I always love discussing personal finances, and can sometimes get a little nerdy about it. I have to remind myself that not everyone cares as much about the state of his or her finances like I do. However, I had such a discussion at the gym of all places recently and it was fun. One of my gym buddies put it eloquently when he said, “I just need someone to tell me what to do”. Most (if not all) of us reading this article don’t need a financial advisor so outside of that it’s a little tough to get solid advice. So, I thought I’d take a stab at doing so and throw together a “Personal Finance Checklist”. Please note that I’m not a licensed advisor and your situation may differ, but generally these are the steps you should be following:

1) Get a bank account with no annual fees and a savings account that pays more than pennies. There is no reason you should pay a bank any fees. If you currently do, shop around. Either find a way to meet their requirements to opt you out of paying fees (typically by doing direct deposit) or find a new bank. Credit Unions or Online Banks are great options that don’t charge fees. As a bonus, most of those types of banks also pay more in interest…1% vs 0.1%. May not make a huge difference now but why get less when you can get more? 

2) Set up an emergency fund. The absolute first thing you should be doing after step 1 is finished is establish an emergency fund. The question of an emergency occurring is not a matter of if, but when. Whether it’s car troubles, a hospital bill or something more drastic like losing your job, bad things happen to everybody. Ensure that you are prepared. Start with saving $1,000, and then build it up to 3 months of expenses, and then build it up to 6 months of expenses. You’ll sleep a lot better at night and won’t wince every time your boss calls you into their office or say a little prayer when you go to start your car. Put this money in a separate bank account, ideally an online bank like Capital One, American Express or Ally. They a) have no fees and b) pay like 10x more interest than your regular bank does. 

3) Get a budget. Figure out a way to track your income and expenses. It can be something fancy like Mint, EveryDollar, or something simpler like a good old-fashioned Excel sheet. The right budgeting tool is the one that works for you. Update it weekly and stay on top of your spending. And for goodness sake, don’t spend more than you make. 

4) Save for retirement. If your work offers a 401(k) retirement plan, participate in it. I know that there are other expenses and you’ve got dinner plans Friday night or a new shirt to buy but unless you want to work forever, you MUST put away money now. Plus, thanks to the fact that retirement is a long way off, investing a little now will be a LOT later and a little now is better than trying to play catch up later. Investing in a Traditional vs Roth doesn’t make a ton of difference, it’s just a matter of if you think taxes will be more or less when you retire. I personally do about a 50-50 split, just to hedge my bets. Pick a target date retirement fund (i.e. I’ll be looking to retire in 2050 so I picked a 2050 Target Date fund) and put most of your retirement money in it. It’ll adjust over time so you don’t have to worry. Double check to make sure the expense fee isn’t too high, ideally the lower the better (2% is way too much, 1% isn’t ideal but ok if that’s all they offer). Designate a percentage of your paycheck from 1 to 15% and put it all in a target date fund. Then forget about it! 15% is the ideal amount to save, but I realize that’s aggressive. If you can’t do 15%, contribute at least the amount they match (if they match), otherwise you’re just throwing away free money. Then set it to auto-escalate by 1 or 2% each year. The more things you can put on autopilot the better! 

5) Figure out a plan to pay off debt. Debt is a reality for basically every young professional, and one way or another, we’re going to have to pay it off. Come up with a plan to pay more than the minimum each month and get as aggressive as you can with paying it off. It’s a great feeling being debt free, and there’s so much you can do with money you’re not paying back to someone else. Now I’m not saying sacrifice everything and get debt free in the next year (although if that’s you, go for it), but adopt a mindset of trying to get out of debt. 

6) Aim to follow the 75% rule. Try to set yourself in a situation where you spend 75% of your paycheck and then save/invest/give away 25%. Life isn’t easy and it’s certainly not cheap, so try as best you can to limit it to 75%. For the other 25%, hopefully you’re getting closer to 15% retirement, and then building up your savings account and maybe even doing some index fund investing. Also, consider giving away some of your money, whether it’s to your local church or your favorite charity. Recognize how blessed you are and consider giving some to those who are less fortunate. 

7) Save for your big goals. Learn to set goals and take steps to achieve them. Perhaps you want to go back to grad school and do so without paying for all of it with student loans. Maybe you’d like to buy a house and you’re hoping to have a down payment ready. Whatever your goal, take steps (i.e. SAVE) to achieve it. Maybe consider opening a separate savings account, so you’re not tempted to spend it and also can get motivated by seeing it grow. Commit to a goal of a certain amount and set up an auto-transfer to move the money into that account. 

8) Rinse and repeat. If you’ve made it to step #8 congrats! I’d say you’ve graduate from the JV team to the Varsity squad of personal finance. At this point, you’re financially sound, have goals and are working towards them. Now you can start doing big boy or big girl things, like opening a Roth IRA (individual retirement account) and saving more for retirement. You could also look into purchasing a rental property, or continuing to grow you investment in an index fund. Celebrate where you’re at and keep full steam ahead! 

The journey to financial freedom and stability isn’t an easy one. There will be distractions and setbacks along the journey. Success doesn’t come by not failing, but by the perseverance to try again. Stick with it and realize it’s a marathon, not a sprint!

I hope you enjoyed this post! If you’re curious to learn more, I’ve written a lengthier guide with more information at each step, as well as more stages that a young professional can find themself in. Check out the full guide, “The Personal Finance Checklist” and the first 50 purchases that use code “ymfguides” get a 50% discount.