Get Good with Money

1. Financial Wholeness: The Foundation of a Rich Life

"Financial wholeness is when all the aspects of your financial life are working together for your greatest good, your biggest benefit, and your richest life."

Holistic approach to finances. Financial wholeness encompasses ten fundamental areas of your financial life, including budgeting, saving, debt management, credit, income generation, investing, insurance, net worth growth, professional advice, and estate planning. By addressing all these aspects, you create a strong financial foundation that can withstand life's uncertainties.

Journey and destination. Achieving financial wholeness is both a process and an end goal. It requires consistent effort and mindful decision-making across all financial areas. As you progress through the steps, you'll gain more control over your finances, reduce stress, and increase your ability to achieve your life goals. The path to financial wholeness is unique for each individual, but the principles remain the same: build a comprehensive understanding of your finances and take action to improve each area systematically.

2. Budgeting: Your "Say Yes" Plan for Financial Freedom

"A budget is your Say Yes plan. It can allow you to say yes to your wildest dreams: going on vacation, going back to school, starting a business—you can say yes to all these things if you're willing to make the necessary changes."

Create a comprehensive budget. Start by listing all your income sources (Money-In) and expenses (Money-Out). Categorize expenses into Bills (B), Utility Bills (UB), and Cash Expenses (C). This categorization helps identify areas where you have more control over spending.

Automate and optimize. Set up automatic transfers for savings and bill payments. This reduces the chance of human error and ensures consistent progress towards your financial goals. Regularly review your budget to find areas for improvement, such as reducing unnecessary expenses or negotiating better rates for services.

• Use the "Noodle Budget" concept to identify your bare minimum living expenses
• Implement the "Jump Like Jordan" technique to boost your credit score
• Practice mindful spending by asking: Do I need it? Do I love it? Do I like it? Do I want it?

3. Save Like a Squirrel: Preparing for Life's Financial Winters

"We need to be like the squirrel and work hard and save big during plentiful times. Get lean (without oversacrificing) and stockpile savings when we can. We need to mimic squirrel behavior because a financial winter comes for everyone."

Emergency fund priority. Aim to save at least three to six months of essential expenses in an emergency fund. This financial cushion provides security during unexpected life events, such as job loss or medical emergencies.

Goal-oriented savings. Beyond emergency savings, create specific savings goals for short-term and long-term objectives. Use separate savings accounts or "money buckets" for each goal to track progress and avoid temptation to spend.

• Automate savings transfers to make saving a habit
• Use high-yield online savings accounts for better interest rates and to make access slightly inconvenient
• Capitalize on Unexpected Money (UM) by immediately saving windfalls or unexpected savings

4. Dig Out of Debt: Strategies for Financial Liberation

"Debt is not a place. I can help you make a plan to pay off your debt, but I can't pick you up there or drive you home from it, you know?"

Understand your debt. Create a Debt List detailing all your debts, including creditor names, total amounts owed, interest rates, minimum payments, and due dates. This comprehensive view helps prioritize debt repayment efforts.

Choose a repayment strategy. Consider using either the Snowball Method (paying off smallest debts first for psychological wins) or the Avalanche Method (focusing on highest interest debts first for maximum savings). A hybrid approach combining both methods can also be effective.

• Explore debt restructuring options like balance transfers or consolidation loans
• Automate debt payments to ensure consistency
• Use unexpected money or windfalls to accelerate debt repayment
• Remember to balance debt repayment with saving and investing for long-term financial health

5. Credit Score Mastery: Unlocking Financial Opportunities

"Credit score isn't a grade on how well you manage your money; it's a score that reflects how well you use other people's money."

Understand credit score components. Focus on the five factors that make up your credit score: payment history (35%), credit utilization (30%), length of credit history (15%), credit mix (10%), and new credit inquiries (10%).

Strategies for improvement. Take actionable steps to boost your credit score:

• Make all payments on time, every time
• Keep credit utilization below 30% (ideally under 10%)
• Maintain long-standing credit accounts
• Limit new credit applications
• Use the "Jump Like Jordan" technique: pay off a small recurring charge in full each month

Remember that improving your credit score takes time and consistent effort, but the financial opportunities it unlocks are well worth it.

6. Increase Your Income: Maximizing Earning Potential

"You are sitting on a gold mine of income-earning potential that you haven't even considered. That gold mine is your fabulous self."

Maximize current job potential. Start by optimizing your primary source of income. Keep a "Brag Book" or "Go Me!" file documenting your achievements and contributions at work. Use this information to negotiate raises or promotions.

Develop side hustles. Identify your skills and explore ways to monetize them outside your main job. Consider:

• Skills related to your current profession
• Talents or hobbies that can generate income
• Services in high demand in your community

When starting a side hustle, focus on direct return on investment (ROI) items first. Begin with low-cost, high-impact activities before investing in more extensive business infrastructure.

7. Invest for Retirement and Wealth: Growing Your Money Tree

"Money is like a plant. It needs to grow to stay alive. Investing is the way your money not only survives, but thrives."

Retirement investing basics. Start by determining how much you need for retirement (12-25 times your annual income or expenses). Utilize tax-advantaged accounts like 401(k)s, IRAs, and Roth IRAs. Aim to invest at least 10-20% of your income for retirement.

Wealth-building investments. Beyond retirement, invest for overall wealth growth:

• Understand your investor type: active, passive, or in-between
• Choose appropriate investment vehicles: stocks, mutual funds, ETFs
• Consider using robo-advisors or financial planners for guidance
• Practice dollar-cost averaging by consistently investing over time
• Focus on low-cost index funds for broad market exposure

Remember that investing is a long-term game. Stay consistent, diversify your portfolio, and resist the urge to react to short-term market fluctuations.

8. Insurance: Protecting Your Financial Future

"Insurance is a risk management tool. The reason you get insurance is to protect you in case something happens. And it's a small price to pay for big peace of mind."

Essential insurance types. Focus on four main categories of insurance:

1. Health insurance: Protects against medical expenses
2. Life insurance: Provides for dependents in case of your death (term life is usually sufficient)
3. Disability insurance: Replaces income if you're unable to work
4. Property and casualty insurance: Protects your assets (e.g., home, car)

Optimize coverage. Regularly review your insurance policies to ensure adequate coverage as your life circumstances change. Consider increasing deductibles to lower premiums if you have a solid emergency fund. For most people, term life insurance is preferable to permanent life insurance due to lower costs and simplicity.

9. Boost Your Net Worth: Owning More Than You Owe

"A positive net worth is powerful. It can help you retire without stress, travel guilt-free, provide for your family, go out to restaurants without worrying about every last dollar, and more."

Calculate your net worth. Regularly assess your net worth by subtracting your liabilities (what you owe) from your assets (what you own). This simple calculation provides a snapshot of your overall financial health.

Strategies for growth. To increase your net worth:

• Focus on paying down high-interest debt
• Invest consistently for long-term growth
• Increase your income through career advancement or side hustles
• Minimize unnecessary liabilities and focus on acquiring appreciating assets
• Regularly reassess and adjust your financial strategies

Remember that net worth growth is a gradual process. Celebrate small victories and stay committed to your long-term financial goals.

10. Assemble Your Money Team: Financial Professionals for Success

"You need a team. A Money Team, to be exact. A Money Team is the support system that helps guide and influence your financial choices."

Key team members. Consider adding these professionals to your Money Team as your financial situation becomes more complex:

1. Accountability partner: Keeps you on track with your goals
2. Certified Financial Planner (CFP): Provides comprehensive financial guidance
3. Certified Public Accountant (CPA): Assists with tax planning and preparation
4. Estate planning attorney: Helps with wills, trusts, and legacy planning
5. Insurance broker: Advises on appropriate insurance coverage

Choosing professionals. When selecting financial professionals:

• Seek recommendations from trusted sources
• Interview multiple candidates to find the best fit
• Understand their fee structures and potential conflicts of interest
• Verify credentials and check for any disciplinary actions
• Ensure they align with your financial philosophy and goals

Remember that your Money Team should evolve as your financial situation changes. Regularly reassess your needs and adjust your team accordingly.

Last updated: October 21, 2024