Whether you are dealing with massive debt or merely trying to make ends meet, proper money management can be overwhelming. That feeling of drowning? That’s normal. But financial freedom and control is not something achieved in a day. It is a journey that requires time, effort, and commitment.
I like to think of financial freedom as the final reward at the end of an open-world video game.
- First, you have to gather information. This is the part of the game where a bunch of non-player characters (NPCs) tell you about the world. You are also tossed into the occasional mini-battle to learn how to use the controls. At level one in the game of personal finance, you build your knowledge and tool inventory by:
- Tracking your monthly income and expenses.
- Listing your current savings, real estate, and retirement assets.
- Calculate your debt, including credit cards, mortgage, student loans, and any other loans.
- Pull your credit report by using a free service like com
- Create a household budget.
WARNING! Avoid traveling into areas of the world map that are beyond your level. There are a lot of financial wellness sites and blogs that will start talking about ways to increase your income, investing in stocks, life insurance, and more. The creatures here are designed for those at a higher level. Frustration and character death may ensue.
- Collect side quests. These are the small tasks you need to perform to gain experience and levels to tackle the more significant parts of your journey. Personal finance side quests are usually about discovering new ways to cut costs or do things you love more frugally. Bigger side quests might be consolidating your student loan debt, transfer credit card debt for a lower interest rate. Smaller quests could involve making weekly meal plans, brewing your coffee at home more often, or trying to buy used items more often.
- Embark upon your quest, one journal entry at a time. While everyone will tackle the main storyline a little differently, the primary goals remain the same.
- Build an emergency fund of at least $1,000.
- Pay off debt (save your mortgage for later). Strategies for this include paying smallest to largest by dollar amount or largest to smallest by interest rate.
- Build your emergency savings to cover three-to-six months of expenses.
- Create a strategy to meet your retirement goals.
My personal finance journey might run into some murky woods or include more mid-bosses than yours. The occasional misstep might mean I lose some inventory or knock me down a level. But it’s a game we can win if we set our minds to it. So, what are you waiting for? Those monsters aren’t going to slay themselves.