If you are new to the world of personal finance, or just have not been able to start down your road to freedom for one reason or another, then today is a great day. Today I have put together my 30 day action plan for beginners. You will not be able to retire in 30 days, but you will be on the right path with an excellent foundation. Let’s get started.
Grab a piece of paper and a pencil. Draw a horizontal line across the center of the page to divide it in two parts. On the top section, write the word “Income” at the top. In this section, begin to write down all of your sources of income and how much they bring in every single month. If your income varies, just put down a conservative estimate of your monthly income from that source.
In the lower half of the page, write the word “Expenses” on the top of this section. Similar to the top, write down all your sources of expenses over an entire month. Be sure to include a portion of your expenses that you may see only once or twice per year. For example, if you pay insurance on your car every 6 months, then divide this number by 6 and include in your Expenses section.
Finally, write the words “Surplus/Deficit” on the bottom line. Now add up all of your Income items, and subtract out your Expense items. Over the next 30 days, you want to make sure that if you are negative, then you are getting into the positive territory. If you are already positive, then continue trying to increase that number over the next month.
Collect all of your account information for your financial accounts. Include login url’s, usernames, passwords, and account numbers. Make sure you include any old retirement accounts, checking accounts, savings accounts, or any other type of account that may hold money of yours, or you may owe money on. Save this information for later.
Open up a Mint.com, YNAB, or Personal Capital account. Start adding in all of your accounts that you rounded up yesterday. For an excellent comparison of the three websites, check out this review.
We’ve already talked about the importance of having an emergency fund, but today you need to start a plan to fund it! Take your monthly expenses found on Day 1 and multiply the total by 6. That is your target number. Figure out your timeline. If you can fund that amount today, then do it! If you need a year, then divide your target number by 12. However, try to get this funded ASAP.
Today email your Human Resources department and find out about your Retirement Benefits offered. Make sure to find out what the employer match is. Also, be sure to get a list of the different funds that you can contribute to.
Open an account following the information from your HR department yesterday. Look for a low-cost index fund or target date fund to put your money in for now. Set your contribution percentage as high as you are comfortable, but AT LEAST the company match. If there is no company match, put at least 5% to get started. Here is a beginner’s guide to 401K’s to help you get started.
A balance sheet shows how much you have in assets, how much you owe, and the difference at a point in time. You can get started by adding up all of your assets including stocks, bonds, mutual funds, cash, property, etc. Next subtract out all of your loans and other liabilities. The difference is your Net Worth. Here is an excel template from the Tennessee Department of Treasury in order to help you get started.
Earlier we discussed 5 debt repayment strategies, and today you’re going to start on the best. In a Debt Avalanche (also known as Debt Stacking), you pay off your loans from highest interest rate to lowest interest rate. Today you’re going to make an additional payment to your highest interest loan that you have.
Health Savings Accounts are available for people with High Deductible Health Insurance. If you fall into this boat, then open up an HSA today! According to The Mad Fientist, HSA’s may be the ultimate retirement account.
Congratulations! You are already one third of the way through the 30 Day Financial Jumpstart. It is important not to get burnt out, so start following me on Instagram @gettingrichyoung for some daily motivation.
Here are a few of the most liked pictures so far!
An Individual Retirement Account is an important step to boost your investments that are in tax-advantaged accounts. Vanguard is my personal favorite mutual fund company. JLC has an excellent write-up on what makes Vanguard so special,
Today it’s time to go through your closets and attics. Find all that stuff that you haven’t used or looked at in more than 6 months, then get rid of it. First sell it. If you can’t sell it, then donate it. Take any money you make from the sales and immediately throw it into your Debt Avalanche. Paring down on your stuff may also save you money according to The Three Thrifty Guys.
Sign onto your account from Day 3 and see where your money has been going so far. You want to start reviewing your spending on a frequent basis to truly understand where your money is going. You can’t plug the holes of your sinking ship if you don’t know where they are!
Now that you have a better idea of where your money is going, start identifying ways that you can cut your costs. Try to strike the right balance of cutting costs to speed up your path to financial freedom, but not cutting joy out of your life. You will need to enjoy yourself on this journey, or you will burn out and fall right back into the pit you were in before. All of your new savings should be put towards paying off your debts, funding your emergency fund, and investing.
Today it is time to figure out how long until you are free. Try using this Networthify early retirement calculator in order to figure out how long before you can retire. Play around with the numbers and understand that your savings rate is the primary factor in determining how long you are chained to your desk.
Start reading blogs and listening to podcasts on the subjects of personal finance and entrepreneurship. By absorbing some new knowledge daily, you will drastically improve your financial intelligence. Today, try reading my post about five unique tips for financial freedom.
Here are some of my favorite blogs and podcasts that I follow.
Mr. Money Mustache | Smart Passive Income | The Mad Fientist | Millenial Moola | Money Manifesto | Stacking Benjamins
Focus on increasing your current income. Bust your butt at your day job and make sure people notice that you are providing a lot of value. Ask for a raise or promotion if you truly deserve it. If you find a way to improve your value to the company, pay raises should follow either directly or indirectly through new opportunities later.
If your career is at a dead end, or if your job simply doesn’t provide enough for you to meet your retirement goals, then make a change. In fact, take a look at changing jobs even if you are content with how much you are making currently. According to Forbes, employees who stay in companies longer than two years get paid 50% less!
Make sure that you have the support of somebody to help you get through the rough times. Let your spouse or family member know that this is where you currently are, and this is where you want to go financially. It will both keep you accountable and they will be willing to take you more seriously if you ever truly need help. They will also be more understanding if you ever start talking about your new minimalist lifestyle trends.
It is important to find your underlying reasons for wanting financial independence and early retirement. Without something driving you and pushing you forward, you may never make it. Worse, you may make it to financial freedom, but have forgotten why you wanted to get there.
Here are a few of my personal reasons for pursuing the dream:
1. Never having to wake up to an alarm clock again
2. Having the time to travel, backpack, and hike as much as I want
3. Being able to spend more time with family and friends
4. Not having to worry about making ends meet
5. Having time to volunteer more in the local community
Stoicism is essentially a philosophy which was popular in Ancient Rome. It emphasizes logic and the practice of eliminating our need for more. Mr Money Mustache has an excellent post on why Stoicism rocks and how it can change your life for the better.
After 3 weeks of lowering your expenses and boosting your savings. It’s time to look into whether you need as much space anymore, or need such an expensive car anymore. You can probably save a ton of money by moving to a smaller house or getting a used car instead of a new one.
Your real hourly wage is calculated by taking your income, subtracting all work related expenses, then dividing by the total number of hours you spend on work related activities. For example. If you make $30,000 per year, spend $5,000 per year on work related expenses (gas, maintenance, lunches that you have to eat out, taxis to get to meetings, work clothes, work vehicles, etc.), and work a total of 10 hours per day (8 hours at the office, 1 hour lunch, 30 minute drive each way). Then you are really making $25,000/yr / (10 hours/day x 250 days/year) = $10 per hour. Here is a WikiHow article to help get you on the right track with this exercise.
Yesterday you learned how much you are making in real dollars per hour. Look at your expenses sheet again and divide every expense by your real hourly wage. Now look over how much everything is costing you in hours. How does that make you feel? How can you reduce your work related expenses even further to boost your real hourly wage?
If you are not exercising regularly, smoking, drinking excessively, and/or not eating a balanced diet, then you are costing yourself a bunch of money down the road. According to this Harvard Business Review article, Johnson and Johnson calculated that wellness programs returned $2.71 for every dollar spent. Start taking your health into your personal finance equation today. Quit an unhealthy habit and start an exercise plan.
How much time are you spending doing unproductive things like watching television? Don’t get me wrong, I still watch TV from time to time, but nowhere close to the average 2.8 hours per day according to The Bureau of Labor Statistics. Try switching some of your time you spend doing things that aren’t helping you get ahead for some activities that improve your skills. As Zig Ziglar once said, “Rich people have small TVs and big libraries, and poor people have small libraries and big TVs.”
If you haven’t already, bookmark these free tools to help you along your journey
Networthify’s Early Retirement Calculator
NY Time’s Rent vs Buy Calculator
FireCalc’s Financial Independence Early Retirement Calculator
After spending the last few weeks working on boosting your current income stream, and looking at a more profitable one, now it is time to examine new streams. Diversifying your income streams is important because it helps you better cope with job loss, recessions, etc. To get started on ideas check out this list of 95 Side Hustle businesses from Side Hustle Nation.
Become an Entrepreneur instead of a Wantrepreneur. Today is your day to start taking action on your brainstorming session from yesterday. Take the first steps towards starting your new side hustle. Every penny you earn is a small step closer towards financial independence.
Congratulations! You have come a long way in the last 30 days and should be proud! Compare your status and plan today with where you were on Day 1. Your expenses should be lower, your investment balances should be higher, you should be creating new streams of income, and you should have a clear plan to financial freedom!