Creating a Financial Game Plan

Written by Tori Dunlap of Her First $100K 

As a personal finance creator and coach, the number one question I receive is, “Tori, where do I start?” If you’ve ever looked at your big financial dreams and thought “how the heck do I even get there?” –– this article is for you. 

Whether you’re a single mom trying to pay off debt, a college student who has no idea how to budget, or a 30-something realizing that they never made a plan for retirement, there are universal guideposts to follow to get you back on track and crushing goals. My favorite saying is “personal finance is personal” and this journey is no exception, however, the steps below are for anyone and everyone hoping to build a brighter financial future.

So, how DO you get started? Pull up a seat and let me introduce you to The Financial Game Plan.

^{Tori Dunlap of Her First $100K} 

The Financial Game Plan is my checklist for working through your financial goals and figuring out your next steps. No matter if you’re a budgeting queen, investment pro, or absolute finance newbie, this checklist will guide you through everything you need to have in place to make your financial goals achievable.

Step One: Emergency Fund

When we start looking at a financial plan, the first thing I ask my clients is, “do you have an emergency fund, and how much is in it?” The emergency fund is the foundation of your financial plan –– whether you're a college student working a part-time job or a multi-millionaire, you need an emergency fund. 

Depending on your comfort level, I recommend putting three to six months’ worth of expenses into an emergency fund. These expenses should cover everything you need to survive –– housing, food, ongoing healthcare costs, minimum debt payments, and utilities. Most personal finance experts recommend this amount because it should cover you both in case of a pricey emergency, like your car transmission going out or losing your employment.

An emergency fund gives you peace of mind when the inevitable stuff hits the fan. This fund provides you a soft place to land when the rug is pulled out, and trust me when I say –– it makes getting back up a heck of a lot easier.

Step Two: High-Interest Debt Payoff

After, and only after, getting your 3-6 month emergency fund in place, turn your attention to high-interest debt.

Paying down high-interest debt can be one of the hardest parts of getting on track financially. Debt often brings up feelings of shame –– but it really, truly shouldn’t. The average American has $90,000 of debt (though some of that is mortgage debt), but younger and younger generations are tacking on astronomical debt through student loans. I share this information, so you know you are not alone, and it’s just as likely that your neighbors and friends are also working on paying off their debt.

My preferred debt payoff method is what’s called the Debt Avalanche. Getting started is easy –– list out all of your debts with the name of the loan, the interest rate, and the amount owed. Once they’re all written in front of you, list them in order of the highest interest rate first. This highest interest debt should be your #1 priority for pay-off. That means that every other debt gets a minimum payment only. Every extra dollar you have to throw at your debt goes to that first debt on your list.

Once your highest interest debt is paid off, start applying those extra payments to the second debt on your list, and on and on. This method of hyperfocus helps you pay down the debts that are crushing you the most –– and focusing on one helps you stay motivated while staying current on your other payments.

Step Three: Low-Interest Debts & Investing

Step three is a two-parter –– once your high-interest debts are paid, you’re going to turn your attention to low-interest debts like student loans or car loans. We focus on higher interest debts first because they accumulate the most interest and therefore grow the fastest.

An alternative method to the debt avalanche is the debt snowball, where you pay your smallest debts first (regardless of interest rate) and “snowball” the payments as you tick each one-off. Depending on what works best for you psychologically (some people prefer the win of paying off the small debt quickly to tackling a larger high-interest debt first), either method could work. 

Once you’ve gotten your higher-interest debts out of the way, it may be time to consider investing! When it comes to investing, I can’t tell you how many clients and friends have admitted that they thought investing was for “old people” and didn’t realize that investing isn’t just for more wealthy individuals. A great place to start if you’re new to investing may be a tax-advantaged retirement account like a Roth IRA. Tax-advantaged simply means that this account grows tax-free since you’re using after-tax dollars to invest. These accounts are easy to set up, and you can start with as little as $50 a month.

A Roth IRA has an annual contribution limit of $6,000 and does have income caps ($140,000 a year for individuals, $208,000 a year for joint filers), and you’ll only be able to access your money tax- and penalty-free at 59 ½ years old.

When it comes to investing, prioritizing your retirement funds is key. As you age, whether you retire because you want to or you have to, this nest egg will help provide for you in the most expensive decades in your life.

Step Four: Long-term Savings Goals

Once you’ve paid off your high-interest debt, started funding your retirement, and have your emergency fund tucked away, it’s a great time to start planning for your future savings. Some examples of long-term savings goals are buying a home, investing in rental properties or other real estate, big vacations, weddings, parties, and more.

Now, you don’t have to wait to start contributing to these goals (I am not big on the whole deprivation thing), but this is the time when you can really turn up the gas. You may have been only putting aside 10% a month towards savings goals like these prior –– what might it look like to set aside 20% or 30%? You’d be amazed at how much more you’re able to save for now that your high-interest debt is out of the way and your retirement accounts are maxed.

As a final note on long-term savings, there are multiple accounts you can use for these goals depending on how far out their scope is. If your goal is in the next 3-5 years, a CD or money market or even an HYSA might be a good container.

The Exception: 401k Matches

Wait! There’s an exception to the system above? Indeed there is.

If you are offered a 401k match from your place of work, take it and contribute each year up to that match. That is FREE money, and you can’t do anything else with it anyway, so you might as well take advantage of it for your retirement. I’d still recommend getting your emergency fund in place, but as a general rule, I don’t want you leaving free money on the table.

Once you’ve passed step 3 and into step 4, you can start contributing up to the max contribution in your 401k. 

There you have it –– the financial game plan. Some steps will fly by, and others will be a struggle. Remember this –– personal finance is personal. You’re the only one who can take your unique journey, so enjoy it