How To Make A Money Plan
This is Part 1 of our series! There are a few steps but we break down how to make a money plan that won't make you want to give up and eat popcorn.
What is a money plan?
It’s a roadmap for your money but wayyyy less scary or time-consuming than you think. So much of it depends on where you’re at and where you want to go.
To do a full money makeover in 2022, you may want to address your budget with a budget planner, take a look at your mindset & intentions for the year, check your emergency fund (read ‘f$ck it fund’), and set up your high-yield savings account.
Once you’ve got that figured out, it’s about having your money make you more money. Ladies, we got wayyyyy more to be doing than sitting around working for the man, getting unpaid and gender pay discrepancy. So another part of the money plan is figuring out where you want to go. We’re talking about exploring different types of passive incomes that work for you, maxing out the retirement accounts, and learning how to invest - which is something you can do right here, with us!
We’re covering some of the basics to get you started. Why don’t you give it a go while you read? 🙂
Where are you at with your money?
Heyyyy I know, the first thing you want to talk about is anxiety over money, right? Right? This is soooo totally your favorite topic. Ok, we joke, we hate anxiety or even talking about it. But bear with us for a second as we touch on it lightly. We gotta talk a little about money and anxiety so we can overcome it.
As anxiety-inducing as it can be to take stock of your life and all your money - even just for yourself to see 😬 - to move forward and do better this year you need to figure out exactly where you’re at. How can you know where to go if you don’t know where you’re at now? Have you tried using Google Maps when your iPhone’s internal compass is broken? Yeah, we think not. And if you haven’t, then you’ve never known the pain of dropping your iPhone and breaking it.
Let’s start at...
Step 1: List out all of your accounts and their balances.
Do you have any…
- Checking accounts?
- Savings accounts?
- Retirement accounts?
- 403bs? (and no, that does not say “bs” lol)
Got any other investments? Let’s say things like…
- ETFs, Index Funds, Mutual Funds?
- Whoa let’s get crazy with Crypto?
- Some kind of robot advisor? *Beep boop*
- NFTs that you think are *actually* worth something?
Own a property? Well, property is a weird one because you have to consider the balance on the mortgage… But since we define an asset (look away, accountants and bookkeepers) as anything that can give you money or value, we’ll count the value of your paid-off portion of your home on this one…
Cool, these are your assets. Again, an asset is anything that has perceived value or money. You with us? Cool.
Step 2: Let's take a look at your debt.
Now let’s get to grips with your debt. That’s the money you owe. Things like…
- Credit card debt
- Student loans
- The remaining balance on your mortgage
- Car payments
- That splurge purchase that you had to charge on Klarna because someone on TikTok told you that you gotta have it (it’s ok, we’ve all done it)
A brief aside here… not all debt is “bad” debt. Debt, if it’s in the effort to help you create more assets, can be good. Things like a small loan for school or to jumpstart a business are all good kinds of debt because you’re reinvesting in yourself. And BBG, you are THE most important asset there is in your life. Don’t you forget it.
Alright Becky and Reena, we’ve got our assets and debts… now what!?
Cool. With the information you’ve gathered you can figure out your net worth! Oh, you thought net worth was reserved for the Kylie Jenner’s of the world? (I mean, we may personally have a few less 00s compared to Kylie Jenner’s net worth 😂) But no, you have your own too! It’s simply this net worth calculation:
Total Assets - Total Liabilities (aka debt) = ❓❓Your Net Worth
There’s no hard & fast rules on how much net worth you should have at say 30 or 35 or 60. That depends on your goals. Are you trying to FIRE? Retire at 70? Take a sabbatical?. Regardless, you need to know where you’re at now and make a plan to see if you can get that figure increased.
Talking of increasing that figure, the next check off the list for the first part of your money plan is your credit score.
Learning how to check your credit score is a biggie too….
Another good check in at the beginning of the year is your credit score. Register with Equifax, Experian (US & UK) or TransUnion to find out your score. And yeah, we know you don’t want to do it so let’s help you stay accountable to that because seriously, you gotta know your score. If you don’t know it, you can’t make it better. And if your score is low, it’s going to end up meaning crappier credit cards, higher interest loans, and less ability to borrow….wait, that last one sounds like a blessing in disguise… So if you want that credit card with the free lounge passes in airports, figure out your credit score and work on keeping it there or making it better.
What’s considered a good credit score? The average credit score in the US is between 650 - 750 points and this is a pretty solid score. So a good credit score is one that site between these numbers - or higher! With that, you’ll get good credit card offers, lower interest rates, and generally be considered a “good repayer.” But aim to be as high as possible. The highest credit score is 850.
Getting it as high as possible means you want to make sure you’re not passing on credit card debt over month to month and paying your commitments on time every month. If you’re considering buying a house in the future or even renting then a good credit score is important!
The final thing for part 1 of your money plan is - Goals & Intentions
Now that you have a pretty good view on where you're at right now with your money. Let’s take a minute to eat some ice cream, or whatever your vice, and celebrate. Go on. Do it now.
Ready now? Good. We’ve worked out the number of accounts we have, where they’re at, and what's in them. We’ve seen and understood our debt, calculated our net worth and discovered what our credit score is.
Next up is setting your new year money goals and intentions. Some of these might be things you want to do that require money or the actual act of managing your money. They’re super personal to each of you, but here are a few we’ve considered over the years:
- Practice mindful spending - take a beat before making purchases.
- Set up a high yield savings account and pay in 10% of your income each month.
- Go down to a 4 day working week by the end of the year.
- Buy a vacation home.
- Learn to invest and make the first move.
- Figure out how to start investing in stocks.
- Increase my net worth by 5%.
That’s a wrap on part 1 of our 2022 money plan. Now you’ve figured out where you’re at with your money & where you’d like to go, in part we are going to cover tips & tricks of how to get there.