Personal finance flowchart – the 7 steps to financial success
The Flowchart is divided into 7 phases:
- Budgeting and goal setting. Truly understand your inflows and outflows, and determine what truly want in life? This is critical. See our post on personal finance and investing goals.
- Build an emergency fund. At least 1 month of your salary initially, but ideally 3 months of your salary. Store in a safe, easy-to-access account. Life happens. This is your safety net and it allows you sleep easy at night.
- Retirement accounts. First, make sure you are contributing at all. Make sure you are contributing enough to match any employer contributions. Future you will be glad you started today.
- Pay down any high-interest debt. You cannot take control of your finances and start to invest until you tackle your debt.
- Start saving & investing. Save for short-term goals in easy-to-access savings accounts. Invest for long term goals using a Roth IRA (see our passive investing guide).
- Supercharge your retirement savings. Save more of your pre-tax income. Increase contributions to your 401k or similar.
- Save for other financial goals. Finally, you can work on truly rewarding financial goals. Such as early retirement, college 529 plans for the kids, or the dream vacation home.