Your Financial Roadmap to Become Confident about Money and Build Wealth

When I moved out of my parents’ home for my first job, my savings dropped to $400. Ouch.

I was making $47k at the time while paying Boston rent and living expenses on my own. Even though I was making money with my “real world” job, I felt more broke than in my $100/week college job days. I didn’t have a clear financial roadmap, but I knew I needed more money in my account to feel more secure. The paycheck-to-paycheck cycle was not serving me well.

My first money steps

My initial financial plan included only buying two types of vegetables and the frozen orange chicken from Trader Joe’s as my weekly meals. What this plan didn’t account for was how the orange chicken as my only source of protein is literally not good for my body. So for some extra hundreds of dollars in savings, I was trading my health.

I was unintentionally building my “emergency fund” to have more financial peace, but I felt like there was more to wealth building than scraping pennies at Trader Joe’s.

So I scoured through any personal finance resource I could find and developed a game plan. My new strategy was not without any faults or mistakes, but it gave me a clear roadmap for what I should work towards. It also led to concrete steps I could take to achieve each milestone.

Fast forward a few years- my net worth rose from $400 to six figures.

It was not a fast journey, but an intentional and strategic one. The first few steps were hard, but it got easier as I stuck to the plan and developed habits. Also, I realized when I have more money, it’s easier to make more. Going from $400 to $1k felt harder than going from $5k to $10k.

So if you are like me a few years ago- wanting to get better at money but feeling uncertain about where to start, keep reading. This will be your guide amidst all the financial dilemmas, advice, and trends out there. Make it your game plan and have fun hitting each milestone.

Before we go further, how do you measure wealth?

Let’s make sure we’re on the same page. I talk about taking small steps to wealth, but how am I defining that?

While there is an actual definition of “wealth,” my definition is having financial independence. It means to afford the life I want without being tied to money. This will look different for everyone. But for me, I want to reach a point where I can choose to do what I enjoy without clocking in 9 to 5 for a soulless corporate job. I know that resonated with you corporate bots out there.

At the same time, I don’t want to be so focused on securing my future 40 years from now that I forget to live in the present. My mom has always said, “There is no tomorrow without today.” So how do I prepare myself financially while living a life I love?

Tracking “Net worth”

Since feeling financially comfortable can be subjective, I like to use some kind of benchmark that is quantifiable and objective. Besides how I’m feeling (like am I anxious about paying my bills? Am I feeling secure? etc.), I track my wealth through my net worth.

Net worth is the value of your assets minus your liabilities. Assets are what you own, and they bring money into your pocket. For example, assets can be the value of your checking and savings accounts, retirement accounts, real estate, etc. On the other hand, liabilities are what you owe. So they can be student loans, car loans, home mortgages, car payments, etc.

My husband and I still spend significantly on what we like, but we track our net worth across all our accounts to ensure we’re on the right path. So put in a boring way, the over-arching goal of this roadmap is to increase our net worth by owning more and owing less.

The Game Plan:

So now that we’ve established how we can measure wealth, let’s dive in. If you are not even sure how you are doing financially, this is a great place to start.

The steps outlined in this roadmap will give you clarity on where you are right now vs where you can be. Going through each of the steps will make you feel more confident and secure about your finances.
And with each milestone, your accounts will grow in value and get you closer to your best financial self.

Step 1: Build an emergency fund (Even a baby one!)

So some personal finance plans may put this step after paying off debt or getting the 401k match. But I think having even a “baby” emergency fund is crucial for staying calm and away from debt.

An emergency fund is essentially a safety net for unexpected expenses like car or home repairs, loss of income, or literal medical emergencies, etc.

Your ultimate goal should be to save 3~6 months of your monthly expenses. Now, if you are not sure how much you spend each month, that’s where you’ll need to start. My expense tracker can help you find this number.

For example, if you spend about $3k every month for your rent, food, insurance, and any necessary costs, your emergency fund should be at $18k. This would cover about 6 months of living expenses.

Before getting overwhelmed by the big number, I recommend starting a baby fund! A good initial goal is $1k.

Once you have this, you can gradually increase this amount until you hit the end goal. If you do run into emergencies along the way, you’ll be thankful you have the means to cover those costs. Whatever amount you take out, you will want to re-fill for future emergencies.

Step 2: Get your 401k match

Again, people may differ on this step. However, I personally think once you have a baby fund (outlined in #1), you should get your 401k match. You do not need to wait until you have your full 6 months of living expenses in your savings because you want this free money. 

401k is an employer-sponsored retirement account that often comes with an employer match. However much you choose to contribute to this account, your company will match up to a certain percentage of that. 

For example, let’s say your employer matches 50% of your contribution up to 6% of your salary. Your salary is $50k, and you decide to contribute to get the maximum match.

Since 6% of your salary is: $50,000 x 6% = $3,000,

And the company is matching half for each dollar up to this amount, their contribution is: $3,000 x 50% = $1,500.

And don’t forget, this would be in addition to your contribution: $50,000 x 6% = $3,000.

So voila, there it is. Your 401k just got $4,500 (spread out over your paychecks), and $1,500 was free money from your employer.
Does that sound amazing or amazing? So as soon as you have some cash for emergencies, make sure you are fully leveraging this 401k match.

And don’t forget to actually invest your 401k– this is an investment account, not a place to store your money.

Step 3: Pay off high-interest debt (credit cards!)

Debt. No matter what advances you make in saving and investing, your finances will not improve if you have high-interest debt.

Don’t get me wrong, I love credit cards. I use them for almost all my transactions. But they can be one of the biggest hindrances for your wealth-building journey.

Many credit cards come with interest rates that are above 20% APR. If this number means nothing to you, it should. The annual percentage rate (APR) is the cost you pay for borrowing. So with 20% APR, you are paying 20% extra on your unpaid balance every year. This can quickly add to your interest if you don’t pay your balance by the due date in full. 

If you have credit card balances you’ve been ignoring or running away from, it’s time to face them. Gather your statements and get a clear picture of the number you’re working with. I know, it can be anxiety-inducing, but knowing your starting point is key.

Debt can feel crippling, but millions of people have come out the other side, paying off hundreds of thousands. If they can do it, you can do it too.

Step 4: Save more in your emergency fund

Ok so if you have some cash for emergencies, you are getting your employer’s 401k match, and you have paid off your high-interest debt– time to put more into your emergency fund!

While a baby fund of $1k is a good start, it is not a big enough cushion in the long run. Remember in the beginning I mentioned up to 6 months of living expenses is a good goal? Once steps 1 through 3 are covered, you want to aim for this number.

I know that saving is not fun, but it does feel damn good to have money saved. Create small goals and aim for another $1k saved. Then build up from there until you reach the amount you need to fully feel comfortable. 

Step 5: Invest in retirement accounts

“Retirement accounts? I’m already contributing to my 401k!”

Did the above sentence run through your head? Many people think that 401k is the only retirement account that exists or that they need, but wrong. There are other retirement accounts that aren’t tied to our employers. We can separately open such accounts (like Roth IRA) to further supplement our retirement income.

Retirement accounts have specific tax advantages that help us invest and grow our wealth, specifically for when we retire. They essentially put more money into our pockets than leaving money in savings or individual investment accounts.

For us millennials and younger generations, our 401k income may just not be enough. Or maybe we just don’t want to work for that long (this is me)!

Again, don’t forget to actually invest the money after you open retirement accounts- that’s the most important part!

Step 6: Pay off low-interest debt

America and debt. Name a better duo!

We often forget that our monthly expenses are riddled with debt like student loans, mortgages, and car payments. My personal belief is that completely paying off debts with much lower interest rates (less than 5%) is not a top priority.

However, having any kind of debt does impact your net worth because you owe more. So it’s important to tackle this if you have extra cash for it or make sure that you have a realistic repayment plan.

Take student loans for example. If I have already achieved Steps 1 through 5, I may consider paying off my student loans. Especially if that would make me sleep better at night. But if it wasn’t giving me anxiety and the interest rate is 3-4%, I may just diligently pay it off every month. Why?

Because if I can comfortably make my monthly payments and have money left over, I will likely be better off investing with the extra sum (more on this in Step 7). This only works though if the interest on your debt is around or less than 5%, and you plan to use that money for long-term investments of 7-10% average return.

If you have student loans, mortgages, car payments, or any other debt with higher interest rates than what you’d profit from investments, focus on these debts. Or have a hybrid approach of putting more of your money towards debt and still investing or saving the leftover.

Step 7: Invest (and save)

Congratulations, you made it to the last step! If you are at this last step, it means four things:

1. You have some financial cushion with your emergency fund
2. You are actively preparing for your retirement years
3. You don’t have debt (or have very manageable debts with low interest rates)- meaning, whatever you make is yours, not some loan shark’s
4. You are prioritizing your financial health and already know very important financial concepts

Now give yourself some credit for crushing your financial milestones! This is amazing progress, and you are in a great position to invest.

To clarify- the “investing” I am talking about here is investing outside of your retirement accounts. Don’t forget that you are already or should be investing through your 401k and Roth IRA (or related accounts)!

This last step consists of opening an individual brokerage account to focus on your long-term wealth building. I say long-term because if you have big expenses coming up in the next few years, that should be in your savings. But if you are chilling with decent savings, absolutely go open an investment account!

I will have a post dedicated to why and how I invest.

Final words

There it is! Your financial roadmap for 2024 and beyond. Of course, there are so many other topics that make up our financial health (taxes, credit cards, specific investments, etc.), but these are the essential milestones.

Amidst all the money talks, I hope this guide can keep you grounded in the basics. Remember, it only takes some simple steps to be your best financial self!