The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life

The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life

One of the reasons personal finance can feel so overwhelming—nay, defeating—is that there’s so much pressure to do everything at once. I think it’s why so many people feel lost and incompetent with money. I did too, until I discovered a financial order of operations.

Money decisions are always intimidating. Every financial decision you make compounds over time! That can be good, like when investments grow. But it’s also terrible, because financial mistakes can haunt you for years after you’ve made them. With so much pressure to get it right, every single time, and always on the first try, it’s no wonder people freeze up.

I wish someone had sat me down and compassionately explained that I didn’t have to do everything all at once. If you want to stay motivated and make meaningful progress on a goal, it’s so much better to focus on just one at a time. And just like in eighth grade math, there’s a right order of operations to everything, depending on what stage of life you’re in.

Today I’m going to take you through my financial order of operations. It’s a basic blueprint of ten steps most people could follow to transform their finances for the better.

In my opinion, it’s the best order in which to save, invest, and pay off debt. It also takes into consideration the incredible importance of maintaining motivation and keeping financial decisions centered exactly where they should be: around your personal goals, dreams, and emotional well-being.

Best of all, anyone can follow the first two steps! You don’t need to have money or a job to get started. Woo-hoo! Gates are open—send in the teenaged overachievers!

Obviously, everyone is different. Think of this journey as the Oregon Trail. We all start in the Independence, Missouri of total ineptitude, and we’re all trying to get to the gloriously fruitful Willamette Valley of financial independence. Some of us may choose to raft down the Columbia River Gorge, and others will take the Barlow Toll Road. That’s totally fine! This guide will help you make informed decisions, even if you don’t follow it exactly.

Doing everything at once is a trap

Because I run a financial blog, it probably seems like I’ve always had my shit together. I assure you, this is not the case.

My truth? I spent a decade of my life being torn apart by a ravening pack of competing financial priorities.

My first jobs in life were seasonal. In college I worked weddings and special events, and before that I was a summer camp counselor in high school. (Do not challenge me to Four Square unless your people are there to see it. Cuz you might get embarrassed.)

I am the master of three things: myself, the order, and Four Square adjudication.

These jobs left me with a huge surplus of cash at the end of every summer. I sought out personal finance experts and asked them: “What’s the best thing I can do with this money to make my future more stable?”

The answers I got back? Not great!

“You must save that money for college, and pay off all your credit cards, and open a retirement account now, but also keep it in an emergency fund, and give a percentage to charity. You need to start investing immediately, and you should start small and safe because you’re young, but also take huge risks because you’re young! Buy stocks that you believe in, but also don’t trust yourself, because you’re too stupid to pick stocks. And if you don’t do all of that at once, you’ll end up like a grubby Dickensian orphan, pressing your freezing pink nose against a window pane to longingly watch a happy family carving up their Christmas goose as you slowly choke on coal dust.”

This is a terrible way to communicate advice. When everything is critical, every step forward you take already feels like a failure because you didn’t somehow step in seven directions at once!

It took me years to understand how much this financial multi-tasking was hurting me. I eventually devised my own financial order of operations.

And here it is.

Step 1: Understand why you want money by thinking deeply about what you want in life

“Other than paying bills, I have no idea why I want money. Why do I need money just to live? It’s so stupid. I wish I never had to handle it, or even think about it.”

Okay, first of all: same. There’s VERY necessary social criticism here. As our bouncy podcast intro states, we truly do live in a patriarchal capitalist hellscape! There are uncounted things we wish were different about this world we all live in.

Having said that, I’m going to encourage you to set this attitude aside. Compartmentalize it and pull it out when you need to tap into a greater sense of empathy for your fellow humans. Like at the voting booth. But our mission is to help you understand how to thrive in the system that we have now.

So, yes: step one is to actually want money, and understand why you want it.

This is not an easy step! Piggy and I both think it’s weirdly the hardest!

Sitting down and making a list of life goals is the most important thing I have ever done to gain control of my finances. Firstly, because motivation matters. (A 72-year-old man cannot deadlift an SUV—until his son-in-law gets pinned underneath one. Then suddenly, he can!) But also because it’s something I have true control over. I can’t control the economy, or what jobs come my way. But self-knowledge helps me adapt to anything.

I also think it’s important that you like the reasons you want money. Money can remove logistical barriers between you and your best life, but it can’t erase psychological ones. If your big brain doesn’t believe, deep down, that you are a cool person with cool ideas that deserve to see the light of reality, you need to actively work on that while the money stuff cooks.

Suggested reading for this step in the financial order of operations

Step 2: Understand how you use money right now by tracking your current spending

“I know what I want in life, but money is a constant barrier. I have no idea how I could make any of my dreams happen when daily life is such a struggle.”

Many gurus leap to “set a budget” or “spend less” here. But Piggy and I are the snorting, stamping, dark horses of the personal finance world! We don’t really agree with that advice. Neighhhhh!

Budgets and frugality are great tools for addressing some financial problems, for sure! But that’s jumping to solutions without verifying the problem. Which is exactly why so many people bristle at traditional financial advice. “Shut up about systemic inequalities and hold still while I berate you for buying avocado toast!”

If you want to effectively change anything for the better, you have to start by fully understanding it first. And you can’t skip this step just because what you’re trying to change is you. That’s when you need objective data the most!

So start by just tracking your own spending. Use Mint, a spreadsheet, an expense journal, whatever works for you.

And do it with complete neutrality. Don’t beat yourself up for the occasional tiny luxury until you’ve seen with your own eyes that it’s a real problem.

If it is, great. Easy problem to solve! But we think material extravagance is a smaller, rarer problem than depressed wages and the skyrocketing costs of education, healthcare, and rent. (That’s why we write a lot more about salary negotiation than why cheap toilet paper rules—although we have, and it does.) Once you have that knowledge, you can confidently devote your energies to pursuing remedies that will actually cure what ails you.

And if you notice little areas of overspending? Easier to change because you want to, not because you were shamed into it.

Suggested reading for this step in the financial order of operations

Step 3: Make your money usage more predictable by saving a small emergency fund

“I know how much money I make and spend during a usual month. But it seems like every month there’s some unexpected expense, a new crisis, one more thing that needs fixing… It makes it impossible to feel safe or stick to a plan.”

It’s no secret that we Bitches have diamond-hard nipples for emergency funds. Unlike budgets or frugality, we can confidently say they’re a tool that everyone should have, no matter their circumstances. Here’s why.

Surprises are unavoidable. And when they happen, they can strike a real blow to your forward momentum. People will make really foolish financial decisions because they think it’ll protect them from surprise expenses. They’re incorrect.

I can’t tell you how many people tell me they bought a brand new car because they “don’t want to be surprised by a $500 repair bill every year.” So… you… voluntarily pay $500 a month to a dealership instead? I? What??

Watching ppl buy a new car to "save money" like ?????

If you don’t have a plan to mitigate unexpected expenses, the cycle of debt is waiting to catch you. If your finances are like a leaky boat, incurring new debts (especially high-interest debt targeted at emergencies, like credit cards and payday loans) is like drilling fresh holes in the dry parts of the boat. 

For most people, I define a small emergency fund as one normal month’s expenses. If you’re in a position where catastrophes would have really high stakes (such as having children or other dependents, or being the only working partner in a couple), I’d bump that up to two months. Don’t invest it in anything. Just keep it safe and liquid (immediately accessible as cash), preferably in a high-yield savings account.

Suggested reading for this step in the financial order of operations

Step 4: Start investing by making other people do it for you

“I can just barely keep up with monthly expenses, but my budget is way too tight to even think about investing. I know I should be, but I just can’t afford it right now.”

Not everyone works. And not everyone has a job that offers benefits like 401(k) matching, although it’s becoming more common to offer them even to part-time employees.

If you work somewhere that offers company matching, now is the stage to work toward maxing out those benefits. This is the closest thing to free money you’ll ever find.

In fact, this perk is so valuable that you could think about it another way. Starbucks, for example, offers its employees retirement matching between 4-6%. If they didn’t offer that perk, each employee’s base pay would probably have to be 4-6% higher to stay competitive and retain good employees. So if you don’t take advantage of that perk, you’ve kinda voluntarily accepted a 4-6% pay cut, haven’t you?

People often use the phrase “don’t leave money on the table” when they urge you to max out company matches. I want to highlight what that really means. If Starbucks owes you a paycheck of $350 for your work this month, and they slid it across the table to you as a stack of cash, would you ever just leave a $20 bill laying there?

Because you are, if you don’t take the 401(k) match.

And that money’s not even for you—it’s for your future self. Grandma You has stiff joints and can’t work on her feet anymore. But if you’d put $20 a month into her retirement account like a good little past self, she’d have $165,000 by the time she retired. BE NICE TO MEE-MAW AND TAKE THE FREE MENNY, HENNY.

Suggested reading for this step in the financial order of operations

Step 5: Eliminate your biggest liability by paying off any debts with an interest rate of 8% or higher

“I can pay all my bills, but it feels like I’m treading water. I’m so discouraged when I work hard to earn a little more, or spend a little less, and it feels like the money always goes to bills and debts rather than to me. Why do I even bother? Is it always going to be this way?”

No. It’s not. Trust me. I’ve been there. This is not your forever.

But depending on how much debt you have, this might be a pretty long step. For me, it took six years to erase my high interest debt. And I didn’t start to feel the positive effects of my new financial priorities until about year four. It sucked, little dudes, it sucked!

At the same time, no step has felt so satisfyingly transformative. Remember Helen from our case study on managing multiple student loans? She’s been sending me texts as her monthly payments drop lower and lower. From $750 a month, to $715, to $600… Soon it’ll be just $350. And in a year it will be $0.

That first little $35/month victory probably didn’t feel like much to celebrate. But it’s called the snowball method because it gathers strength and speed over time. Progress feels painfully slow at first, but the end is an avalanche of extra money so shocking you won’t be emotionally prepared for it, even if you’ve been waiting for years.

We consider high interest debts to be anything above 8%. Why that number? It’s a pretty average return for money invested in the stock market. So if you have a few bucks left over to invest every month, you’ll save more money paying off a 17% credit card than you would make by investing it.

We highly recommend following the snowball method of debt reduction, which you can learn more about in the articles listed below.

Suggested reading for this step in the financial order of operations

Step 6: Improve your stability by growing your small emergency fund into a medium one

“It does feel a lot easier to breathe now that my most crushing debts are gone. I still have bills, but they’re manageable. Should I be saving more?”

As people age, they tend to acquire more financial commitments. Your car is older, your body is older, you may have a partner, dependent parents, children… They’re like barnacles on a whale, you just pick them up somehow! So now that you’ve eliminated your most parasitic debts, now is an excellent time to grow the size of your emergency fund.

For a medium-size emergency fund, three months of average expenses seems nice and healthy. And again, it may be wise for you to double that to six months if you have circumstances that make failure a non-option.

Suggested reading for this step in the financial order of operations

Step 7: Make the most of limited investment resources by maxing out your yearly IRA contributions

“Things are easier now, but I’m so far behind. I keep hearing that I should have a full year’s salary saved in my retirement account, or own a home. The fuck! Yes, I feel better, but I’m embarrassed that I’ve worked so hard and have so little to show for it.”

Okay, but here’s the thing: the crowd is around you, not ahead of you! Half of all Americans in their twenties and a quarter of people in their thirties have  z e r o  retirement savings.

Also, time does play a big role in retirement savings. But it’s definitely not a necessity to eventual success!

When I was at my absolute brokest, I held back tears and sacrificed things I shouldn’t have to put $50 a month into my IRA. I did it because I was told that was The Right Thing To Do.

It was honestly one of the dumbest things I’ve ever done. I kept it up until I literally couldn’t afford to buy food. I stopped putting anything into my IRA for about six years, and redirected all my focus to paying off my huge-ass student loans. Getting them paid off liberated several hundred dollars in my monthly budget. When I was ready to dust off the ol’ IRA, I made up for the “lost time” in a blink. More importantly, I could make the investment gladly, because my heart wasn’t troubled by the stress of carrying those loans anymore.

Due to their favorable taxation status, maxing out your IRA is the best way to give a zesty jolt to your retirement savings now that you can (finally) afford to do so.

Suggested reading for this step in the financial order of operations

Step 8: Feed your motivation by pricing and prioritizing your dreams

“I guess I’m doing it now. But I took so long just to learn the bare minimum of adulting. I can’t believe that all of this work hasn’t gotten me any closer to my dreams.”

Y’all like these “inner critic” monologues? They’re all taken from my own life! I have lived every one of these steps, and I still vividly remember all the negative feelings that finances stirred up in my pessimistic little brain, even as my situation slowly improved.

At this point, you’ve been working hard—probably for years—just to meet your basic commitments. Now’s the time a lot of people lose their way. So here’s an exercise to help you find it again.

Find the list you made in step one. Now that you have a lot more experiencing managing money, ask yourself: how much would these dreams actually cost to pursue?

  • Let’s say my dream is to write a novel. Don’t care if it’s published or not, just want to say that I did it!
  • Google (and my publishing professional coblogger but what the hell does she know) tells me the average novel is 90,000 words long.
  • Google also tells me that every professional novelist is different, but many seem to write around 1,000 words per day.
  • Since I’m just starting out, I’d probably go a little slower. If I could write 800 words a day, it would take me 112.5 days to write a first draft. But I’m sure I’d want some days off, so let’s round up and say five months!
  • How much money do I have to have saved so I could stop working for five months? Well, my expenses are around $2,000 per month, so…

And there you go. If I saved up about $10,000, I could spend five months as a full-time novelist.

Doing this exercise for every dream on my list was MIND-BLOWING.

A treasured hobby I’d given up because it was “too expensive” was more affordable than I realized. With my partner’s blessing, I picked it back up.

I listed so many travel locations that were far-flung and expensive to fly to—but why had I hesitated to go visit New Orleans, when it’s so close and so affordable? We booked the trip right away, and slid home two weeks before the coronavirus lockdown, warmed by fresh memories of an amazing time.

Basically, I started doing the relatively cheap things immediately, and prioritized the rest to continue to work toward. It put a much-needed wind in my sails. I wasn’t going to work every day just to pay my bills and keep breathing air. I was working toward my next big goal. And that’s so important at this stage, where routine easily becomes apathy.

Another example: What to do with totally unattainable dreams?

Admittedly, some of the things on my list are unrealistic dreams. They would cost, like, infinity money.

For example, my fifteen-point plan to buy this property, renovate it all by hand, and turn it into Kitty’s Safe House for Battered Women, Wayward Queers, and/or Rescued Farm Animals That Is Secretly Also North American Hogwarts, but like Good, with More Artsy Frog Statues.

Frogwarts, for short.

I mean, come on! It would only cost 1.5 million! Plus thousands of hours of hard labor, thirty or forty years of my life, and untold sums in upkeep. It’s reasonable, shut up! (bursts into tears)

Ugh. Reluctantly, I must acknowledge that there are holes in this plan—my dream business plan—that cannot be filled with wood glue and smiles. But it’s still worth thinking about! Even if you can’t realistically pursue every dream, you can think about ways to translate it into something more achievable. I clearly like fixing up old houses, looking at mountains, rescuing animals, rescuing people, throwing the two groups at each other, and stuffing them all full of homemade pizza until they are strong again. I can find other ways to do all of those things.

… Although now that I’ve said it, I’m sure we can make Frogwarts happen if we get enough new Patreon donors. #MakeFrogwartsReal

Suggested reading for this step in the financial order of operations

Step 9: Stop investing in things that don’t give you joy by paying off the rest of your debts

“Man, I used to feel so powerless when I opened my bills. Now that I have the money to pay them without it hurting like hell, it’s suddenly empowering. They think they can keep me in debt for another ten years, twenty years? Hmph. I’ll show them.”

This is the stage where I finally started to feel really good about becoming debt free. I wasn’t fighting a dragon with sharpened popsicle sticks anymore. I had a proper sword. There was a lot more debt to go, but it just got easier and easier.

Now, some people (contrarian finance bros who only scan the subheads) will say “nooooo, you should be investing instead!” There’s a certain kind of person who will make that decision. But it isn’t me! And I don’t think it’s our readers either.

Life is just so uncertain. Yes, the market tends to return about 8%, but there’s absolutely no guarantee of that! If I lost my job suddenly, or got sick, which would I rather have: bills, or no bills? And what if I lost my job because the markets took an unprecedented nosedive? It’s happened multiple times in my life! I’m too cautious for that.

Note: you may have heard older finance gurus draw a distinction between mortgage debt and every other kind of debt. That’s because there use to be a tax credit that was super favorable to homeowners still making mortgage payments. But Trump’s 2017 tax reform plan nerfed the shit out of it. So it’s not much of a consideration anymore.

Suggested reading for this step in the financial order of operations

Step 10: Focus entirely on your dreams by investing all your time and money into making them real

“This feels awesome. I feel like I suddenly have so many options! In fact, the number of options I have is a little paralyzing. Everything I’ve learned about money is about managing debts and tight budgets. I’m not really sure what to do with the opposite problem.”

I’m here.

It’s weird here. Good, but weird!

My debts are long gone. Recently, my mortgage went with it. I still have bills to pay, but they’re only about a quarter of what I used to spend every month. So the rest of my income is pouring, slowly and steadily, into investments.

How to invest is a huge, complicated, ever-evolving topic that we will definitely write more on in the future. But here’s a quick spoiler: the three best beginner investments, in our humble opinions!

  • A house is a good investment because you can live inside of it AND FILL IT WITH DOGS!
  • Mutual funds and index funds are good investments, because I’m way too busy playing video games to research individual stocks!
  • Roboadvisors are good investments because investing robots are inherently cheaper, better, and more trustworthy than my fellow humans. Go figure!
I know the pet all these pewpies in!

At this point, I think it’s a good idea to have a large emergency fund. It could basically immunize you from all but the very worst catastrophes. But it doesn’t have to all be cash! If you’re debt-free, keep your medium size fund in cash, but put those credit cards in a drawer. They’ll be your safety net for anything your cash can’t cushion.

I attribute my successes to privilege, luck, help from others, inspiration from others, and my own hard work. It’s my dearest wish that all of you will join me, in your own time.

Suggested reading for this step in the financial order of operations

What financial order of operations has worked (or not worked) for y’all?

Is this order of financial operations similar to what you’ve followed? Or do you see a better universal option? Have you tried something and it totally fucking failed? We want to hear about that too! Tell us about where YOU are on your journey in the comments below.

And if this article has helped you, please consider throwing us a few bucks via Patreon. Although Piggy and I are pretty dang financially stable now, we run this blog on our own time. Each article takes 10-14 hours to produce, and we churn out a new one every week. It’s a lot of work! And it’s easier to do if we have some support.

You may have noticed that we threw a bit of shade on unnamed personal finance gurus in this article (but come on, you know who we mean). A lot of them make bank by selling advice that personally benefits them or their sponsors. We think that’s LAME AF. That’s why we chose to be donor supported instead.

So if our advice has helped you, you can show us by joining us on Patreon. It’s a really fun community, and you can join for as little as $1.

There is currently no tier for $1.5 million donations BUT MAYBE THERE SHOULD BE. #MakeFrogwartsReal

The Financial Order of Operations Starts And Ends With ME BUYING FROGWARTS.

That’s all, kids! Be kind to yourselves, no matter what steps you’re tackling today. Recognize your wins, take breaks, mess up, reward yourselves often, and don’t forget to allocate your retirement funds!

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26 thoughts to “The Financial Order of Operations: 10 Great Money Choices for Every Stage of Life”

  1. I don’t know what this says about me, but I clicked through the Frogwarts link and was like “oh, duh, that place. everyone wants to renovate that place into a loving home for battered women, wayward queers, and miscellaneous farm animals. Cool that it’s still on the market.” (It says that my grandparents live in that general area and it’s situated on a thru road, actually). You know what they say about great minds 😛

    1. Excerpt from my business plan:

      Frogwarts houses will be divided into Beer People, Wine People, Speed People, and Weed People. They don’t need to take those substances—just need that kinda vibe. I will auction off the naming rights to these houses for $375,000 each. (Obviously I hope we get people with strange alliterative names, like a Helga Hufflepuff, but honestly, it’s okay if it’s House Dave or whatever. Not the hill I’m gonna die on in this project.) WE ONLY NEED FOUR PEOPLE. #MakeFrogwartsReal

      1. I was already into doing some sort of work on Frogwarts, since it’s in upstate NY and I live in Brooklyn. But finding out that there are houses for beer people and wine people when I have an interest in homebrewing? Makes me think…

        Bottom line, if this gets started I will do miscellaneous work in exchange for not having to pay for lodging while I’m there and a six pack.

  2. Currently on step 5 of my journey, and though it took me a while to get to this point, and others are doing “better” than me, I constantly remind myself that this is MY journey, personal finance is PERSONAL, and I will get to step 10!! I’m using my credit cards as an annex to my small emergency fund currently, since I have a loan I’m aggressively working to pay off right now. Then, the emergency fund shall be built to medium size.

    Finally bit the bullet and purchased your debt visualization worksheet from Etsy and I’m so excited to print it and really see my hard work!

  3. I feel like step 2 (or 3) should be getting a job or some sort of a way to make money. Because like if you’ve got a teenager with no current income, they can’t really track their expenses (they have none. They might have an allowance from parents but if they don’t, it’s all parents expenses not their expenses) and they can’t start saving for an emergency fund or investing because they have no money to spend or invest.

  4. I’m in steps 8-10, all at the same time. I’ve never done step 8, but it would be very interesting (and enlightening) to do it! Plus I think part of it for me is fear of math. Honestly that drives A LOT more of my financial decisions that I should probably admit in public. :/

    I’ve always been wired as a saver so I mostly got to skip the debt repayment steps. We are throwing extra money at our mortgage, considering some remodeling & improvements for it, and maxing out retirement. I threw some extra money into my first foray at non-retirement investments a few months ago, but haven’t looked or done anything else with it since.

    1. Dammit, now I fell down a Zillow hole, looking at expensive homes for sale in my area. And this is just *chef’s kiss emoji* : “All endeavors to properly chronicle the mastery and beauty of this home would fall short. It must be experienced in person.”

      (P.S. Don’t buy Frogwarts. Its *definitely* haunted!)

  5. 1) Frogwarts will haunt me forever, I wish I had never clicked through the 47 images on Zillow

    2) Speaking of Zillow, the flame to which I am a moth, I am at 10 as well, but because I am single in an high cost of living area, I will never be able to afford a house here, maybe not even a condo. It stinks.

  6. I’m on Step 9, but I’ve skipped 1, 2, and 8. It was actually a New Year’s resolution this year for me to do 1, but I never got around to it, and I’ve kind of decided not to do 2 (my thought was there wasn’t enough waste to be worth shaming myself for data with limited generalizability). But I really lit up on reading step 8–it sounds exciting and like something I really need right now.

    As for my own struggle with common wisdom in the PF space… I think I probably found out about FI/RE in early 2015 as a tangent from Googling “how to pay taxes for the first time like do they send me a form or what.” I ended up making a Roth IRA contribution of $2,000, which grew to $2,020 the next week, and then plummeted to $1,800 for the next two years. It didn’t end up making a huge difference in my circumstances financially, but that pressure to act most optimally, all the time I spent checking on that little baby Roth and regretting its lack of growth–my mental resources definitely could have been spent better.

    2k roth for tax year 2014

  7. That’s a pretty fantastic step-by-step guide. I probably skipped around a bit, and am still figuring some things out on the back end, but I’d have a hard time organizing my thoughts this well.

  8. “A house is a good investment because you can live inside of it AND FILL IT WITH DOGS!”

    This is literally the main reason I want to own a house. London landlords don’t allow dogs– it just doesn’t happen, and it’s painful. So owning a house *so that I can have a dog* is basically the extent of my financial goals right now.

    But I can totally get behind Frogwarts.

  9. I am THERE for Frogwarts!!!

    And if it has a cemetery on its property (couldn’t tell from the pics but 90% probable?) I will clone myself and give you two able-bodies to help fix it up!!

  10. I’d say I’m at 10.5. I’m kind of amazed to realize I have actually done all the steps you list. Step 8 I have done in stages based on what goals I’m pursuing at the moment. Theoretically I could price our my entire bucket list but I’ve usually just focused on what is in front of me.

    I’m on the verge of using all this financial planning to achieve one of my most cherished goals. I hesitate to even name it because the rug has been yanked out from under me before but this time it’s looking very good.

  11. I sort of got stuck at 6, but I think in a good way? Being a very anxious human being, I couldn’t figure out how big my emergency fund should be, so I just kept stuffing money into it. And somewhere along the way, Emergency Fund became Buying a House Fund. I’m not there yet, but I’d say about half-way.

    I think it’s not always the worst to not know what your long-term goal might be. Sometimes you can save up just with the thought of “not sure what this is for, but I’ll figure it out”, and then when you do figure it out, it’s very motivating to start with something built already.

    That said – I think it’s super important to break this whole process into steps like you did. I used to feel like I’m missing out by not looking into investing beyond my workplace pension, and then I realized that no matter how kick-ass the market performs, it will never compensate for the fact that I’m paying rent. After that, everything fell into place in my head.

  12. Here is the order I followed to get on a good financial track: 1) Got my expenses below my income; 2) Saved up a small emergency fund; 3) Began my 401K w/employer match; 4) Paid off all debt using snowball method; 5) Beefed up emergency fund; 6) Paid off house; 7) Now saving all I can while still splurging here and there!! It took me 10 years approximately to get from Step 1 to Step 7, and I could have done it much earlier in life if I had got my butt in gear sooner!! But oh well.

  13. Hi Kitty, thanks for the excellent post. Lots of food for thought in there for sure. Here’s my current status in a nutshell.

    Step 1: Vaguely in my head, but not really formalized. I think this one merits working on though, so I might try to address this in a blog post.

    Step 2: Done! I have tracked my spending on and off since I started working depending on my situation at the time. Since I started taking the whole FIRE topic more seriously, I’ve been tracking it religiously.

    Step 3: Done! I probably have too big of an “emergency fund” (as in, cash balance in my bank account), but I plan to optimize this soon. I’m currently looking for the best way to right-size this.

    Step 4: Done! I recently increased my pre-tax salary sacrifice to take the highest possible employer match.

    Step 5: Done! While I have 3 mortgages (my own home plus two rentals), all of them have sub-2% interest rates. I’m constantly debating whether to pay these down faster or invest the money in index funds instead. Currently I’m leaning towards paying down the mortgage on my own home but investing everything else in the stock market, due to the higher upside. Thankfully I have never had any other debts.

    Step 6: See step 3 😉

    Step 7: I’m not based in the US, so this one does not really apply. I’m not aware of a similar vehicle where I’m based, but I have three pension contracts currently, two of which I still actively contribute to (the third one is from a former employer in another country that I unfortunately cannot transfer). Plus, there’s the state pension which I automatically need to pay into (yay?) 😉

    Step 8: This one is a good one! I have not done this, but I might tackle this together with Step 1. Thanks for the inspiration!

    Step 9: See step 5. Again, I haven’t fully decided how to balance paying down the mortgages vs investing in other things like index funds. I am leaning towards paying down my principal residence and investing the rest in the stock market, but I’m not 100% convinced by this strategy yet.

    Step 10: Not quite yet 😉 I think that will happen once I achieve the FI portion of FIRE. Definitely looking forward to that time, but it will likely take me at least 10 years to get there.

  14. After going through some random combination of the steps you listed, I was feeling kind of stuck. The saving habit is so engrained now that I don’t need to actively motivate myself – but it was feeling very dull to do that just for some vague pension life decades into the future. So I played the Dollar Bill Game and priced out some stuff and am feeling INSPIRED and INVIGORATED at Step 8 🙂 Just started language classes (way more affordable than I thought – well I’m rich now compared to when I made that assessment), and am planning my post-Covid grand train voyage where I’ll be practicing those language skills! Thanks for giving us not only advice on saving, but also on spending!

  15. Awesome, funny post! Love it! Just a comment about ability to travel even with limited funds. We have just retired and are now doing home swaps! We have future trips arranged to San Francisco, Puerto Vallarta, and Amsterdam, with free lodging (the best kind—someone’s home!) in each city. There are several home exchange organizations. It is amazing! While we stay at their homes, they will stay at our home. Why didn’t I think of this before? Each stay is 2-3 weeks, cuz why not? We are retired!! Our house would otherwise sit empty while we pay for lodging elsewhere. Bonus gift: we cleaned out and better organized our home! We bought a few new items to make it nicer for ourselves and our guests.

  16. You are spot on by putting no 1 first! This step is overlooked in almost all financial advise. I was aimlessly frittering away my money once I had a reasonable emergency fund and had paid off all debts, because I had no plan or purpose where money was concerned.

    1. Many people do the same thing as you did. Those who don’t understand why they need money often spend a lot of money for nothing. When you understand your attitude toward life, then you understand why you need money as a tool.
      Therefore, money cannot be a purpose, only a tool.

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