Author Topic: Goals for getting ahead  (Read 2013 times)

Offline Joel

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Goals for getting ahead
« on: November 02, 2016, 02:07:28 PM »
There are several steps I made to transition from struggling paycheck-to-paycheck to living with financial bliss. I'm going to attempt to spell them out here.

My 8 steps:

1. Pay off all high-interest debt (credit cards and loans). Consider paying off all debt (student loans and mortgage) depending on interest rates.
2. Having cash-on-hand before I make any credit card purchases
3. Marking income for next month (buffer)
4. Preparing for rainy day expenses (maintenance for cars and house, insurance deductibles, medical emergencies, technology replacement)
5. Building an emergency fund (3-6 months is preferred)
6. Save up annually to pay insurance in full and avoid monthly payment fees
7. Save for new car replacement in order to pay cash for next new car
8. Contribute the maximum amount possible to available retirement accounts (401k, IRA, and HSA)
Biking and budgeting my way to early retirement!

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Offline John

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Re: Goals for getting ahead
« Reply #1 on: December 22, 2016, 08:08:55 AM »
Usually I try to follow a similar method when receiving a paycheck. Only after the will to reduce spending to less than income are you truly going to get ahead. For most this may take some time depending on your situation.

1. Pay necessary utilities (things needed to survive - rent, food, electricity) * Careful not to include wants
2. Pay x% to debt (how much depends on your income and your debt level)
3. Pay x% to savings (even if its $1)
4. Pay unnecessary utilities (Netflix, gym membership, etc)

If you can make it to Step 4 with your paycheck and still have a few dollars left over, you are ahead of the game. Its only amount of time before you start shifting more of your money from #2 to #3. #3 is a key to getting ahead. If you start shifting your money from #2 to #4, then you'll never be ready for those "emergencies".

My goal was to eliminate #2 or at least get to where it was PIF. Once I fulfilled my saving requirements for #3, I was able to enjoy the added niceties of #4.