“Spend less than you earn.”
“Pay yourself first.”
“Avoid all debt!”
If you ask a personal finance blogger (or your dad) for their best piece of money advice, one of the gems above is sure to come up. And for good reason. They’re all important, and every one of them will help you improve your financial life. But let’s say you’re mired in debt, have nothing saved, and are grasping for a life raft. You’re overwhelmed, overburdened and are ready to sucker punch the next person who tells you that you really should be contributing to your 401(k).
To that person I say: pick ONE financial goal and pursue it doggedly. Want to build up an emergency fund? Fine, make only minimum payments on our debts until your savings account is at a level that makes you comfortable. Want to pay off a credit card? Funnel all your extra funds to that card until it’s toast. Just pick something and do it, then move on to the next most important thing.
Why just one goal? Why not put some money into savings while you’re also paying off your credit cards and putting some money into that damn 401(k)? Because I think that when people are first starting to learn about personal finance and all the things they should be doing with their money it becomes very easy to get overwhelmed, to get paralyzed with all the choices to be made, which “expert” advice you should be following. I know I felt that way. I wish that someone had told me: it doesn’t matter! Just use the energy and enthusiasm you’ve built up in doing all this research and get started!
But where to start? How do I pick a goal?!
I can’t prescribe a set of steps for financial success that I think is appropriate for everyone, a la Dave Ramsey. One of the major criticisms of Dave Ramsey (that I think is very valid) is that his “baby steps” make a lot of assumptions and are very inflexible. His plan fails to take the wide variety of personal circumstances that people are coming to – and from – into account. I’ve always felt that there was something condescending about the way Dave Ramsey so rigidly plans every aspect of his followers’ financial lives, as if they’re not smart enough to actually put some thought into their choices and, you know, make choices. So I won’t say that building an emergency fund or saving for retirement or paying off the car is what you should do first. You have to decide what most important for you to do first.
Just one thing at a time, please. But seriously: do it.