broke retiree, like many baby boomers. Many baby boomers are no longer able to earn a good income and are at the mercy of social security which can end up leaving them destitute, old and poor with a lot of regrets...a very sad situation. But do not be them!
After getting your emergency fund and 401k(403b, SEP IRA, etc.) savings rate bumped up to at least 10%, you'll be on a good track! Out of every 5 Americans: the top 2 will be saving at least 10% in their retirement accounts, the remaining 3 will be saving less and at major risk of not having enough money to live comfortably in their golden years. Do you want to be toward the top or the bottom!? Comfortable later in life or scared to death and scraping by?
(I can advise you on which 401k options to select later. I pay for a professional service created by a man who retired at 40 YO a multi-millionaire, by using the strategy. Contact me if you have any questions)
5. Now once you have the minimum savings and more peace of mind! IT's time to knock out DEBT The snowball method is very popular. It means to ignore the interest rates and knock out the lowest balances first.
Example: 2 credit card balances and 1 student loan. Credit card A has a $5,000 balance, Credit card B has $2,500 Balance, and Student loan has $30,000 balance. Even if credit card A has the highest interest rate, you will feel better seeing a balance gone when you pay the smallest balance off first! Knock out the smallest balance first. The only time to knockout the highest interest rate first is if it's really high like 20%+, that interest rate is killing you! Kill it first!
6. After building your emergency fund, your 10% retirement savings rate and your credit card/student loan debt paid off, now you should increase your emergency fund to at least 3 months take home pay.
Keep the 1 month in the regular savings. Put the extra 2 months in a stock account(aka brokerage account) ...I can advise you on what to invest in later if you're at this level, depends on a couple things. I can share what i'm invested in if you want to know.
7. After at least 3 month's take-home saved in accounts, retirement savings at 10% at least, and credit card/student loan debt paid off - You can get your 401k(retirement) savings rate to 15% or You can save for a down payment on house. Keep in mind you can loan from your 401k at about at a 4% interest rate...if needed.
8. After getting a good deal on your home so it's not over 30% of take-home pay(33% MAX! Includes mortgage, home owners insurance, association fees, and taxes) assuming you've maintained the previous steps - look at getting a good deal on rental property or if you can't see yourself as a landlord you can invest in growing, well-managed companies through stocks.
(I can advise those who are at that level, from personal experience and professional, contact me)
9. It's good to give 10% of your income to tithing/charity. For the believers this is the first step! Life is more about helping others than personal wealth. We're blessed to be able to be a blessing to others.
Also, unexpected setbacks in life happen. Don't be discouraged if you're not at the level you want to be. I've been there and I can relate. Just be wise and frugal with your spending and get to the
1. One month's take-home pay emergency fund (absolute minimum) 2. 10% 401k(retirement) savings rate (minimum) 3. Pay off credit card and other non-mortgage debt 4. 3 month's take-home pay saved 5. 15% 401k(retirement) savings rate 6. Get a good deal on a home (less than 30% take-home pay going to housing expenses, 33% maximum) 7. Increase smart investments and wealth to have a greater ability to help others and more options in life. Many people have built wealth through getting good deals on investment properties (be smart, do a lot of researcher and work with an expert). Many people have also grown wealth through investing in stocks. A safe percentage (personal number see an advisor) in an S&P 500 ETF or S&P 500 Index Fund is smart. There are thousands of stocks and thousands of investment choices, but history shows that a simple S&P 500 index fund achieves a better return than the majority of mutual funds and hedge funds over a 10 year average.
Lastly! It's smart to at least get a $100,000 term life insurance policy, minimum. Also, get a short-term and even long-term disability policy. Even though there is a low likelihood of using it, the cost is affordable and the impact of unexpected death or disability on your loved ones would be too catastrophic if it happened! Nothing can destroy your family's financial security like the death of an income earner or a major health issue/accident that causes you to become disabled. We see many "GoFundMe" accounts, but you cannot be sure that your family will get enough that way. They probably won't! You also must have health insurance.