I want to improve my finances, where should I start?

Range Certified Financial Planner
Range Certified Financial Planner
November 13, 2022

Personal finance is just that, personal.  There are so many choices to make that people often get overwhelmed and end up doing nothing.  We get it.  Whether you just landed your first job or have been saving for years - the following guide will help you decide where to start and what to do next. 

We’ve broken down our recommendations into digestible steps below, please skip any steps that aren’t relevant to your personal finances.

Determine your monthly cash flow 

Using a financial planning app such as Range, a spreadsheet or even a pen and paper - figure out your monthly income and expenses (think housing, utilities, grocery, etc.)  Do you typically have a surplus of cash each month?  Great!  Let’s move on.  

No need to worry if you don’t.  This is still a terrific opportunity to gain awareness around your spending habits and to make some changes. 

Ensure you have some wiggle room

Our planners recommend keeping at a bare minimum enough cash on hand to cover one month of expenses plus $1,000.  This is typically enough to provide some peace of mind for the unexpected (household repair, insurance deductible) while still allowing you to focus more income on debt payments, if applicable.  

Take advantage of 401(k) matching contributions

Does your employer offer a matching contribution on a 401(k) or other retirement benefit?  If so, make sure to enroll in the plan and contribute enough to get the full match.  It’s effectively free money and grows tax-deferred!

Reduce high-interest credit card balances to zero

Paying off high-interest debt as quickly as possible will help you avoid the compound interest trap and can meaningfully reduce financial stress.  Try to focus on cards with the highest APRs first. 

Establish a true cash runway 

Now that your consumer debt is paid off you can begin to focus on building a more substantial cash runway.  We recommend increasing your cash on hand (step 2) to at least 3-6 months of expenses.  This will help protect you from a more sustained loss of income and provide greater flexibility.  Pro tip: use a High Yield Savings account to earn more interest while keeping your funds accessible and insured (up to $250k FDIC insurance).

Contribute to other tax-advantaged accounts such as a Roth IRA

As investors, there are limited opportunities for tax savings - so why not use them?  A Roth IRA allows you to invest up to $6,000 (2022) of after-tax money that will grow tax-free and can be withdrawn tax-free in retirement.  

Save even more for retirement

Still with us?  The next step is to increase your 401(k) plan contributions up to the annual limit of $20,500 (2022).  Congrats!  Your retirement accounts are now maxed out.

Open a taxable brokerage account

For those who prefer a hands-on approach, a traditional online brokerage account is your best choice because you select your investments.  If you’re more of the “set it and forget it” type, then perhaps a robo-advisor would better meet your needs.  In either case, we recommend using low-cost ETFs and investing for the long-term.  Although there are no special tax savings - one benefit of a regular brokerage account is you don’t have to wait until retirement to access your investments penalty-free.  

Make additional mortgage payments 

The last step is paying down any low-interest debt like a mortgage.  This isn’t a huge priority because you’re likely to generate more in investment returns than what you’d save in interest by making extra payments on the loan.  However, it’s important to assess your own situation and whether you would prefer to be completely debt-free.  

Personal finance doesn’t have to be overwhelming.  Get started today and see how incremental changes can make a huge impact.  

Range is here to help.

With Range, you can work with our team of Certified Financial Planners and get answers to all your money questions.  

Get started with Range today

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