Summary I
You’ve now seen that managing your personal finances is as simple as building a snowman. To help solidify the learnings in part I, the following table outlines the analogies used and the takeaway for each.
Many of the steps required to set yourself up for success are included above. To make it even simpler to work through, the following list places these steps in sequence.
Set aside money as it’s earned.
Find what works for you, with a target of 20% across your goals.
Automate this through transfers into a new account.
Pay off any high-interest debt.
Set up a rainy day fund.
Ensure you’re earning interest on the money.
Deposit three to six months’ expenses.
Invest your money for future goals.
Find the right amount of risk for you and your goals.
Diversify your investments.
Stick to your plan and ignore the noise.
A financial plan doesn’t need to be complicated and lengthy. Begin where you feel comfortable, and as you learn more and it becomes easier, you can expand your plan. Developing strong savings habits doesn’t happen overnight, but the more you practice and consider your future financial needs, the easier it gets.
You now have the foundations of personal finance required to move on to the next part of this blog. With tools like compound growth and diversification, your financial goals aren’t as far off as they may have initially seemed. In part II, we’ll cover additional tools, including budgets, insurance and accounts to lower your taxes. We’ll also expand on some of the ideas we mentioned in part I, such as paying off debt and investing in the stock market, fixed income and real estate.
This blog is a duplicate of the recently self-published book The Snowman’s Guide to Personal Finance available for purchase here.