The best time to get on-top of your finance is any time, really, but people are most motivated at the beginning of a new year. So here is a step-by-step guide for those of you who’ve made getting on-top of your finances one of your 2016 goals but don’t really know where to start:
Step 1) If you’re working and have a 401(k), find out if your company has a 401(k) employer match and make sure you are contributing at least up to the match. If they match up to 3% of your salary, then start contributing 3% of your salary to your 401(k). The reason this is step 1 is because this is FREE money you’re leaving on the table. Side note: It helps to know your company’s vesting schedule.
Step 2) This step can actually be done in conjunction with Step 1. Find out if your company has a Roth 401(k) option. If they do, get it set up and start contributing to your Roth 401(k) instead of your regular 401(k) UNLESS your company doesn’t match Roth contributions. In that case, contribute to your regular 401(k) first (up to the match) and then the rest into your Roth 401(k). Reasons why a Roth is usually better for millennials can be found here.
Step 3) Pay Yourself First
Step 5) Track Your Spending
If you’re already doing all 5, congratulations! You’re already way ahead of the game. I’ll cover some more advance stuff another time like investments and insurance.
Happy New Year!