Although these top 40 strategies are thorough, they serve only as an introduction to personal financial planning. It’s critical that you keep learning so you can take your financial affairs to the next level (in a positive direction, of course). A few easy ways to do so:

• Keep visiting the blog
• Read/periodically review Beyond Paycheck to Paycheck
• Look at other valuable unbiased financial web sites

However, while it’s important that you commit to continuing your financial education, it’s just as critical that you legitimately start taking action. The same way you can’t stay in school forever (even PhD’s eventually go to work), you won’t achieve your financial goals succeed solely by learning about money.

If you’re feeling a little intimidated, begin slowly by implementing one or two of the strategies discussed here or listed in Appendix A of Beyond Paycheck to Paycheck. As you feel more comfortable, you’ll gain momentum and the confidence necessary to check a few more items off the list.

You’ll make some mistakes along the way– everyone does. The key is to make small mistakes and to make them when you are as young as possible. Larger mistakes made when you are older and closer to retirement are much harder mistakes from which to recover.

# # #

Armed with the Top 40 Introductory Financial Planning Strategies, you now have a basic understanding of personal finance. You know the basics and can interact with others on a new level—even Gary. And, of course, you’re aware that what you don’t know can hurt you.

In addition, you now own a financial planning education you can use to achieve your lifelong financial goals. As with most things in life, implementation is the key to success. Having the necessary knowledge but choosing not to help yourself leaves you an unsympathetic figure. Unlike most people, you have an opportunity. But now, possessing this education, you have an additional burden, as you must choose between:

• procrastinating at your own peril, or
• accepting this opportunity and taking deliberate and confident steps to make your own financial success story come true.

Which will you choose?

“personal finance” “financial education”

You: Okay now I know you’re crazy.

No, it’s not a joke – financial planning can absolutely be an enjoyable experience. When you are confident with the plan you have in place, you get to enjoy the results. The sense of ownership and control over your own financial destiny can become mildly addictive.

You: Since right now I’m kind turned off by the concept of financial planning, “addictive” seems like a strong word.

Fair enough. But it’s addictive in a good way. For example, I enjoy watching my net worth fluctuate. Like everyone else I know, my net worth goes up or down whenever I check it. When it goes up, I am happy because I am wealthier.

You: Yes, that part is easy to follow. But when it goes down?

When my net worth goes down, I know that–for me–the cause is a drop in the value of my investments. (The other possible cause is that I spent more than I made. But I don’t do that, so I know that, for me, it’s from the results of my investments). Anyway, since I am always only a little ways away from another investment in the stock market, the recent stock price drop which caused my net worth to fall means I will soon be buying more shares at their new, cheaper price.

With my long-term horizon, I am comfortable with the expected hiccups in market performance. And so should you. These fluctuations provide us with a great long-term opportunity to “buy low.” Later on, you’ll learn how to “sell high” without ever having to time the market.

Now see why financial planning can be fun?

“personal finance” “financial education”

If you’re like most people, your financial inactivity is somewhat driven by the fear that personal finance is complicated. As I see it, this fear is primarily caused by two factors:

1. You were never taught the basics about money during school.
2. So far, the financial professionals you have been exposed to have been more interested in landing you as clients (and thereby selling you something) than teaching you the basics.

Both of these things are unfortunate, because the truth is:

Personal finance is easy.

When I first meet with folks who want to get a handle on their financial affairs, they are blatantly doubtful when I tell them that understanding money is easy. When I explain to them that their day jobs are far more complicated than managing their monetary affairs, they stare at me in disbelief. Yet, as readers of Beyond Paycheck to Paycheck already know, if you can handle subtraction, you can handle personal finance. After all, the most important rule in personal finance is to spend less than you make. You don’t need to know calculate pi or how to take a first derivative.

Now as you get more established financially (I am not talking about just getting started) certain, more advanced, parts of financial planning can be challenging. But so were parts of high school. Specific monetary issues can even become frustrating, but your job can be frustrating too. Yet most people get through high school and deal with their work-related frustrations admirably. (no post office jokes please)

Simply treat financial planning as if it must get done, and you will succeed.

You have already accomplished more challenging goals. But for many of those, you had a mentor, a teacher, or some kind of roadmap. Use this web site, blog, and Beyond Paycheck to Paycheck as your introduction and start by biting off a little at a time. You just might find, shockingly . . it can be fun.

“personal finance” “financial education”

If you’ve never invested before and the idea sounds intimidating, remember: you are already doing it.

You: That doesn’t even make any sense.

While you may not have made any financial investments yet, you choose how to invest everyday. For example, your daily activities are the result of a series of investment choices about how you’ll use your time. You choose to do certain activities. You decide not to do others. Throughout, you hope that your payback, in whatever form, is greater from the things you chose to do compared to those you decided not to do. Investing money works the same way–you choose among various financial options, hoping to meet your financial goals.

You: Okay, but that’s just time. What about money?

Well, if you have any money saved, you are investing.

You: No, I’m not. All my money is in savings.

Your savings account is, technically, an investment—just not an aggressive one. So even if you don’t choose to take your investing to the next level, you are making an investment decision with your savings account: you have selected one of the most conservative investment possibilities available.

You: “One of the”? What could be more conservative than leaving my money in a savings account?

There’s always the mattress.

Still, keeping all of your savings in a very low-risk vehicle such as a savings account will cost you. You’ll miss an important opportunity for growth compared to someone who chooses a more aggressive investment strategy.

Remember, don’t be afraid to invest. You already are. Soon, we’ll talk about why people should be far more relaxed about investment decisions and be able to live Beyond Paycheck to Paycheck. In the meantime, are you investing? Or are you living paycheck to paycheck?

“personal finance” “financial education”

Financial planning is not difficult.

You: Yes it is.

No, it isn’t.

You: C’mon!

Seriously. Want proof?

You: Sure.

I once scored more points during a high school intramural basketball game than I received on a calculus test later that same week.

You: That only proves you’re a very good basketball player.

Some of my very best friends would be happy to tell you otherwise. I scored a 16 on the calc test.

You: Wow.

That’s sort of like what I said at the time. But I’ve lived long enough to understand that my poor showing in calculus is now an advantage.

You: That’s some good spin.

Glad you noticed. I can assure everyone that you don’t need to know calculus, advanced math, or even like math at all to successfully manage your personal finances.

You: I guess that does make sense given your calculus experience.

Exactly. Now let’s talk about you. I know you can make it through Beyond Paycheck to Paycheck. Perhaps you already have. Was there anything in there you couldn’t learn?

You: No, not really. But there were certain parts that were more complicated.

Fair enough. Maybe you did need to read some sections more than once. Perhaps I didn’t explain those parts well enough, or maybe you were tired from a long day of work. But I’m not talking about the kind of confusion easily fixed with a re-read. Rather, where are the complicated formulas?

You: Subtraction was about as hard as it got.

The challenging graphs?

You: None, thank goodness.

There aren’t any, because financial planning isn’t difficult. It is not calculus.

You: It is not organic chemistry either.

Nope. Now admittedly there is plenty to understand, but use this blog and your copy of Beyond Paycheck to Paycheck as your ongoing reference guide. Also, use tools widely available on the Internet–at the web site of your 401(k) plan custodian, for example. Periodically visit totalcandor.com. Stay confident. You can do this.

“personal finance” “financial education”

Perhaps you dreamed of being a radio station shock-jock but wound up hawking contact lenses to eye doctors. Of your childhood friends, Ryan is now a high-powered executive and Jason works for the fire department. Karen became a teacher and Michelle remains a perpetual student.

That’s great. Job titles alone do not determine financial destiny. Many paths lead to financial success. Although the typical fire fighter’s salary is not extraordinary, there are wealthy firemen. Similarly, well-paid executives with maxed out credit cards are not to be envied.

A “lower than someone else’s” salary is no excuse for failing to make good financial decisions. Don’t feel sorry for yourself just because you make less money than your boss.

You: But if I only made a few thousand dollars more, it would be so much easier to—

Nonsense. Right now, someone is looking at you, wishing for your salary. The fact that you can’t save is mind-numbing.

You: You’re not really talking about me. I make only $XX,000 per year.

This is not for a different reader–I am still talking to you. Think about a recent immigrant who makes the minimum wage (maybe), yet still manages to send money home every month. Yes, even at $XX,000, your salary would present many additional opportunities for the immigrant’s family.

On the other hand, a high income does not grant anyone the right to spend recklessly and ignore basic financial planning principles. Regardless of salary, folks who spend more than their income are making poor long-term financial choices. Even the well-paid are unexpectedly laid off. Those without a savings cushion find themselves in bigger trouble faster, as their spending habits are much tougher to ratchet down.

Ultimately, your income is important, but your habits are much more so. If you’re happy with your chosen profession, congratulations. You already beat one set of odds, so enjoy. When you retire, your savings determine your lifestyle. The status of your former jobs won’t even buy you a package of Metamucil.

“personal finance” “financial education”

You: I just bought this whole life insurance policy yesterday. Was that a good idea?

It might have been, but I don’t know.

You: How come?

Well, I’d have a lot of questions to ask you before I could comment on what’s appropriate for your situation.

You: What kind of questions?

As in your income, assets, marital status, previous marital status, children, age of children, mortgage, other debts, degree of participation in your 401(k) plan, if it has a match, and so on and so on.

You: Well the guy who sold me the policy didn’t need to know all that!

No, not to sell a policy to you he doesn’t.

You: So did I get burned then?

I still don’t know because I still don’t know enough about you. But the fact that you’re nervous and asking me about a decision you made yesterday tells me that you may have good reason to be fearful.

You: So what should I do?

First, never make a financial decision you don’t understand. If you don’t feel comfortable with your understanding of something, have the person explain it to you again. If it still doesn’t feel right, sleep on it. It’s okay to be skeptical.

You: Really?

Absolutely. A good financial advisor never rushes you into a decision, especially if he wants you as long-term client.

Gary: C’mon, people, hurry up here. I got 15 others to see after you and I know they’re buyers. Are you in?

If you’re feeling sales pressure to make a decision quickly, it’s a decent indicator you might want to take a step back and talk it over with someone else. Taking care of your money, even in the presence of financial experts, is one way to be sure to live Beyond Paycheck to Paycheck.

“personal finance” “financial education”

You: Trusts aren’t for me–they’re for rich people, right?

Many people assume trusts are only for the extremely wealthy. And while there is certainly a place for trusts among the affluent, a revocable living trust makes sense for many people living a typical middle-class lifestyle.

You: How so?

A trust provides for a cleaner passing of your estate—large or small—to your designated beneficiaries.

You: I’m sorry. I speak English.

Sorry. In other words, a trust helps get your money and the things you own to the people you want to get them–and makes less of a mess in the process.

You: But why would I need a trust if I already have a will?

Unlike a will, trust assets avoid the costs and delays related to probate.

You: So it’s one or the other?

Nope. It’s often both.

You: Why would I still need a will if I have a trust?

Although you can pass assets through a trust, you cannot pass children. If you have young children, you need a will to make it clear who should take care of your children (become their guardians) should pass away. Furthermore, a will is used for things that you choose (or forget to choose) to put into your trust.

You: So I need both.

Maybe. Nearly everyone needs a will. Whether you need a trust will depend on several factors including your level of wealth and the complexity of your family situation (married, committed partner, step-children, etc.). That’s why estate planning is one area that often makes sense to talk through with an expert – usually an estate planning attorney.

You: So what now?

Although most people associate trusts with the extremely wealthy, the moral of today’s financial planning education is to be receptive to the idea that a trust may make a bunch of sense for you.

“personal finance” “financial education”

. . . that your heirs are going to be happy that you did not have one.

You: But I’m in my late twenties and no one is going to confuse me with a Rockefeller. What’s the rush?

Even if you aren’t likely to die with a large sum of money, a will can be critical.

You: Why?

If you have kids, for example, only a will can determine who will be their guardians in the event you pass on. A will, especially when you have either a family or significant assets (let alone both), is essential.

You: What if I die without a will?

If you die without a will (technically called intestate), then the state government determines everything from who takes care of your children to who gets your money (and things). The odds of the government’s decisions gelling precisely with your wishes aren’t too great.

You: Well I don’t agree with most of the decisions the government is making while I’m alive, so I guess that makes sense.

Fair enough. Don’t miss your chance to leave your family in good shape. Get a will.

We’ll talk about trusts and other estate planning documents, like powers of attorneys and health care documents, in the near future. For now, especially if you have kids and/or significant assets, get a will.

“personal finance” “financial education”

You: What should I do with my 401(k) money when I switch jobs?

Generally, you have four options for your 401(k) money whenever you leave your job:

1. Leave it there.
2. Roll it over into your new company’s 401(k) plan.
3. Roll it over into your IRA.
4. Take the money.

Choosing number 4 will never be the right move (the reasons why are another post for another day). Selecting options one, two, or three are all acceptable.

You: Okay, but which one of the three should I do?

Gary: Definitely number three, a rollover into an IRA.

You: Why?

Gary: So I can invest it for you.

You: So only rolling over the money into an IRA allows me to invest?

Gary: Let’s just say it’s the only way that I’ll be able to work with you. And it’s obvious you need my help.

You: Is this true?

Part of it is. A private commission-based financial advisor is unable to make money telling you how to invest money in your 401(k) account, because the money is held in a workplace retirement account. The advisor can’t access the money.

You: So what’s not true about what Gary said?

Two things. First, you don’t need his help to do a rollover.

You: But I’ve never rolled over a 401(k) before!

At one point you hadn’t drank beer, kissed a significant other, rode a bicycle, snowboarded, yet now all these things are second nature. Thanks to your financial education, you are now aware of the easiest way to get help doing a roll-over.

You: I am? Where can I get this help?

Any of the various brokerage houses you can open an IRA with, such as Vanguard, Schwab, and Fidelity will help you. They’ll help you with the paperwork for no extra charge.

You: For real?

Absolutely. The more money you successfully move over into your IRA, the more money you can invest with them and the more money they stand to make. So they’re happy to help.

You: What’s the second reason Gary is wrong?

There are more than two reasons Gary is wrong.

You: I mean about the whole rollover thing.

Okay. Second, a rollover to either an IRA or to another 401(k) plan may be appropriate.

You: Which one should I do?

Personally, I prefer to roll over the money into an IRA as it gives you all the flexibility you’ll need when it comes to investing options. Others prefer moving the money inside the new employer’s 401(k) account. You won’t go wrong choosing either option. The most important thing to know is that you can do a rollover and that you should never just “take the money out.”

You: The moral of the story?

Whenever you leave your job, either roll over your 401(k) plan into your new employer’s 401(k) plan or roll it over into an IRA. Doing so helps simplify your life because it gives you one less account to keep track of (if you leave it behind.)

Simpler is better because simpler gets done. Move your money where you know you will keep your eye on it. Invest an hour of time to roll over your 401(k) the right way when you leave your employer, instead of spending days trying to figure it out a few years later. Now that’s living Beyond Paycheck to Paycheck.

“personal finance” “financial education”