Organizing your financial life: Beginner’s guide

Last month on our IG Live, Danika and I talked about negotiating job offers, why you should do it, and how to go about it. In case you missed it, you can view it here.

Now that you’ve landed your dream job, advocated for yourself, and got the salary you deserved, what now? First off, way to go. Great job!

Take some time to celebrate your success in a meaningful way and set aside some time to organize your finances. Yup, you read that right, celebrate and finance in the same sentence. 

Getting your financial house in order is an act of self-love. What better way to celebrate than setting yourself up for long-term success? It’s not going to happen overnight. So give yourself some grace, and if you’re reading this, you’ve already made that initial step of seeking guidance. Below, is a 6 step guide to begin organizing your financial life.

How to get started:

Step #1: Know your financial flow

“Budgeting” gets a bad rap, but we think it’s vital whether you’re just scraping by or earning six figures. If you don’t know where your money is going, how can you make the most informed decision with everything else? 

I’m not going to sugarcoat it. Budgeting is a huge challenge for most people. Danika writes about this phenomenon and how to handle cash flow here. You may also find it surprisingly empowering to know exactly where your money is going.

Be kind to yourself. Don’t judge yourself for the financial decisions you may or may not have made. Instead, ask yourself if your past holds you back from building healthy financial habits moving forward? If someone ever does shame you about how you spend your money, especially if it’s a financial professional, it’s time to reassess that relationship.  

Action steps:

Have a recurring money date (alone or with your partner if you have one). Set an hour aside. Pour the tea. Pick out the playlist. Spend time looking over your spending history from the last few months.

Ask yourself these questions:

  • Is there anything you spent money on but don’t enjoy?
  • Is there anything that looks off (i.e. an amount that is too high/low or doesn’t make sense)? 
  • What is one small thing that you can do today to improve my spending picture?

Step #2: Take advantage of your employee benefits

If you’ve just started working at a new company, you’ll be eligible to choose your benefits. However, keep in mind that after the initial 30 days or so, you can’t make any changes until the next enrollment period; pick wisely. 

Action steps: 

Obtain your employee benefits booklet and all necessary information to make an informed decision. Don’t hesitate to reach out to your employer for clarification or seek out professional advice. 

  1. Enroll in the 401(k) and contribute at least as much as the company matches (free money!) One of the fastest ways to build wealth is by taking full advantage of your company’s match. 
    1. If you have a 401(k) from a previous employer, consider consolidating it into the current 401(k). See Step #6. 
  2. Evaluate the health insurance options. If the plan offers an HSA, consider choosing a High Deductible Health plan. Why? Read here
  3. Opt into life insurance, short-term disability (STD), and, most importantly, long-term disability (LTD). 
  4. Check to see what other perks you’re eligible for. Some companies offer access to legal help and even financial planning! Other unique perks we’ve seen include reimbursements for fertility treatment, health club costs, and travel stipends, to name a few. 

Step #3: Build a rainy day fund

Emergency savings is a must-have and is non-negotiable. It can make a big difference in handling life’s unexpected moments without moving further away from your financial goals.  

The rule of thumb is to set aside between 3-6 months worth of living expenses. However, if you’re single, we recommend aiming for the 6-month mark as you don’t have the buffer of a partner’s income. 

You don’t have to fund an emergency reserve all at once. Start putting aside a small amount each month until you hit the target. If you have high-interest debt, you should still fund your emergency savings. The last thing you want to happen is an unexpected expense where you don’t have the cash on hand and have to put it on your credit card, resulting in more debt payments. 

Action steps:

  1. Open a high yield savings account earmarked for emergency savings. Then, start putting aside as much as you’re able to until you hit your target.  
  2. Automate savings. Consider setting up an automatic transfer to the emergency reserve each month.

Step #4: Break the debt cycle

If you have significant credit card debt or other consumer debt, you’ll want to devise a plan for paying it down. There are multiple ways to go about paying off credit card debt. Some key ways include: 

  • Stop using your credit card(s). Shred it if it’s too tempting seeing it in your wallet. Use debit cards for purchases moving forward until you get a handle on your debt. 
  • Come face to face with your debt by making a list of the account(s) that carry a balance. Note the balance, minimum payment, and interest rate. 
  • Look at your budget and determine how much more money you can allocate towards the monthly payments. Ideally, you will pay off anything with high interest as aggressively as possible.

Action steps:

  1. If you carry a credit card balance, stop using your card. 
  2. Make a plan to pay off your high interest debt. If you don’t pay more than the minimum, your debt will only increase. 

Step #5: Set your money intentions

You can afford anything but not everything. Get clear on what you want and why you want it. It’s okay if you don’t know precisely what you want yet. Be flexible and understand that goals change all the time. Values, on the other hand, tend to change less frequently. Start by deciding what truly is essential to you. 

Action steps: 

  1. Write down what your goals are. Be specific and determine whether they are short-term (less than 5 years) or long-term (5 years+) goals. Ask yourself these questions: 
  • What’s important to you? 
  • What do you value?  
  • Where do you want to be in 5-10 years?
  1. Make a plan to invest towards your goals. Whether it’s buying a house, starting a side hustle, or simply growing your net worth, start saving as soon as your emergency reserve is fully funded. 

Step #6: Keep track of your account(s) 

Making sure you know where all your accounts are might be an obvious point. However, life gets busy, and before you know it, thirty years have passed, and you can’t recall where that 401(k) from your first job out of college is, or that you even had one to begin with. If you get into the habit of organizing your finances now, your future self will thank you. 

One easy step you can complete today is to start a finance folder (physically or electronically). Label it however you want; Finances, My Rich Life, Financial Stuff. I labeled mine S.H.I.T.: Salary, Home, Investments, Taxes. The point is to have fun with it. Finances don’t have to be boring unless you want them to be. Store any financially related document in there. Think tax returns, insurance policies, estate documents, budgeting worksheets, etc. 

Action steps:

  1. Set up a secured online folder to store all your financial information.
  2. Know where all your accounts are and make sure you have access to them. I strongly suggest using a password manager like 1Password or LastPass to keep track of login and passwords. 
  3. Consolidate 401(k)s from former jobs into your current 401(k) or a rollover IRA. 

Getting your finances in order is an excellent way to set yourself up for future success.

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