How should I organize my finances?

Any smart money types out there care to lend some advice?

I want to be financially well off for as much of my life as possible. Being unstable financially makes me nervous.

I was always the type to over compensate, shall we say. The thing you want costs $50? Better save $100 before you buy it. You have to be there at 3:00? Better show up at 2:30/2:45.

I've never been one to spend without care but I've also not really watched my finances until now.

I'm 23 and have been contributing to a Roth IRA for a few years now. After I make this next contribution in a couple weeks, I will have put $10,000 into the account.

I have a savings account that, after my next Roth contribution and paycheck, will have roughly $9,000 in it. I have a checking account that I like to keep $1,000 in. So every paycheck I get, I replace whatever spending I did over the last two weeks, and then put the rest into savings.

I live at home with my parents currently - for financial reasons - and I only pay for my gas, my car insurance, my cellphone bill, and any food I wish to eat that's not at my house. In total, I'd estimate that it totals about $300 a month.

I am planning on taking my next paycheck and opening an account at a credit union that will give me a 3% interest rate on both my checking and savings accounts and closing my accounts with my current bank.

Dave Ramsey has a 7 Step program for getting out of debt: 1K emergency fund, pay off all debt, 3-6 months expenses, 15% income invested, college fund for children, pay off home, build wealth.

Is 1K enough? I have that. I have no debt. So that puts me at 3-6 months of expenses. How much does it cost to live for a month? I'm planning on saving as though I were living on my own. Anyone have a guesstimation for me?

Also the over-compensator in me is wondering if the 1K emergency fund is enough. Or if I should have a larger one? And is 3-6 months enough? Should I save for a year?

Help.


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What Guys Said 2

  • Good on you for making these smart financial decisions now, rather than waiting until later on in life.

    I started watching Dave Ramsey's Financial Peace University a while back, but I stopped watching less than halfway through. I just remember thinking "Oh... kay... when does this get hard? Why are so many people in so much debt?"

    $1,000 should be good for now. At some point, I'd recommend building it up some more, but not quite at the same rate. When I first started mine, I put in $100 each paycheck. When I got to $1,000, I dropped it down to $50, and then $25. I ended up moving a lot of that over towards my cash fund for buying my car. I'd like to start building it again myself.

    Also, SOME debt is good. If you have SOME debt, you have the means to pay it off, and you are making good on those payments, you'll have an easier time pulling out a loan for when you CAN (if you want to, also) buy a house or a car or something else along those lines.

    Also, make sure you're putting money into savings.

    It sounds like you're on the right track though. I myself should finish watching FPU, though...

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  • Step 1: Don't get married or have relation$hip$ (unless she is worth more than you).
    Step 2: Don't have kid$.
    Step 3: Don't have hor$e$.
    Step 4: Rich people buy assets and lease liabilities. So, for instance, buy a house, but lease a car because houses accrue in value but cars generally depreciate. If you must own, buy used.
    Step 5: Shop at Aldi. Use coupons.
    Step 6: When you get your own home, get one in a place with low property taxes and low cost of living - someplace rural; even if you don't live there now, you can safely retire there because your money will go much further.
    Step 7: For that home, plan to go off the grid and garden to save money.
    Step 8: Invest in "inevitables". Some things are inevitable, but people don't buy stocks in it until it becomes obvious to them that it is inevitable. For instance, one day, there will be no more oil, so what are the oil companies going to sell then? Meanwhile, renewables are inevitable; sure any one company may be a fuck-up, but invest in the industry because profits (and dividends and stock values) are inevitable.

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