Live your best financial life in 5 steps

Zina Kumok
October 4, 2017
14 min read
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When we think about the future, we like to think everything will have fallen into place.

Regular exercise, a bustling social life, a successful career, a healthy diet – all the aspects of a fulfilling life will be present and accounted for.

It’s actually getting there that’s the hard part.

But when it comes to your finances, the process doesn’t have to be a slog. Getting your finances on point can be as simple as making a few easy changes – if you know where to start. After that, it’s just a matter of sticking to your updated lifestyle and avoiding bad habits.

Here are some simple things you can do right now to get your financial house in order.

Pay off debt

The number one priority for any financial checklist should be paying off high-interest debt, like credit card debt and personal loans. You should tackle this high-interest debt first because paying huge sums of interest every month is like flushing money down the toilet. A 2016 survey from NerdWallet found that households with credit card debt pay on average $1,300 a year in interest.

In general, you should pay off any debts with an interest rates higher than 6-7% before focusing on other financial priorities. Continue to only make minimum payments for low-interest debt, like a mortgage.

Create a budget

Only a third of Americans currently prepare a detailed budget, which means 66% of people don’t track how much they’re spending. Budgeting is key to financial success, because it allows you to see where your money is going. If overspending is an issue, you’ll never solve the problem without a reliable, useable budget.

First, upload all your bank and credit card statements from the past three months and divide your expenses by category. You can do this in a spreadsheet or with an app like Mint or You Need a Budget. These apps are popular with beginners, since they sync all your information into one easy-to-understand graph.

Then, compare your expenses to your income. Are you spending more than you realized on eating out or shopping? Are you saving less than you thought? Use these insights to change your spending.

Save for emergencies

The latest research from shows that only 24% of Americans don’t have an emergency fund – an upward swing from previous years. However, it still means that 57 million Americans don’t have any money tucked away in case of job loss, medical problems and other unexpected emergencies.

A savings account of $1,000 should be sufficient for most expenses including major car repairs, a trip to the ER, or a flight for a last-minute funeral. However, if you’re self-employed, have children or a mortgage, six months worth of of expenses is a better goal.

Learn to invest  

While some Americans are already investing consistently, many are being too conservative with their portfolios. Millennials are especially likely to invest in bonds instead of stocks due to fear and uncertainty.

Unfortunately, investing too conservatively means you’re unlikely to have enough stashed away for retirement. The fact remains: The only way to outpace inflation and grow wealth is to invest in the stock market.

Still worried about losing your shirt? Remember that diversifying your portfolio means it’s highly unlikely you’ll lose everything in one fell swoop.

Start a retirement account

A survey from GoBankingRates found that one in three Americans has no money saved for retirement. With fewer and fewer companies offering pensions to employees, the need to save for retirement has become even more crucial.

If you don’t have a retirement account, ask your HR department if you’re eligible for an employer-sponsored plan like a 401k or 403b. If you aren’t eligible, you can start your own Individual Retirement Account (IRA) with an investment firm or a robo advisor. Try to save between 10-15% of your income for retirement.

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