Take control of your money with my ultimate no-fail budgeting guide. Learn simple, actionable tips to save money, pay off debt, and reach your financial goals.
Home » Article » No Fail Budgeting Guide
Before investing one dollar into the stock market you need to do several things. Start by eliminating high interest debt, create a 3 to 6 month emergency fund, establish a foundation for a cash flow plan, and then ensure the capital you do end up investing won't be needed for at least 5 years. To tackle high interest debt you simply need to stop carrying credit card balances because credit card balances is like a negative investment. When you carry a credit card balance you are paying somebody else money for the money they loaned you. You can start tackling that high interest debt by paying off all debts that have more than a 6% interest rate.
When you build an emergency fund, you keep 3 to 6 months of essential living expenses (housing, utilities, groceries, and a car payment if you have one) in a high-interest savings account that is relatively risk-free. By doing so, you will have the money you will need for a sudden job loss or medical bills. I personally keep at least one years worth of my monthly expenses in a high-interest savings account. That way, if I should have a sudden loss of income, I can still live for at least one year with absolutely no income. The standard budgeting framework is a structured approach to ensure your bills get paid, some of your wants get met, and constantly investing money. This budgeting framework rule is 50/30/20. You're basically taking each after-tax paycheck and dividing it up into three buckets.
Bucket one, 50%, for your needs; these needs consist of housing, groceries, utilities, and automotive expenses. These are considered the absolute minimum you need to survive. Bucket two, 30% of your after-tax paycheck, which gets applied to dining out, entertainment, and travel. Bucket three, 20% of your net paycheck, goes into savings and investing; you apply this money to retirement accounts, emergency fund replacement, and taxable brokerage accounts. Proper allocation of investment dollars would be, employer 401K match plans, tax-advantaged accounts, low-cost index funds and ETFs, and using automation to automatically invest in specific stocks or funds. In the articles below, I will explain how you can build your no-fail budgeting strategy.
Disclaimer, Due Diligence Required: Financial markets, tax laws, and economic regulations change frequently and vary by jurisdiction. You should always perform your own independent research, complete thorough due diligence, and consult with a licensed financial advisor, certified public accountant (CPA), or legal professional before making any financial decisions or putting capital at risk. The owners and publishers of this website assume no liability for any financial losses or damages resulting from the use of this information.
Advertisement
12 Articles for a No-Fail Budgeting Guide | Tricks and Tips for Life