Let’s face it: Paying down debt, budgeting and planning for retirement can feel like a chore. And without the resources or know-how, the mere anticipation of financial planning can often be more painful than simply sitting down and checking those tasks off your list.
But with the right tools and resources, managing your finances can actually be painless. Here’s how to get started tackling basic financial tasks, even if you’d rather be doing literally anything else.
How Can I Make a Budget?
There are many different types of budgets, but all of them help you track how much money you have going in and out. Over time, budgeting can transform your financial life by helping you align your saving and spending habits with your priorities and goals.
For technology-savvy folks, budgeting apps like Mint and You Need a Budget allow you to designate different spending categories and link directly to your bank account to automatically track spending and monitor progress by category from the convenience of a smartphone. These apps often include a financial literacy component to boost your knowledge while you go.
If you’re not interested in linking your bank to a new app, old-fashioned spreadsheets, worksheets or handwritten ledgers are equally effective budgeting tools. You may find that you’re more likely to hold yourself accountable when manually noting each inflow and outflow.
How Can I Pay Off Debt?
Paying off debt—whether it’s student loans, credit cards or a mortgage—is one of the most daunting financial tasks. But it doesn’t have to be, even if you have multiple debts. Consider these strategies:
● Pay off high-interest debt first. The longer a balance accrues interest, the more you’ll pay over time, but the highest-interest loans will be the most expensive.
● Consolidate debt. By combining multiple old loans into a single new one, ideally at a lower interest rate, you’ll make payments more manageable or the payoff period shorter.
● Use the snowball method. This tried-and-true method means you pay debts in order from smallest to largest. With the avalanche method, you wipe out the largest debt first. Either approach can help you build momentum, create a payment structure and provide a sense of accomplishment.
Remember, not all debt is bad. Taking on some debt can help you build a credit history, which you’ll need if you want to take out a mortgage to buy a home down the line.
How Can I Build an Emergency Fund?
Emergencies happen. You or someone you know has probably been laid off or hit with an unexpected medical bill within the last year. That can hurt your overall financial health if you don’t have money saved for a rainy day—in fact, only 41% of Americans have enough money put away to handle a $1,000 emergency, according to data from Bankrate.
Financial experts say you should have about three to six months’ worth of living expenses in your emergency fund. If that sounds like a lot, don’t worry—here’s how to get started.
● Automate savings. Having a set amount deducted from each paycheck that goes straight into your savings means there’s one less task to think about, and you’ll be less tempted to spend that money.
● Sock away windfalls. Sure, it’s tempting to splurge when you have a little extra money, but putting a tax refund, bonus or gift in your emergency fund can help you build up your savings bit by bit.
● Trim your budget. Don’t think you have any wiggle room in your budget? Consider cutting repeated monthly expenses that add up, like a streaming service you don’t use or extra charges on your mobile phone plan. Then put that savings in your emergency fund. Your future self will thank you.
How Can I Map My Short-Term Goals?
Maybe you want to start your own business or take a year off to travel. Whatever your goal may be, putting it down on paper allows you to develop a timeline and set milestones.
● Start now. It’s easy to put big-picture goals on the back burner and tell yourself you’ll start saving when you get a raise. But short-term financial goals are also part of your overall financial plan and budget, and if you don’t start saving early, you may put it off indefinitely.
● Break down spending. By looking at exactly where your money is going, you’ll ensure that your spending habits align with your priorities. You may find that taking money from one category (e.g., buying new clothes) and putting it toward another goal (e.g., your emergency fund) better reflects your priorities.
● Figure out your net worth. Look at your assets, like property, savings and income, and your liabilities, including credit card debt, student loans, auto loans or a mortgage. Learning how much you’re worth can help you get a sense of how much you can put toward a goal each month.
How Can I Start Planning for Retirement?
Start today! Retirement is the biggest expense of your life, so saving money toward retirement should be something you start early and keep in the back of your mind during your entire working life (not to sound too daunting, but it’s true). Here are a few quick ways to get the ball rolling.
● Use automatic transfers. By deducting a set amount from each paycheck, you can save for retirement. Financial experts say you should save around 10% of your income for retirement. That means when your income goes up, so too should your retirement savings.
● Max out employee-sponsored plans. If you have access to a 401(k) retirement plan, take advantage of matching employer contributions. Though plans vary, most match a percentage of an employee's annual contribution, up to a certain limit. If you don’t get your full match, you’re leaving money on the table.
● Take advantage of compound interest. This is interest earned on interest, and it is the key to retirement savings. Need motivation? Consider this: Say you deposit $100 a month at a 5% interest rate for five years. You will have saved $6,000 in deposits and earned $800.61 in interest. After 20 years, your account will have earned an additional $7,573.87 in interest thanks to compounding—even if you never made another deposit.
How Can I Start Investing?
Today, new investors have more options than ever, including some that can be accessed right on a smartphone. Here are a few of the many, many ways you can dip your toe in the investing waters.
● Robo-investor tools from companies like Stash, Ellevest and Betterment appeal to many new investors because they offer accounts with no or low fees and minimum balances. Investors can make small trades aligned with their risk tolerance.
● Invest your change. Apps that automatically link to your bank account make investing easy, too. Acorns, for example, rounds up the price of your everyday purchases to the nearest dollar and automatically squirrels the remaining change away in an exchange-traded fund.
● Tax-advantaged accounts. If you want to open a tax-advantaged account like a Roth IRA, consider target-date funds. You pick a target date index fund based on your estimated retirement date and put aside a set amount each month. The fund rebalances your investments as you get closer and closer to the target date.
Starting with a set-it-and-forget-it system of investing can ease the pressure on you and mitigate risks.
How Can I Find a Financial Advisor?
Financial advisors are not just for the wealthy—in fact, they can provide financial education and advice that will help anyone who is looking to fortify their finances and plan for the future.
Start by looking at a reputable organization, such as the National Association of Personal Financial Advisors or the XY Planning Network, which specializes in millennials and Gen Xers. Pricing matters, and you may want to go with a planner who charges a flat fee, as opposed to a percentage of your assets. Make sure the advisor offers quality customer support.
If you just need some help coming up with a plan or want to sharpen your skills, a robo-advisor might be a good fit. Using an algorithm based on your risk tolerance, current retirement savings and anticipated age of retirement, a robo-advisor can create a customized portfolio based on your responses.
How Can I Boost My Credit Score?
Your credit score tells lenders how likely you are to pay back a loan. It’s calculated by a number of factors, including your credit history and your available-to-used credit ratio. A good credit score can help you secure the lowest interest rate on mortgages and car loans, saving you money over time. A few small steps can make a big difference in your credit score.
● Pay your bills on time and never miss a payment. This is the single most important thing you can do, as it signals to lenders that you’re a responsible borrower.
● Don’t carry a high balance. If you can, pay down your card each month. Your credit score takes into account how much credit you have available. If you’re always charging close to your limit, that can ding your score.
● Maintain your account balances. Having at least $400 in savings and no negative balances for three months will now improve your credit score.
Some people think this means avoiding credit cards altogether, but that’s simply not the case. To establish a credit history, you should be using credit responsibly.
Alizah Salario is a freelance writer and editor based in Brooklyn, NY. Most recently, she covered personal finance for CNBC’s Grow magazine.