Here’s our checklist of financial items that you need to work through on your way towards financial freedom and independence:
- Open a bank account with: local branches in your area, free checking and free online banking. Make sure you do not have any monthly service fees attached to this account.
- Open an internet savings bank account. We recommend Ally Bank and Capital One. Link this account to your checking account.
- Start saving money each and every week. Even if it’s only $10, you have to start somewhere. Make sure this saving is automatic, so you don’t have to manually make the decision. It should just happen automatically.
- Build up at least a cushion of a few thousand dollars in an emergency fund. Your life will be so much less stressful if you have some money in the bank.
- If you have credit card debt, then stop using all credit cards and start paying down this debt. This is an emergency situation that will ruin you financially.
- Start automating your finances. Your financial life should be as easy and stress-free as possible. This means automating your bill paying, mortgage, auto insurance, and especially your savings and retirement savings. It’s easy to save if the money never hits your account in the first place — you won’t miss it.
- Visit AnnualCreditReport.com and get your free yearly credit report from each of the credit bureaus. This is guaranteed to be free thanks to the federal government. If you see errors, you need to report them and work to get them fixed.
- Sign up for your company 401k and you must determine what your company will “match.” This is FREE money! But they almost always make you contribute on your own to get the full amount of the free cash. So some will “match dollar-for-dollar” on the first 5%.” What this means in human terms is if you contribute 5% of your income, your company will chip in another 5% of your salary, absolutely for free. So all of a sudden you’re saving 10% of your income for retirement.
- If your company does not offer a 401k plan then open a Roth-IRA account. We recommend Fidelity, Charles Schwab or Vanguard.
- Open a regular investing account. We recommend Charles Schwab for their selection of no-load and low expense ratio index funds that you can open with only $100, Fidelity for their commission-free ETFs that you can buy as single stocks and Vanguard for their amazingly low expense ratio mutual funds and overall company philosophy.
- If you have children or expect to have children soon, you need to buy 30-year term life insurance while you’re young and healthy. $500,000 of coverage can be had for under $400 a year. Do not get suckered into buying anything other than term life.
- Go to a lawyer and get a will drafted. Keep this updated as your family and life situations change.
- Consider getting “umbrella” insurance added to your homeowner’s insurance. $1 million of coverage can be had for under $150 on most policies.
- If you have children, you need to open a 529 college savings plan as soon as possible. We recommend the Virginia inVest 529 plan for VA residents.
- Buy a small file cabinet for your document storage. You should have a file folder for each of your bills, credit cards, mortgage, each year of your tax return, insurance policies, etc. It’s important to be able to retrieve documents when needed.
- Buy a small Fireproof Safe
for all your essential paperwork such as: birth certificates, marriage certificates, social security cards, passports, life insurance policies, wills, and copies of the front and back of every item in your wallet in case it gets stolen and you need to cancel all your cards
- Read this post at Mr. Money Mustache’s website. No better explanation of our entire thought-process exists than this article, so why try to recreate it here? Just read it and see how you can live the same middle-class life as everyone else just so much smarter and wealthier.