Standard financial advice applies: reduce expenses, increase income, avoid debt, work harder, watch the budget.
*I am not a financial professional. I am not a financial wizard. Here’s what I’ve done (or what I’m still doing) for my own financial well-being. Feel free to play along at home, (at your own risk)…
You Need A Budget (YNAB)
You Need A Budget is a method with four rules for managing your finances. It’s also an app. I initially purchased the app to solve a communication problem: I wanted an app that would allow my wife and I to have a central location to track our income and spending. The YNAB method completely changed the way that I think about money. I haven’t yet upgraded to their software-as-a-service offering yet, but I’m sure I’ll be doing that in the future. Since I’ve purchased it, they’ve also come out with a book: You Need a Budget: The Proven System for Breaking the Paycheck-to-Paycheck Cycle, Getting Out of Debt, and Living the Life You Want.
Get out of debt! Follow Dave Ramsey’s 7 Baby Steps (at least in part) and work on getting out of debt using his debt snowball plan. I modified the baby steps with the rules from YNAB, as they seemed to make sense. I also used a slightly modified version of Dave Ramsey’s Debt Snowball Plan.
- How to Get Out of Debt Using a Debt Snowball
- How to Get Out of Debt With the Debt Snowball Plan
- Financial Mentor’s Debt Snowball Calculator
Scott Adams’ Financial Advice
Because you should be taking financial advice from a man who draws funny pictures for a living, here’s one page of advice from his book Dilbert and the Way of the Weasel:
- Make a will.
- Pay off your credit cards.
- Get term life insurance if you have a family to support.
- Fund your 401k to the maximum.
- Fund your IRA to the maximum.
- Buy a house if you want to live in a house and can afford it.
- Put six months worth of expenses in a money-market account.
- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement.
- If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio.
It seems to be straight forward no-nonsense advice. Some of it is easier said than done. Your mileage may vary.
Warren Buffett Investing Advice
If you don’t trust investment advice from a man who draws funny pictures for a living, why not take investment advice from Warren Buffet? Every year I see some variation of the following article: Warren Buffett says index funds make the best retirement sense ‘practically all the time’. I still consider the stock market just slightly more reliable than gambling but a Vanguard S&P 500 Index Fund seems to be a low cost and relatively safe way to invest in the stock market.
Mr. Money Mustache
In 1997 a man began saving as much money as he could every year, reduced his expenses as much as he could without feeling deprived — all while raising a family — and in 10 years he effectively retired. The actual term is: became financially independent. Mr. Money Mustache still works, but not because he needs to, which to me is the very definition of being financially independent.
Check out some of these articles that I think serve as a great introduction to his philosophy:
- Getting Rich: from Zero to Hero in One Blog Post
- A Brief History of the ‘Stash: How we Saved from Zero to Retirement in Nine Years
- News Flash: Your Debt is an Emergency!!
- My Deprived Life: Raising a Family on Under $27,000 per Year
- The True Cost of CommutingA slick infographic on Lifehacker: The True Cost of Commuting: You Could Buy a House Priced $15,900 More for Each Mile You Move Closer to Work
- The Shockingly Simple Math Behind Early Retirement
- The 4% Rule: The Easy Answer to “How Much Do I Need for Retirement?”
Full disclosure: I’m still not fully out of debt, but I’m much more comfortable than I used to be. This information presented here is all about you taking control of your finances. But *don’t take my advice. I can only tell you what I’ve chosen to do. Your circumstances are probably much different than mine. Do some research on your own and choose the path that you are most comfortable with. And I really would like to hear about it in the comments.