Have you ever come across contradicting money advice? Does a difference of opinion leave you wondering “who you should listen to”?
“And what money advice is actually right for you”?
See the thing is that among financial experts… well there is a difference of opinion.
The list of potential money advice is endless.
Aside from the general differences and preferences.
A difference of opinion in money advice can be a result of different money stages.
There are different stages of the money management journey. And where you are and where you want to be dictates what money advice is relevant to you.
Of course there are different approaches to money management but there are also different stages.
These stages can be impacted on your money goals, relationship with money, and your current financial standing.
Everyone is in a different stage of their money management journey.
These stages consist of novice (beginner), in between (intermediate), and figured out (advanced).
Money advice for a : Novice
If you are a novice you might resonate with:
- Financial fears.
- You don’t have a budget.
- You find yourself over budget consistently.
- You don’t track your expenses.
- You don’t have a savings account.
- You have a savings account but it doesn’t actually make you feel safe.
- You haven’t given retirement or retirement planning any thought.
- You believe that your twenties and thirties aren’t for planning retirement but instead of living now.
- Your money controls you and the decisions you can make.
- You don’t know how much debt you have.
- You don’t know where to start when it comes to actually eliminating debt.
- You have a hard time making sense of the numbers and facing them.
- You believe that you will pay off debt eventually since you can afford the monthly payment.
Action steps for a : Novice
If despite all these feelings, thoughts, and actions you do want to turn your financial fears into financial control. Then there are specific steps that should be taking.
And money advice that is actually applicable to you.
Being a novice means you should be focusing on establishing the foundation to financial empowerment
Face the numbers.
Start compiling, reviewing, and adding up your debt, savings, expenses, and income.
You may have noticed that I didn’t start with income first. That is because if you have debt, you should face the hardest part first.
Review your credit score and report.
While you are compiling your debt and expenses, you should still ensure that there isn’t any missing components.
This can be confirmed by checking your credit. But you also want to ensure that there aren’t any discrepancies.
This is also an important step because you want to take action to improve your financial picture.
Grab your credit score and credit report for free with Credit Sesame. It’s an amazing free tool that can not only help you monitor your credit but provides tips on how you can make improvements.
Check it out, here.
Related: How to improve your credit score.
Have some type of spending plan.
Create a spending plan.
This plan is all about understanding where your money is going. And prioritizing your spending based on what you value.
As well spending consciously and overcoming the bad connotations that come with “budgeting”.
The truth is, everyone needs a budget and while some money experts that are well off (aka financially stable) will say that they don’t believe in budgets or limitations – the truth is everyone has one.
There is a limit to the amount of money you can spend. The key is to spend with what you value in mind so that you don’t feel deprived.
Related: What to do – when you go over budget.
Create a plan to pay off debt.
Evaluate how much debt you have. And how many different lenders or sources of debt you have.
Then you can prioritize what you want to pay off first, how much you can contribute per month, and set a deadline of when you will be debt-free.
Establish an account buffer.
While you should always try to account for your expenses accurately. Sometimes your insurance goes up, your bank charges you a random fee, or the cashier at the store accidentally charged you twice f0r something.
The bottom line is that having an account buffer to checking account for the ins and outs will provide you the peace of mind you need.
And best of all, avoid overdraft fees.
Money tip: How to build a checking account SUPER fast.
Establish an emergency fund.
Having a small amount stashed in case of an emergency is vital in demolishing debt but also in staying debt free.
It’s one of the most discouraging moments when you are working towards paying off debt and then a setback happens. It’s quickly likely that without an emergency fund you would end up right back in debt.
A setback could prevent you from making your usual debt payment. Or actually result in using a credit card to cover the expense.
The typical emergency for the average American costs $1,500 to $2,000.
Over the course of a year that’s a saving amount of $125 to $167.
To put that into perspective.
If you eat out often, that’s comes down to skipping a dinner and drinks date once a month and saving that money instead.
Or using these money saving tips to save money everyday without skipping.
Of course this isn’t enough of a buffer to cover a job loss, but it’s a step in the right direction.
Eliminate credit card usage.
At the beginning of a financial journey a credit card can be a huge set back because there is constant temptation to use it.
Instead of using it to earn points and as a result create more debt.
Cut it in half and avoid using it until you are in a different stage of your money management journey.
Side note: Don’t cancel the credit card or close the account. Doing so negatively impacts your credit history and score.
Pay yourself first.
Make your contributions to your savings and retirement accounts before paying your monthly living expenses. And before you start spending your disposable income.
Shift the way you calculate your discretionary spending. In order to spend the money you have left instead of money you don’t actually have.
Then do yourself a favor and automate your contributions to your savings and retirement account.
If you have done this manually previously you know that there is always an excuse to avoid the contribution, forget it, or contribute less than need to meet your money goals.
Consider adopting the cash diet.
You’ve automated all the expenses that are fixed and paid yourself first. Check.
Want to take that a step further?
Consider using the cash diet for things you tend to overspend on.
You know… groceries, dining out, clothes, and treats.
Using cash for groceries or discretionary spending can be extremely helpful.
This method can help you grasp how much you are actually spending. Because most people.. well they don’t know.
Super cute cash envelopes, here.
Money tip: How to even start a cash envelope system?
Money advice for the : In between.
If you are in between you might resonate with:
- You have an established budget. Or spending plan.
- You are in the process of demolishing debt.
- You understand the different debt instruments that can be used.
- You have established an emergency fund. And are working towards taking it to the next level.
- You have established a retirement account. But maybe you don’t have enough or aren’t contributing as much as you need to according to your goals.
- You struggle with the debate of savings less and paying more towards debt.
- You want to make more money. But believe that the traditional route of doing so it going to take forever. (You just might be an undiscovered side hustler).
- You struggle with treating yourself or continuing the course of conquering your finances.
- You want to go on vacation but wonder if that’s a good idea since you have debt.
Action steps for the : In Between
Being a in between means you should be focusing on continuing to make progress towards conquering your finances.
- Establish a healthy emergency fund. One that will help you in a worst case scenario. In the beginning of your money management journey you established a bare bones emergency fund which is a great start and the foundation to creating a healthy one. Continue to contribute and establish one that is three to nine months’ worth of income.
- Live below your means. Comfortably spend less than what you earn.
- Prioritize what you value and spend consciously. Make sure that your expenses and the way you spend money correlates with what you say is important to you. This avoids the struggle between treating yourself and feeling deprived.
- Master your spending plan and stick to it with ease. Budgets can change, evaluate yours. Evaluate that your budget that takes into account the things that make you happy. And contributes to your money goals.
- Continue to demolish debt.
- Understand how interest is calculated and how expensive it actually is. With the understanding of interest you will know why avoiding it and planning your purchases is so important.
- Explore the opportunity to make extra money whether it’s with a raise. Or finding a side hustle that can supplement your goals of being debt free.
Money advice for the : Figured out.
If you have it figured out you might resonate with:
- You have found ways to increase your income whether it’s with raises or a side hustle.
- You don’t feel deprived by your “budget”.
- You have goals or want to be financially free.
- You don’t have debt. Except for maybe a mortgage.
- You understand the importance of saving for retirement early.
- You have a good contribution toward retirement.
- You don’t wonder where your money is going.
- You don’t wonder how you would pay for an emergency.
- You have financial control. Your money doesn’t control you.
- You use credit cards to your advantage.
Action steps for the : Figured out
Being the one that has it figured out means you are making progress. You understand financial empowerment and are focused on financial freedom.
Your money goals have given you the power to take action towards getting what you want.
The steps to continue this journey include:
Calculate your net worth.
Be clear of what your net worth is, (what you own minus what you owe). At this stage you don’t have debt therefore depending on if you own a home or not, this number should be positive.
The only way to make progress on your net worth is by knowing where you stand.
Check your net worth for free with Personal Capital. You can even use this account to track investments and budget.
Evaluate your credit.
Check your credit score and history every few months to ensure that your standing is where you believe it to be.
Credit Sesame, is a great free resource to monitor and improve your credit score and report.
Additional action steps:
- Increase the contribution to your retirement and investment accounts. The level of increase is a personal choice however, overtime you should be increasing the contribution.
- Diversify your income. Make a commitment to create multiple sources of income whether it’s with a day job and a side hustle, creating a business, or even having rental income. Any wise investor would say that you never want all your eggs in one basket. Not to mention having several opportunities to earn income speeds up the process of achieving your money goals.
- Use interest to make you money. The earlier you start contributing to a retirement account and continue to increase your contributions the more opportunity you have to earn interest over a longer period of time.
- Credit cards. Using credit cards to pay for your expenses or discretionary spending can be an opportunity to earn points and rewards. While a novice wouldn’t be doing this because of the temptation to overspend. Someone who has it figured out and spends consciously should take advantage of the potential rewards if that’s important to you.
FREE money tool for every part of your money journey.
- Paribus – to find out if a recent purchase has experienced a price drop.
- Ibotta – to earn cash back on groceries, toiletries, and even travel. Bonus: $10 in your account just for signing up.
- Trim – A personal finance assistant, that will help you find forgotten subscriptions. And cancel them for you if you no longer want to pay for them.
- Ebates – so you can shop online without the guilt. Earn cashback on your purchases. Bonus: $10 when you sign up here.
- Honey – Do you shop online and forget to add coupons? Yeah that happens a lot to most. Honey adds coupons to your online carts.
- Gas Buddy – to help you save money on gas. Gas Buddy will tell you the closest gas station with the best prices.
The bottom line is that the money advice you should take is strictly dependent on where you are in your money journey.
Not every piece of money advice is applicable to you and your money goals.
There is a reason why it’s call personal finance, it’s because it’s personal to your stage and what you value.
Remember that before you start implementing money advice you read.
Does different money advice leave you wondering how to implement something that will help you get closer to your money goals? What stage are you in your money management journey?