7 Key Steps To Glide Ahead Of The Money Curve

Glide Ahead Of The Money Curve -- Signs Seeking Money
Matt Artz

The financial situation of most Americans is painfully inadequate. In fact, it’s dire. To see just how bleak it is, check out this article from Time. While it’s a little dated from a publishing standpoint, it is current news from a statistical and advisory perspective. Don’t believe me? You would be wrong. Savings are falling woefully short, while credit card debt has reached record heights. Not the kind of record you want to set.

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There are those in bad enough shape that there’s not much they can do. People fall on hard times and need assistance to live or to recover for various reasons. That’s why there are charitable organizations where one can donate to various causes, and training programs to put people back on their feet. So don’t presume that anyone and everyone can necessarily help their situation on their own if they’re really bad off.

On the other side of the financial spectrum, there are noteworthy individuals who have achieved financial independence. They’ve managed to save enough to leave their 9-5 for a life doing what they’d rather do, following their passion.

But looking at the statistics, they are apparently the exception rather than the norm.

Of course, there are those with gobs of wealth where money is no object, but that’s a topic for another discussion.

If you’re just starting out, or if you’re among those who struggle but bring in some kind of income, you really should be saving and not drowning in debt (barring difficult circumstances). If you’re upside-down in your financial posture, this is a primer just for you on how to get onto the same path, heading in the same direction, as those who have “made it” to financial freedom — even if you won’t necessarily accomplish that yourself any time soon. You will still benefit immensely by following their example.

Below are 7 habits that will free you from the financial abyss if you commit yourself to them:

1. Actively Focus On Growing Your Net Worth (Savings Over Debt) And Live Accordingly

Where do you stand in your financial health? If you’re in the “common” category with low-to-no savings and mounting debt, you need to “serious up” by turning that around now. Or, if you’re just starting out, you need to plan now to avoid getting into that situation before you become part of the stats.

So the FIRST action to take is to get serious about your finances — about your savings and spending habits — right now. Don’t procrastinate and allow yourself to be caught up in the cycle of excessive consumerism and debt. Understand that these and inflated expectations are problems that you must actively determine to combat in your mindset and inclination.

You must place a higher value on and greater priority toward bettering your fiscal responsibility. Only then can you take steps to improve your personal affairs. Learn as much as possible about managing your money wisely and commit to it with goals for personal growth. The longer you wait, the more difficult it is to recover because bad habits are hard to crack and stupid decisions arduous to unwind once you’re behind the eight ball. You need time on your side, so the time to start is now. In this respect, time is indeed money.

Even if it’s too late to get an early start and you’re in poor financial shape already, the time to reverse the trend is now. It will never be earlier in your life again than it is at this moment.


When is the best time to knuckle down and improve your financial situation?

  1. When the stress of debt and other financial obligations outweigh the thrill of retail therapy. (Too many select this option, apparently.)
  2. In bankruptcy. (Ditto)
  3. Worry about tomorrow, tomorrow. (Double ditto)
  4. Yesterday, regardless of your current financial condition.

Just in case I didn’t explain it well enough above, NOW is the time to wise up concerning your financial health. This is the number one takeaway from this article.

2. Live Below Your Means

The first rule of personal finance is to Live Below Your Means. That means to spend less than you make. Seems like common sense, right? So why don’t many follow it? Here are a few pointers for reclaiming “common cents”:

  1. Make it a goal to budget or track your money (one way or another), so that you’ll know where your money beats a hasty retreat.
  2. Research ways to live frugally and get tips from others on-line. You can start right here in the Savings Catalog and then do further research on your own for more great ideas. Not every one will apply or appeal to you, but that’s okay, take what you can for your benefit.
  3. Get off the debt-go-round, it’s anything but merry.
  4. Designate a certain percentage of your income to put into savings and retirement (more on this later) . Retirement saving is for now, using it is for later.
  5. Avoid pricey new cars.  If you have plenty of money already and your net worth is way up there, then fine. You may not be set back by this. But if you’re just starting out, or if you really need to save money, it’s one of the worst things you can do. Some cars not only cost a small fortune, they also produce maintenance anxiety from the steep costs incurred for upkeep and repair.
  6. When it comes to your home, don’t get caught up in large-home mania if you hope to save money. There’s nothing wrong with a smaller home (which is probably more comfortable and homey than a large one anyway) that will cost much less in property taxes, home owner’s insurance, maintenance, repairs, utilities and housework. As with expensive cars, the larger, more expensive the home, the greater will be the cost of ownership in all areas beyond the actual price of the house. And if you’re just starting out, save money first before you dive into a new home.
  7. Beware chirpy phrases in ads that persuade you to spend more. “Only $199 a month!  As low as $249 a month! 5 easy payments of just $39!” Complete with exclamation points to make it super exciting!!! The truth is, they are super excited — by all the people who will shovel their money over to them. They’ll even gift-wrap it in a nice, gold medallion so it looks official, like you’re a winner for participating.

And consider, the opportunity costs are high for excessive spending because that money would grow substantially over time had you put it to work for you instead. Think of this any time you make a purchase. Under-do your spending and debt, overdo your savings!

Math Quiz:

You have $x in income and $y in expenses, including all the things you buy along with your monthly bills, debt, goodies, etc.  $y > $x.  Is that a reasonable way to conduct your finances?

  1. Yeah, I like red. Red’s good.
  2. Well, it was just $y, and they said I could pay it off in 4 easy installments. They even smiled about it, so I knew they were friendly.
  3. It says y is greater than x, so y must be better.
  4. As long as those are absolute values for |-$y| > |$x|.

3. Avoid Most Debt

It’s easy and convenient to purchase on credit or to take out a loan — it’s that way on purpose to get you to go along. If there’s anything that will drown you for years to come, it’s accumulating too much debt through poor spending habits. People tend to look at the minimum payment they can afford to make each month and become overextended before they realize it.

Why do you think there are so many debt-relief programs? People make a decent living rehabbing debt addicts, repairing the spending missteps of others. That minimum payment is just a small fraction of the whole of the debt — which continues to rise due to the ballooning affect of interest. You pay handsomely to borrow that money from someone else when you could have just waited, or better yet, saved it to begin with, all because you “wanted something nice (or now)” and put it on credit. So don’t use your credit card for more than you can reasonably afford to pay off each and every month.

Some would advise that it’s okay to mortgage an affordable home or to carry student loans when appropriate. But again, don’t buy more home than you really need. For student loans, endeavor to get an education that will bring a return on your investment. Consider it a contract on your future career and make sure the terms of the deal are good for you with regard to the value of your degree. Don’t bury yourself under heavy auto/housing loans that will devour your soul and produce caustic regret later. It may be unavoidable to take out a loan at times, or a mortgage, but keep them low and consider paying them down quickly.

If you’re already deep in debt to the point of financial mess, plan now to pay it down so that you can focus on saving. Either pay off your highest interest debt first, or your smallest if that will help you mentally to get started, but the higher interest debt costs a lot more to maintain.


To get on track with good financial habits, what should be your general attitude toward debt?

  1. I want to break some more credit card debt records!
  2. I practice DBMM — Debt Below My Means. As long as I can make minimum monthly payments, I’m good.
  3. The less debt, the better, even down to zero if possible.

You receive a solicitation in the mail for a consolidation loan offering terms of 21% interest. You should:

  1. Jump at the chance to consolidate and pay off your debts.
  2. Contact the solicitor and see if you can negotiate the rate down to 18 or even 15%.
  3. Write them a letter and tell them that 21% is a great deal! So good, in fact, that you’d be willing to lend them your money at that rate!

4. Pay Yourself First And Live Off The Rest

Another important action you should take is to save a certain percentage of your income straight off the top. Pay yourself first, then meet your expenses with the left over balance. Say that you bring home $3,000 per month. If you put aside 5% of that into savings, or $150 per month, and live off the remaining $2,850, you will have saved $1,800 that year. So live as though you only make $2,850 by saving the 5% first. Out of sight, out of mind (except when you want to see how much you’re saving as a result!).

Granted, $150 isn’t a whole lot, but it’s a modest example to illustrate how savings add up. Then investigate ways to save even more by reducing your expenses and putting aside a larger percentage. As your income rises, take an extra cut or larger percentage of the increased income and put that away. So again, take out what you can straight off the top like you never got it to begin with and make yourself live off of the remainder. That’s living below your means AND building your savings at the same time.


What happens if you take some off the top for savings but you don’t live below your means using credit?

  1. Win-win! That sounds like the best of both worlds!
  2. You wind up in a 0 divided by 0 situation.
  3. I do that already — I like driving down a winding mountain road with my eyes closed.
  4. Your debt will reduce, negate or overwhelm your savings (and is likely to do the latter of the three if you’re not careful).

5. Keep An Emergency Fund

Now we’ll consider what to do with the money you save.

The first thing to do is designate enough money in an emergency fund to cover expenses for a certain number of months (say, 3 months to a year) should you lose your job or suffer some other loss. This may take a while if your income is low while meeting your current expenses, just be patient. You can tap into that money to cover emergencies that arise, but remember to refund the account afterwards. This money needs to be easily accessible where you can readily withdraw it to handle an urgency. If you have debt that needs to be paid down first, save $1,000, if you can, to start your emergency fund while paying it down. Once the debt is paid off then you can put more aside in the EF.

I would suggest keeping most of your emergency fund in a high yield savings account so the money will work for you and gain a little interest. (You may need to put some into a regular savings account to start. But that’s not the best place to keep and accumulate it because it won’t really gain any interest there.) There are usually some restrictions on how many transactions you can make per month with these types of accounts. But that’s a good thing because the money needs to go in and not out, unless you need it for an emergency.

Once you’ve reached your goal (i.e. the 3 months to a year in savings), you might put additional savings into a CD to gain even more interest (usually 2-5 year CD’s provide higher returns than a high yield savings account). The longer the CD maturity period, the higher the return — but keep in mind you generally want to keep money in a CD until maturity, otherwise you’ll pay a penalty on the early withdrawal. So money tied up in a CD isn’t as accessible it is in a high yield savings account without incurring a penalty. Consider a CD to be your “next level” emergency fund that you don’t touch unless the high yield account has been depleted. You might even consider creating a CD ladder for the next level of your EF.


The best way to prepare for a financial emergency, such as the loss of a job, unexpected repair bills, etc., is:

  1. Keep an extra, dedicated credit card handy.
  2. That’s what the lottery is for.
  3. That’s what GoFundMe is for.
  4. Several months to a year in living expenses tucked away in a high-yield savings account and, if possible, CD’s.

6. Contribute To Retirement

Once you have established an emergency fund and reached your goal, you’ll want to invest additional savings in an account that will grow more aggressively. If your income is low, you may need to wait or make do with a lower amount in your emergency fund. This will entail some measure of risk because investment accounts are typically more risky (to differing degrees). But you can minimize the risk so that you’ll more readily enjoy the benefits of the investment.

It’s a good idea to start with a retirement account for the tax benefits they offer. If your company offers an employer-sponsored plan, such as a 401k, 403b, etc., have a certain percentage withheld from your paycheck automatically to go into this account, similar to saving for your emergency fund. Then live off the rest. Since the money will be withheld pre-tax, it will actually impact your paycheck less than it would if it were after-tax. And, if at all possible, have at least as much withheld as your employer will match with free money.

Say your employer will match up to 6% of your income. Then you’ll want to have at least 6% withheld from your paycheck and placed in your retirement account, if you can afford to do so. Otherwise, you’ll leave free money on the table. If you simply can’t afford it, then just contribute as much as you’re able but seek to increase the percentage in future years. Once you reach the matching percentage, don’t stop there. Continue increasing your contribution percentage (as you’re able) until you reach the maximum contribution limit allowable by law. Again, if don’t have the income to reach that goal, just contribute what you can, but don’t make it too easy on yourself. Not everyone can max out their contribution limits, but it’s a good target to reach for.

Keep in mind that the money you put into retirement is normally “locked in.” You can’t withdraw it until you reach a certain age without penalty except under certain circumstances. But that’s a good thing! I won’t get into further detail here, I’ll leave that for your own research.

Also consider opening a Roth IRA and making contributions there. This can be done through Vanguard, Charles Schwab and Fidelity, to name a few, provided your income falls within the allowable amount by law. This way, you can put even more money into retirement in addition to the employer-sponsored plan, or this will provide a way to contribute to retirement if your employer does not offer a plan. However, contributions to a Roth IRA are not pre-tax — but when you withdraw the money later, the tax on the principal (contributions) will already have been paid. You will only pay taxes on the gains which are tax-sheltered until withdrawn.

If you contribute to but don’t max your employer-sponsored plan, you may still decide to contribute to your Roth IRA. That way, you can hedge the pre-tax and after-tax benefits of both accounts. Again, I’ll leave the detailed research for you to do on your own.

You can also invest in a non-retirement account (without the tax benefits) with no maximum contribution limits. Keep in mind that non-retirement and IRA funds require minimum initial investment amounts, so you may not be able to buy into a particular fund until you have enough to meet the minimum.


Once you have your emergency fund in place, the next step is to:

  1. Spend to live and live to spend, now that I have some savings!
  2. Lighten up on the frugal living since I have a nice cushion.
  3. Buy that nice car / house I’ve been waiting for with my “emergency” fund.
  4. I’m just getting started with my savings and growing my net worth! Time to step up and start investing in my retirement plan and/or other investment fund.

7. Invest In (And Hold) Low-Cost, “Total Stock/Bond Market” Index Funds

If you want to invest your money safely, efficiently and effectively, perhaps the best way to do so in any account, whether it’s your 401k, 403b, Roth IRA or non-retirement account, is to put your money in low-cost, total market index funds or ETFs and keep it there. A popular investment portfolio is the simple 3-Fund Portfolio found on the Bogleheads website. This portfolio is comprised of the Total Stock Market, Total Bond Market and Total International Stock. The idea is to keep your portfolio as uncomplicated and efficient as possible. There are also some all-in-one funds you can buy which are set-it-and-forget-it. Doesn’t that sound nice? You simply determine what allocation of your portfolio you would like to invest in stocks vs bonds and select the fund accordingly, and you’re done!

For example, say you would like 60% of your funds in the total stock market and 40% in the total bond market — you might choose the Balanced Index Fund at Vanguard. The bond allocation helps reduce the amount of volatility in the fund as the stock market rises and falls, and it provides a safety cushion in the event of a market downturn or correction which will inevitably occur. If the market falls, say 25%, a fund with a bond allocation will usually decline a bit less. The higher the bond allocation, the more the cushion.

But a larger bond allocation also tends to limit the upside, or your returns, while the market is climbing. So there’s a risk-reward trade-off depending on your allocation to stocks vs bonds. If you’re a little older, you might want to select a fund with a larger bond allocation to mitigate the risk a little more, and a younger person with more time to invest (and recover from downturns) might select a higher stock allocation.

If you’re completely new to investing and simply don’t have the interest to learn more, you would do well just to place your money into a fund like the Balanced Index Fund mentioned above (though this fund lacks international exposure). At Vanguard, you can also review their Life Strategy and Target Retirement Funds to see what suits you best. Some of the all-in-ones do offer some international exposure if desired.

! Remember, look for a low-cost index fund or funds! Most actively-managed funds (those with money managers) will charge higher fees for modestly better, equal or even less returns than an index fund portfolio, plus they will offer less diversity than the market itself.

Be very careful with regard to your company-sponsored retirement plan. The advisor for your company plan could steer you toward the more costly funds available in the plan. It’s better to educate yourself about set-it-and-forget-it investing in low-cost index funds so you can avoid the fees for the funds they would select on your behalf.

If you invest in 2-3 index funds rather than an all-in-one, some accounts will allow you to set up auto-rebalancing to maintain your allocation in each fund without having to rebalance manually. It’s important to maintain your allocation balance in order to provide a consistent level of risk for your particular risk tolerance. All-in-one funds, of course, do not require rebalancing, but they may not always be the best option in your plan depending upon the fund fees.

There’s a lot more to learn about investing in retirement vs non-retirement accounts which I can’t cover here. As stated previously, you should do your own additional research since your personal situation may require more in-depth, professional analysis. This is just to get your started looking into the various options available to you.


The best way to invest your money safely after your emergency fund has been established is:

  1. In cryptocurrency
  2. In company stock
  3. By following the advice of a friend, family member or neighborhood investment group with “hot stock” tips.
  4. By following the advice of famous stock-picking personalities on the internet.
  5. In low-cost index funds comprising of the total stock market, total bonds, and possibly some international.


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