General Philosophy on Finances

From my personal experiences I feel that the most important thing that anyone can do to improve their finances is to create a budget. Most of my friends might have a rough idea of how much they are making and saving, but when I first started writing down all of my expenses I have noticed a few things.

1) I have spent less money in general when I wrote things down
2) I was spending more than I was making even with a pretty high paying job.
3) I visually saw where my money was going.

I feel that everyone should at least spend 30 or so minutes a month and track where all of their expenses have been going.

I have an excel file that i have created which has categories for basic expenses and income, and tells you if you have saved money each month. Let me know and Ill send you a copy.


The next important thing that should be done is to have some type of automatic savings plan where you pay yourself first immediately after you receive your paycheck. A century ago the US government allowed everyone to pay everything they owed in taxes once a year. the government was smart however, and started taking payroll deductions because they know that most people do not budget their money. I feel that everyone should do the same thing and save at least 10% of their income right off the top. Many people end up spending everything they make and then have nothing left at the end of the month. By automatically investing it helps people budget their remaining money. To be honest once I started doing this I havent missed it!


After setting up a budget and automatically saving, it is important to know where to put this money you are paying yourself. Depending on your situation, I feel that in order of importance you should

1) Pay off and high interest credit card debt
2) Build an emergency fund (of at least 3 months) and leave it in a money market account.
3) Invest in a 401k up to the employee match (if available, if not go to #4)
4) Invest in a Roth IRA with low expense index funds.
5) If the Roth is maxed out and there is money left over, save for a house.

In conclusion
1) Make a budget
2) Create an automatic savings plan
3) With the automatic savings plan, pay off credit card debt, invest in a 401k or Roth, save for a house.

If you follow these steps you are well on your way to financial independence.

Many of my future blogs will explain why I believe in these steps.