Budgets For Beginners

flyingA reader asked for simple tips for starting out with financial management.


#1 – track everything you spend in a month

You may be surprised at the comfort that “knowing” gives you. The anxiety of “not knowing” is usually huge.

#2 – make a list of everything you owe, the minimum payments, and the rate of interest on each account

#3 – after you pay your monthly essentials, surplus cash goes to eliminate your credit card accounts (highest rate to lowest rate). Pay them off and close the accounts. Make a minimum extra repayment of $100 per week on the account with the highest rate.

#4 – saving (or debt repayment) is best done weekly, and automatically – for Americans, an IRA is a good option to consider. If you’re unsure what to do then have each adult in your house stick $100 per week into a target date retirement fund with a low-cost provider, like Vanguard.


The habit of weekly savings is powerful.

I helped a friend repay $10,000 in two years by using 100 weekly checks – her net worth when we started was negative $10,000. All she had was her clothes, her computer and a debt she owed. If she’d continued the savings habit then she’d have a portfolio of $75,000 now.

$100 per week from 18 to 62 years old will grow to $720,304 (5% compounding).


Financially secure parents/grandparents – consider matching earned retirement savings, this will help you to avoid supplementing consumption.

$100 per week from 12 to 30 years old will grow to $150,000 (5% compounding).


How much should you save?

If you want more info on saving for retirement then Bernstein’s ebook is a good one – it’s $0.99 on Amazon right now and a quick read.