1. A rock-solid foundation
The three experts I spoke with gave advice geared toward someone in their mid-20s, who makes a salary of $40,000-$50,000. But anyone can benefit from the advice below.
Every financial checkup starts with knowing your goals and understanding where every dollar goes.
These goals need to pertain to the short term, like, how will I pay my rent? They also should include the medium-term questions, like, could I see myself pursuing another degree? or would I maybe one day like to own a home? Finally, they need to include big things in life: What do I want my life to be like when I retire?*
Abed Rabbani, an assistant professor of personal finance at the University of Missouri, tells me that solid financial footing involves goal-setting on each of these three levels, even if the long-term goals seem out of reach.
“The long-term goals may sound long off, but for anyone, I think it’s imperative to pay attention to all those details,” he says. “It’s very important to save and invest early.”
From there you need to prioritize your goals and quantify them, says Boneparth. If you’re looking to buy a home, you’ll need to have a rough idea of when you might want that to happen and how much you might expect to need for a down payment. If you’re looking to pay off your living expenses, that means you’ll need to figure out how much everything costs.
Figuring that out comes down to mastering your cash flow — which means you know about how much you spend every month and where all of that money ends up….