Welcome to your financial awakening! You’ve been here before, I know—reading about the importance of budgets, saving, and investing. But today is different. Today, we’re not just talking about what financial literacy is; we’re diving into how to actually make it work for you. This isn’t just another guide that leaves you wondering how this advice applies to your life; it’s your ACTION PLAN to finally implement these principles successfully.
1. Budgeting: The Heartbeat of Your Finances
Standard Advice: A budget is essential. You need to track your income and expenses to stay on top of your finances.
Make it Work: Yes creating a budget is crucial. Faithfully implementing your budget is the real key to getting results. Create a budgeting routine that fits your lifestyle. Whether it’s a weekly check-in or a daily log, consistency is your best friend. Use apps or a simple spreadsheet, but commit to reviewing and adjusting it regularly. Think of your budget as a living document, reflecting your evolving priorities and goals.
Get Started: Set aside 30 minutes every Sunday evening to review your spending. Identify one area to improve each week, and celebrate small wins.
2. Saving: Your Safety Net and Launchpad
Standard Advice: An emergency fund and savings for future goals are crucial.
Make it Work: Automate your savings to make it foolproof. Out of sight, out of mind. Start with small, manageable amounts and gradually increase them.
Your first goal is to save $1000-2000 for an emergency fund. Did you know, 57% of American women do not have any emergency savings?
Then work on saving 3-6 months of living expenses. Once you have those safety nets in place, you can direct your savings to long-term goals and dreams by investing. Eventually, you want to be able to save 20% or more of your earnings. Sounds daunting I know. First, you have to pay off your debt and then you will be surprised at how much money you can redirect to savings and investing.
Get Started: The quickest way to build your emergency fund is to sell stuff around your house or do some short-term work to make extra money. What can you put on Facebook Marketplace or Craigslist today? Can you take on an extra project or hours at your job and get paid extra? Can you do a side hustle like Uber Eats, Instatcart, or even good old-fashioned babysitting?
Research high-interest savings accounts to park your money in. Since this is your emergency fund, you want it to be fairly easy to access if you have a true emergency. The intent is to make saving a habit, not a chore.
Once you have your emergency fund in place, set up an automatic transfer to your savings account right after payday. Even $25 per check can build your safety net over time and give you a psychological win. Now you have a new identity; you are a saver.
3. Debt Management: Taking Control
Standard Advice: Managing debt is crucial to financial health.
Make it Work: Develop a clear, realistic plan to tackle debt. Use methods like the snowball or avalanche method and stick to it until your debt is paid. You have to develop strategies to not run them up again. You can no longer use your credit card as your emergency fund. It’s not just about paying off debt but changing your relationship with it.
Get Started: List all your debts and choose a repayment strategy. I recommend the snowball method. You pay the debts in order of smallest balance to highest balance. Pay off the smallest balance first and then add that payment to the next debt. Continue until everything is paid. This method gives you quick wins so you see progress and are more motivated to stick with it when times get rough. Track your progress and stay motivated. You will pay off seemingly insurmountable amounts of debt!
4. Investing: Growing Your Wealth
Standard Advice: Investing is necessary for long-term financial growth.
Make it Work: First, make sure you maximize your retirement contributions at work. This means if your company has a matching contribution, you are getting the full match you are entitled to. Make sure you understand the tax implications of your choices. If you don’t, talk to your tax advisor or a financial planning professional. Many workplaces provide some resources as part of your retirement investment benefits.
After you have paid off your debt and your retirement accounts are fully funded, your next step is deciding where to put your long-term savings. You are still saving; your money is just being redirected from a savings account to an investment account. This is the money that will fund your long-term dreams.
An easy place to begin is with simple, low-cost index funds or ETFs. Vanguard and Fidelity are both popular and easy-to-use providers. The beauty of this type of investing is that you don’t have to have a lot of knowledge to start.
The key to this type of investing is consistency and time. Invest on a regular schedule, such as monthly, and leave your money in whatever fund you select. This saves you from having to guess when the perfect time is to invest in the market and do a bunch of analysis to pick the perfect stocks.
Understand your risk tolerance and start with what you’re comfortable with. Don’t get bogged down by complexity.
Get Started: Open a brokerage account and start with a small amount, like $100. Choose a diversified index fund and invest a set amount each month. The key is to start, learn, and adjust as you go.
5. Strategic Financial Planning: Affording Your Dreams
Standard Advice: Long-term financial planning is essential to achieve your goals.
Make it Work: Align your financial plan with your personal dreams and aspirations. It’s not just about numbers; it’s about creating a roadmap to fund your dreams. Break down your big goals into manageable milestones and integrate them into your budget and saving plans.
This is about your dreams and what you want. It can be big or small-it’s totally up to you. There is no right or wrong answer.
Here are some examples to get you thinking.
- Susan wants to retire to Spain. She went back to a well-paying job she didn’t like in order to accelerate her plan. Short-term pain for her long-term gain. She has calculated only 5 more years until she tells her employer Adios for good! She’s already started Spanish lessons.
- Ellie wants to pay off $32,000 of credit card debt in one year so she can afford to leave her job and open her own business. She cashed in some savings to give her a head start. She has formulated a bare-bones budget and cut the cable (among other things) to make it happen. She knows how much she has to pay each month to meet her goal.
- Cheryl is ready to retire but she can’t afford to because of her house payment. Now that she’s an empty nester, she wants to rent out her daughter’s old bedroom to make extra money. She still can’t retire just yet but she can step down to a part-time position and cut her work hours. She’s meeting her short-term summer goal too-more time to spend at the pool!
Get Started: Identify one dream you’ve put on hold because of other responsibilities or because you think you can’t afford it. Break it down into smaller, actionable steps. Figure out what you would need to finance your dream.
Decide how you will afford your dream and contribute that amount regularly to a dedicated savings fund for this dream and contribute to it regularly.
6. Financial Mindset: The Secret Ingredient
Standard Advice: A positive mindset impacts your financial decisions
Make it Work: . Traditional investing tends to gloss over the psychological aspects of money management. Understanding the underlying mindset that drives these behaviors is often overlooked.
Regularly engage in practices that foster a healthy money mindset. This includes setting clear goals, reframing negative beliefs, practicing gratitude for what you have, and visualizing success.
By integrating a strong financial mindset with practical financial skills, you set the stage for lasting financial well-being. It’s not just about knowing what to do; it’s about believing in yourself and your ability to make it happen.
Make It Happen
Get Started: Start each day with positive self-talk about your money beliefs and skills.
Some examples are:
“I make informed and thoughtful financial decisions.”
“I am in control of my finances and my future.”
“I am confident in my ability to manage my money wisely.”
“I deserve to be financially successful and secure.”
“Every day, I am becoming more financially savvy and empowered.”
You want statements that are specific, believable, and stated in the present tense. Incorporate these affirmations into your day to help develop and reinforce your positive money mindset. Reflect on your progress and adjust your mindset practices as needed.
Your Comprehensive Action Plan:
- Set Up Your Routine: Choose a consistent time each week for financial review.
- Automate Savings: Make it effortless and consistent.
- Start Investing: Begin small and grow with confidence.
- Tackle Debt: Create a realistic plan and follow through.
- Plan Strategically: Align your finances with your dreams and take actionable steps towards achieving them.
- Cultivate Mindset: Integrate daily affirmations and regular reflections.
Conclusion: Your Journey to Financial Freedom
Financial literacy isn’t just knowledge; it’s the implementation that transforms lives. This journey is about creating habits that align with your values and goals. It’s time to take the familiar principles and turn them into powerful, life-changing actions.
You have the knowledge. Now, let’s turn it into wisdom through consistent, deliberate action. Your financial freedom is within reach—embrace it, live it, and celebrate every step forward.
