When it comes to money, debt, budgeting and investing, it can be hard to know where to start. The path to financial success is different for everyone, and it can even mean different things to different people.
For you, financial success might mean having a lot of money in your savings that you can leave to your children and grandchildren. For someone else, financial success may mean being able to book flights as often as they want. And there is no right or wrong answer.
But it is important to understand your money and know what goals are important for you, so that you can set yourself up for financial success as you move through this expensive life.
Below, financial professionals share their top tips.
Get your finances organised
“So, I think the first thing, and the biggest one I would say, is to get organised,” said Kimberly Palmer, a personal finance expert at NerdWallet. “I think that just making sure you’re organised with your finances is really the first step toward taking control of your spending and your saving.”
Finances can have many moving parts: Some bills come through the mail, others come via email, and other payments are just directly taken out of your bank account.
Palmer said you want to make sure you’re keeping track of all of the different moving financial pieces and that you have a system that works for you.
“For some people that means uploading everything into a spreadsheet or using an app that helps you track your spending, but however you choose to do it, whatever method you use, I think the biggest, most important thing is to get organised with your finances,” she added.
Align your financial goals with your values
Gaby Rincón, a personal finance coach and the founder of Realistic Personal Finance in Los Angeles, said it’s important to make sure your finances line up with your goals and values.
So, if you want to retire early, you should make sure your financial decisions reflect that goal. Or, if you want to travel more, you should keep that in mind when deciding what to spend money on.
“My point in this is that getting your money in order, it doesn’t have to be a negative, or it doesn’t have to be deficit-based,” Rincón said. In other words, just because you create a budget doesn’t mean you can’t budget for the things you love, like fancy massages or trips to visit family.
Instead, as you meet your financial targets, you can know you’re working toward what you want and making decisions you can actually afford.
Don’t try to “keep up with the Joneses”
“What I encounter the most is this... unspoken desire to keep up with the Joneses,” said Garrett Prom, the founder of Prominent Financial Planning in Texas. “I have way too many people coming to me that are spending way too much money on things that aren’t bringing them joy in their lives.”
This could mean purchasing a house you can’t afford just because your friends are buying big homes, or getting a car that’s technically out of your budget just so you look “cool” as you drive down the street.
“My number one piece of advice is... don’t try to keep up with the Joneses. Live within your means. Make sure that you’re saving and investing for your future,” Prom said.
Instead, focus on purchasing items you can afford, not on products that are the latest “it” thing.
Create an emergency fund — and you can start small
According to the experts, it’s a good idea to create an emergency fund.
“I think having an emergency fund is just so crucial to helping you get through any sort of difficult time, like an unexpected expense, but also something bigger like a job loss,” Palmer said.
Additionally, if you have an emergency fund, an unexpected expense won’t derail your larger financial goals, said Ashira Nelson, an accountant and finance activist in Ohio.
How much you put in your emergency fund depends on what you’re able to comfortably save. So, no, you do not need to follow the old-school advice of having three to six months saved. While that’s a great thing if you’re able, it’s also unattainable for many folks.
“It’s more than OK to start with a smaller goal — maybe it’s $500. It could be more, it could be less,” Palmer said.
Whatever amount you choose to save can help you get through challenges without having to rely on something like a high-interest credit card, she added, which ends up costing you money in the end.
Look into opening a high-yield savings account
Palmer said you can consider storing your emergency fund in a high-yield savings account.
High-yield savings accounts typically have higher interest rates than traditional savings accounts, which allows your money to make more money via interest. It’s important to know that the yield rates on these accounts are constantly fluctuating due to market conditions, she noted.
“They can earn [around] 3% [annual percentage yield]. By comparison, the national savings average is 0.37% APY,” according to NerdWallet.
You can open a high-yield savings account through banks like Ally, Marcus by Goldman Sachs or Citizens Bank — a Google search will bring up more options, too.
Plus, it’s doubly beneficial to open one of these accounts in the current climate.
“Right now, of course, we’re in an environment where rates have been going higher, so it’s easier to earn some interest on your savings,” Palmer said.
Stay away from shame-based finance advice
“It’s difficult to talk about money in general,” Rincón said. “We’re kind of taught, ‘Don’t talk about it. It’s awkward,’ right?”
This means we often don’t ask questions that are necessary for financial growth or end up in personal finance spaces that rely on shame to get a point across.
Think about it: You’ve probably heard someone say, “Why don’t you have more investments?” or “Why do you still have debt?” Phrases like these involve a lot of shame, Rincón said.
“Absolutely stay away from that because you’ll start to associate [money] with negative feelings and then tend to shut down or give up,” she added.
Any step toward your financial goals is progress; you don’t have to be doing everything at once.
Focus on paying off high-interest debt
If you have debt — particularly credit card debt or other forms of high-interest debt — think about ways you can pay it off, Nelson said.
“I would list everything out, all of your debt, list out everything then put it in order from highest interest rate and go down your list and attack it,” Nelson added.
Starting with your highest-interest debt ― known as the avalanche method ― is important because that’s the debt that is costing you the most money each month, she noted.
Nelson said you can also allot any extra money to your debt each month, which is something she did to pay off $50,000 of debt in 3 years.
“I am so passionate about people paying off their debt,” Nelson said, “I don’t want that heavy burden weighing me down for the rest of my life. I believe in putting a plan in place and [destroying] your debt.”
Track your spending
According to Palmer, tracking your spending is a great way to get insight into your cash flow and where your money is going.
“It can also really open our eyes to when we have recurring expenses that we either forgot about or just don’t even really need anymore,” she said.
You can commit to a month of spending tracking to see your money patterns and obligations, and you can do this in whatever way is best for you.
You can try a Google spreadsheet (which is what Palmer and her husband use), an Excel doc or try out a budgeting app that automatically tracks your spending.
You can even just write down your daily expenses in a journal or check with your financial institution to see if they have any tools available, she added.
“It’s just important to make sure you know where your money is going. And I think that fits into the bigger picture too, of just feeling organized about your finances,” Palmer said.
Consult books, podcasts and experts for additional advice
“The best way to expand someone’s knowledge is to read, read, read,” Nelson said. “When I was trying to improve my financial knowledge, that is the one thing I did nonstop.”
Rincón agreed and said you can get books on personal finance from your local library (which, bonus, is free) or turn to social media where finance professionals post tips and share their must-read books or must-listen-to podcasts.
Specifically, Prom recommends “The Psychology of Money” by Morgan Houser, and Rincón recommends “Get Good with Money” by Tiffany “the Budgetnista” Aliche, “The Richest Man In Babylon” by George S. Clason and “Financial Feminist” by Tori Dunlap.
If you want more advice or tips customised to your situation, Nelson said you can go to an advisor or money coach for additional guidance; being armed with baseline financial knowledge is still beneficial as you embark on your finance journey.