My 4 Favorite Pieces of Financial Advice E-V-E-R.

i heart my 401k Every now and then a friend or two will ask me for my best financial advice, and while I wished I could refer them to a single post of mine, unfortunately I never could….until today!

This post encapsulates my all-time favorite “words of wisdom”, jotted down in one simple place.

There’s a bazillian of things I’d love to share with everyone, but there are 4 main biggies I repeat over and over again – whether on this blog, or when talking to friends, family, or strangers. They aren’t new, but they sure do work! And I follow each and every one of them personally, even if I do slip at times ;)

I truly believe that these will improve anyone’s finances, regardless of age, occupation, or net worth. Your wallet will thank you, your peace of mind will thank you, and you’ll find yourself feeling sexier than ever! So here they are – my all-time favorite pieces of advice:

1. Pump up your 401(k)

If your company offers it, jump in as hard and as fast as you can! Contribute AT LEAST as much as your employer matches. if they match 100% of 6% invested, invest 6%. If they match 25% of 3%, invest 3%. Whatever the case may be, their portion is FREE money baby! Aka 100% guaranteed profit before it even gets invested! And if you have the means to put even more in? Then you, my friend, qualify for the Bad A$$ of the year award ;)

Not only that, but Uncle Sam will hate you for it… at least for now (that’s a good thing). The more you invest, the fewer taxes you pay out that year. Say your annual gross income is $50k. Well, if you don’t put anything in at all, you pay taxes on that $50k. BUT, say you contribute $10k towards your 401(k) in that year, well now you’re only taxed on $40k! (you pay the taxes later) So yeah it may suck initially “being out” of a little money each paycheck, but over time you’ll get used to it and maybe even forget since it’s all automated. Either way, those amounts pile up BIG time over the years, and you’ll be thankful you jumped on this money train when you did!

*if your company doesn’t offer a 401(k), OR they don’t match, consider picking up a Roth or Traditional IRA instead (or in addition to). There’s a pretty cool breakdown of the differences and benefits here

2. Track your spending for 3 months

This is the one thing you can do to learn EXACTLY where your hard-earned money goes to. Think of it as an E-True Hollywood Story based on Your Financial Life – you think you know, but you have noooo idea! haha…okay, well maybe it’s not that drastic, but you’d be amazed at the things you’d find if you actually sat down and sorted through it all. Even if you do it just one time, and one time only, it’ll give you a better over all picture of your finances.

Once you know EXACTLY how much you spend, you can then figure out how to move forward – whether it’s to remain on the same route you’re currently taking, or move to a newer one. I went back through 3 months of checking and credit card statements to figure out my habits, and boy was i surprised! It wasn’t so much in seeing the items purchased, as I remembered them all, but it was the grand total of the expenditures that hit me. I had a guestimated a budget of $500 for my credit card each month, but in reality i was spending between $800-$1200! Woops. I then created a more realistic budget ;)

3. Create an Emergency Fund

Simply for a great peace of mind! There’s something to be said in having a pile of cash in your account for whatever it is you’ll need it for. I really don’t know what constitutes an emergency, exactly, but for me it’s more of a stash to keep myself out of trouble ;) As for how much to put in there, I personally shoot for 3 months, but it really depends on what you’re comfortable with. It can be 2, 3, even 6 months, whatever you feel would make you sleep better at night. Once you reach that point, you’re all set! You can then go about using your money as you wish, knowing you have that safety net.

4. Pay off all Bad Debt

Get rid of it! Whether it’s credit cards, outstanding loans to friends or family, or whatever – it’s not great to have. This is much easier said than done, of course, but my goodness if it’s not true. It effects everything from credit scores, mortgage rates, car loans, and even worst – your overall happiness :( What would you do if you had $0.00 in debt?! How insanely awesome would you feel! It’s not gonna happen overnight, and it certainly won’t be easy, but it’s definitely imperative to work it all out. Whatever you need to get rid of it, just start.

And that’s it! Those are my Top 4 all-time favorite pieces of advice I give out. Some are easier to follow than others, but they all work magic on your financial health!

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13 Comments

  1. JoAnna July 11, 2010 at 12:08 PM

    Well, here I am floppying around like a fish out of water. Each month I promise myself I will get a handle on this thing called finances and each week I am sweating out whether or not I am bouncing checks. I happened on your website through a magazine article and decided to look it over. So far I like what I see so hopefully it will give me the incentive to follow this through for a change. One thing I do know is that I cannot take anymore of this thing they call “financial stress”.

    Thank you for the time you put into this and for the great info. Wish me luck!!!

  2. J. Money July 11, 2010 at 2:30 PM

    YOU CAN DO IT JOANNA!!! The hardest part people have is usually taking that step back and realizing they need to *change* – once you get there it’s just a matter of creating up a game plan and then sticking to it :) We use time to our advantage and work towards financial freedom one day at a time. Stay motivated my friend!!

    (Out of curiosity, what mag did you find this in?)

  3. Gabriela September 13, 2010 at 4:06 AM

    JoAnna — take the word “hopefully” out of that sentence. You CAN do it, and you WILL do it. No hopefullies. Best of luck.

  4. J. Money September 16, 2010 at 10:19 PM

    Love it!

  5. Nev October 11, 2010 at 3:31 PM

    More like PIMP your 401k…. Thats the best advice EVER! Max it out. Free money from the Government via no taxes going in, and possibly free money from your company.

  6. Brittney October 11, 2010 at 6:17 PM

    I have been working on most of these things and you have really encouraged me to take a REAL look at what we spend each month and to make a budget. The only problem is that I cannot figure out how to export my credit card activity from usaa.com since I don’t have Quicken and was hoping to put it in an Excel spreadsheet. Any advice short of going through and adding it myself? I love USAA but their website can be very confusing, especially when you try to search for something!

  7. J. Money October 14, 2010 at 9:44 AM

    @Nev – AGREED! 401ks are my all-time favorite financial tools :)
    @Brittney – Hmmm, that’s a good question…I don’t use USAA’s tools or Quicken all that much, BUT let me send it over to my guys over at USAA and get back to you :) Will cc you on the email! (got it from your comment)

  8. J. Money October 14, 2010 at 1:32 PM

    Got an answer back from the USAA folks! Hope this helps :)

    ——————-

    Here are the steps she will need to follow to get her credit card activity into Excel:

    1. From the main “My Accounts” page, she will want to click on her credit card (the account name is a hyperlink). This will take her to the transactions page for her account.

    2. Once on the transactions page, she will need to click the “Export” icon which is right below the orange “Available Credit” label.

    3. The screen will refresh and give her the opportunity to select the transactions to download. The choices are “All”, “Selected”, and “Date Range.” Assuming she selects “Date Range”, she will need to insert the starting and ending dates.

    4. Finally, she will need to change the File Format drop down box to “Comma-Delimited (CSV)” and then click the green “Export” button.

    This will export the transactions into an Excel spreadsheet which she can then manipulate or copy and paste into her own budgeting spreadsheet.

  9. Brittney October 14, 2010 at 1:53 PM

    Thanks for the info!

  10. Roger Wohlner November 30, 2010 at 11:47 PM

    Great timeless advice, well-written.

  11. J. Money December 2, 2010 at 2:54 AM

    :)

  12. Mick July 22, 2012 at 3:57 PM

    skip the 401k beyond the company match and fund a Roth IRA !!!

  13. J. Money July 24, 2012 at 3:57 PM

    Not a bad idea at all :)