A close friend recently asked me for financial advice. I was a bit hesitant, as I’m not a financial services professional – whether it be investing, taxes, etc.
However, my friend wanted to know some general, basic items – things to consider for getting started and further organized. Here are a few basic things I shared.
Where Are You At?
You don’t need to tell me this. What does this mean for you?
- It might be your net worth (which is your assets minus your liabilities)
- It could be your cash flow (which is your income minus your expenses)
Both are important, but I like to focus on cash flow.
Why? It’s hard to accumulate income-producing assets (things that put money into your pocket – vs. liabilities that take money out) without having excess cash.
This doesn’t have to be a large amount. $1 will do it as a starting point.
Investing aside, it’s helpful to even just save up for something fun like a vacation or a new gadget.
How Do You Find Where You’re Going?
You could manually list out all your assets, liabilities, income, and expenses.
That works for some – not for me. I use a free app/site called Personal Capital.
It’s kind of like Mint.com – you automatically link your various accounts for READ-ONLY access into one location.
I like Personal Capital much than Mint better because it’s:
- (a) less focused on budgets (which I hate); and,
- (b) offers better investment and overall features.
Tracking each dollar spent is not a lot of fun;
I think it’s a waste of time and not worth the stress.
However, the benefit of passively tracking your cash flow, income, and expenses is that it provides insights to enable small but powerful changes.
Where Do You Want to Go?
This could be your needs and wants. A few examples:
- Vacations/trips you’d like to take
- College savings
- Retirement savings
- Down payment for a house or car
Other considerations are insurance (defensive related).
Related: DEFENSE Wins Championships: Insurance
Random Cliche Cliches
Some of these sound stupid. At times, I think many of them are stupid but they work.
- Spend on and save/invest for things you love
- Reduce/eliminate spending things you hate
- Automate where possible; set and forget but validate
- Learn the basics as a foundation and move on
- Baby Steps (a bit of Dave Ramsey here) – focus on one or two areas at a time
Related: Orangetheory Fitness: Why I Spend $2,148 A Year
Wrapping It Up
Sure, you need to know a little about what to do,
but how many people do you know actually do it (whatever it might be)?
Small, consistent gains are key.
And I have no idea why I double-guessed sharing this general, but (hopefully) helpful, advice to my friend.
Readers, how are you attempting to focus on what’s important to you? Where are you trying to get to financially, physically, and emotionally? Any suggestions to consider?
Related:
Our favorite free financial tool is Personal Capital. We use it to track our net worth, manage our spending & savings, and to monitor our investments. It’s simple and free to use.
