I do a lot of searching on Google to find inspiration, motivation, and direction. Of course, there’s a lot of virtual baloney out there so I try to be discerning.
But, when I come across a post from another blogger who I trust, I always click. In fact, that’s one of the well-known “keys” to success – find someone else who’s already done it, then do what they do.
The other day I found a financial checklist on Budgets Are Sexy, which he actually got from Personal Finance Junkie. Although it was originally written as a list of goals to achieve by the time you’re 40, we all know it’s never too late to start!
Every goal on the list is definitely a great step towards financial freedom, so I was inspired to reflect on which steps I’ve already completed and how much farther I need to go.
According to Personal Finance Junkie, these are the 15 things you need to do to reach financial freedom:
1. Build A Starter Emergency Fund Of $1,000
Okay, admittedly we didn’t “build” our emergency fund. We sold our home in Las Vegas back in 2014 and still have a good chunk left from the sale proceeds.
This goal is not #1 on the list by chance. Having a small emergency fund is of utmost importance when building financial security. Not only does it provide a little piece of mind, but it gives you a safety net as you funnel every penny left over after expenses into your debt.
2. Organize Your Important Financial Documents
When I was working on our monthly budget system I started putting together a binder with all of our financial documents. These include our budget worksheet, debt paydown spreadsheet, statements for credit cards, 401K, and insurance, and our financial goals. I still have a few things to add, but I’m almost done with this one!
3. Develop A Monthly Budget Habit
We’ve been on a budget for several months now, and it’s gotten easier since I started budgeting off of our previous month’s income.
4. Pay Off All Of Your Debt
This one will take a while, *especially* if it’s referring to a mortgage too! Right now I’m focusing on credit card debt, then I’ll chip away at my student loans. We have a mountain of medical bills, but since those don’t charge interest I just pay the minimum every month from our HSA card.
5. Build A Mid-Level Emergency Fund Of $10,000
Again, we didn’t “build” our emergency fund, but we were fortunate to have a significant amount left over after we sold our Vegas home. Unfortunately, we have not been wise in maximizing these funds. In fact, I’m ashamed of how much we’ve squandered just on regular living expenses. Now that our budget is in full swing, my goal is to not touch any of that money unless it’s truly an emergency!
6. Cut Your Expenses Mercilessly
You can read my post here about how I reduced our monthly expenses by over $1,000. I feel like this one deserves a “completed” status – but in reality, I’m always trying to cut our spending in any way possible.
7. Track Your Net Worth
A few months back I created a spreadsheet to start tracking our net worth. If you don’t know what net worth is, basically you add up all your assets then subtract all your liabilities, and what’s left is your net worth.
I never actually completed the spreadsheet with updated information. Of course, every month it changes, so I need to go back and enter all of the recent numbers. It’s a metric I’d like to track every month.
8. Earn Extra Income
I do consider my substitute teaching pay “extra income” because we’ve always lived just off of my husband’s salary. But I’m also working on implementing other streams of income to supplement what we already make. I already use Pinecone Research to complete surveys, and I’ve signed up with Amazon Flex delivery, Bestmark mystery shopping, and Rev transcription.
There are a lot of side gig opportunities to increase your cash flow. However, I want to make sure that I’m exchanging my time for the highest rate I can get. My “dream” side hustle is writing for other blogs, so I’ve been researching different ways and opportunities to do that as well!
9. Read The Top Personal Finance Books
If you do a search for “top personal finance books”, you’ll get a lot of opinions from different bloggers.
Some that are on just about every list are:
- Think and Grow Rich by Napoleon Hill
- The Millionaire Next Door by Thomas J. Stanley
- Total Money Makeover by Dave Ramsey
- Rich Dad Poor Dad by Robert Kiyosaki
- The Automatic Millionaire by David Bach
- Your Money or Your Life by Dominguez, Tilfor, and Robin
So far this year I’ve read a few personal finance books, including Unshakeable by Tony Robbins and Your Money Ratios by Charles Farrell.
I just ordered two more from Amazon that I’m going to read next (the last one on the list above, and Financial Freedom by Grant Sabatier). I’ll be leaving reviews of both books on the blog.
10. Automate Your Savings
The only personal savings we automate is called “eSavings” through our bank. With every debit card transaction, our bank rounds up to the next dollar then transfers the difference automatically to our savings account. It adds up to about $100 month. I may change our preferences so a certain dollar amount is transferred instead of just a few cents per transaction.
And then there’s our Health Savings Account, which has been a lifesaver for our medical bills. We have $100 deducted (pre-tax) from my husband’s paycheck each week, and then his company contributes another $15. This gives us an automatic $460 to put towards our mountain of medical bills every month. However, we really need to increase this amount. Otherwise, we’ll be paying off the balance for years!
Because we have a fairly good cushion in our savings, automating more hasn’t been a big priority. Right now I’m focused on the debt, and once that is tackled then I’ll increase our savings rate.
11. Automate Your Bills and Other Expenses
I receive every credit card, loan, and utility bill through email. As soon as I see it in my inbox, I move it to a “Bills” folder so it doesn’t get lost in the shuffle.
At the beginning of every month I check the folder for what bills are due, then schedule them to be paid through my bank’s billpay website. Then, I move the email bill to the “Bills Paid” folder, and enter the transaction in my online checkbook register.
This system has worked very well for me for a long time, and I never miss a due date!
12. Set Your Investments On Auto-Pilot
We do automatically contribute to our 401K with every paycheck. Right now, our contribution rate is 10%, and my husband’s company throws in 3%, so the total going into our 401K every week is 13% of his pre-tax income.
We also have a 529 college savings plan, which we give $100 a month to via auto-pay.
This is a good start, but I also want to start investing in an IRA and eventually mutual and/or index funds. So, even though I’ve given this one a “completed” status (because we *are* automating the investments we have), we still have work to do to build our portfolio.
13. Write A 5-Year Financial Plan
Haven’t started 🙁
This goal has been in the back of my mind for some time. I think what’s holding me back is thinking that far ahead. I’m terrible at making decisions anyway, but especially so far in advance. (Five years?? I might be a grandma in five years!!)
Another barrier is not being comfortable dreaming big. Like most people, I “need” to know everything before I jump in. This is a big mistake, and I’m working on changing my mindset.
All I really need to know is my next ONE thing to move forward – and have faith in knowing that a bunch of small ONE things will eventually result in achieving a huge goal – even a 5-year goal!
14. Max Out Your Retirement Accounts Every Year
Haven’t started 🙁
Dave Ramsey highly recommends that you should stop any payments to a retirement account until you’re out of debt. I may have done that in my 20s or 30s, but we’re too close to retirement age to not be building a nest egg.
However, I don’t feel we should be maximizing our 401K until we’ve crushed our debt.
Maxing our 401K contributions would mean putting in $500 more a month – which, for now, is better spent on credit cards.
15. Complete Your 6-month Emergency Fund
An emergency fund is supposed to be used for times of financial crisis – which means you are living on only necessary expenses.
For my husband and I, I would estimate this to be approximately $5K/month. For a 6-month cushion, we’d need $30,000 in savings.
Right now we are about halfway there. Once we crush our debt (not including the mortgage) and maximize our investments, we’ll start building this up to reach that 6-month mark.
Tag, You’re It!
How many of these goals have you reached? How many are in progress, and which ones have you not even touched yet?
This isn’t an exercise in figuring out where you’re failing! Don’t get down on yourself if you’re not as far as you’d like to be.
The important thing is to start being purposeful about your financial goals – whether they’re on this list or not. This means writing them down, planning them out, and carrying through.
Start with building a $1,000 emergency fund, then develop a budget habit and start paying off your debt. Read a few books to learn how to manage your money better. If you’re not investing, start with contributing just 3% and then slowly start increasing it.
Financial freedom is possible, even if you’ve waited until your 50s to get started!