Your journey to financial independence is just that—yours.
In our 2021 Money Moves Survey by SoFi, they asked people what’s most difficult for them when managing their finances. 36% responded with “Knowing what to focus on next.” So, choose the moves which may be a good fit for your situation and goals.
Here are eight essential money moves that will help to get you started and help move you towards financial independence according to SoFi.
If you’re living paycheck to paycheck:
- Start tracking expenses. – Knowledge of where your money is going is power—and a great place to start.
- Take charge of credit card debt. – Getting into high-interest credit card debt can make saving more difficult—but if you do have it, consolidating your debt can make it more manageable.
- Limit impulse buys. – While non-necessary spending is a part of life (hello online shopping!), the trade-off is saving more so that you have more cushion.
If you’ve got an employer match…
- Make sure you’re meeting the minimum to qualify. Adjust your contribution so that you don’t miss out on the match.
- Track how much of your paycheck is going toward your 401(k) so you can stay on top of your budget and save elsewhere.
- Don’t forget your old 401(k) when you get a new job. Generally, you can leave it, transfer it to your new plan, or rollover to an individual retirement account.
If you have high-interest debt…
- Make a list of all your debt. Order it from lowest to highest balances so you can keep track of all of it.
- Consider the SoFi Fireball Method. This involves tackling any debt that has an interest rate greater than 7% (aka “bad debt”) before you move onto lower-interest debts (while still making minimum payments on all your debt, of course).
- Consider refinancing or consolidating your debt. Whether you have a student loan or high-interest credit card debt, this option could help you pay it off sooner.
If you don’t have an emergency fund…
- Calculate what three to six months’ worth of expenses looks like for you. Take a look at an overview of your finances to help you do the math. Some online tools exist to make this easier.
- Automate contributions to make it easy. Putting your savings on autopilot can help you set aside cash to put toward your goals.
- Make sure your funds are accessible so you can access them when you need them. Once you set up your emergency fund, you can put extra cash in places that can help you save long term.
If you aren’t saving enough for retirement…
- Determine the right retirement account for you. Your current employment, income, and other factors can determine whether you opt for a Traditional, Roth, or SEP IRA.
- Start somewhere. Whether it’s a 401(k), 403(b), or an IRA, save where you can, aiming for 15% of your pre-tax income toward retirement if possible.
- Talk to a financial planner to map your retirement goals and how you might reach them. They can explore financial strategies to fit your vision for your golden years.
If you’re saving for college, a home, or other big goals…
- Determine how long of a timeline you’ll need to hit your goals. This will help you know whether to save in cash (for the shorter term) or investments (for the longer term).
- Save more often—without even thinking about it. You can automate your savings by getting tools that make it easy, like cards with roundups or cash back credit cards.
- Start investing your way. Whether you want to automate your portfolio, trade your own stocks, or buy parts of stocks—there are lots of options to put your money to work toward long-term goals.
If you have a student loan or mortgage…
- Try to get the lowest rate you can. “Good” debt is any loan with an interest rate lower than 7%—but a lower rate can be even more manageable. If you can refinance your student loan or mortgage at a lower rate, that could mean significant savings over the long-term.
- Consider putting extra cash in the market. Instead of throwing all your extra cash at low-interest debt, consider putting some of that money to work in an investment account.
- Use cash back rewards to accelerate good debt paydown. Credit cards that earn cash back rewards could be used to help you pay down your debt.
If anyone depends on you for financial support…
- Protect your loved ones first. If you haven’t looked into disability or life insurance policies, or drafted a will, make sure they’re covered should something happen to you.
- Make sure your assets are protected, too. Whether it’s your home, apartment, or your car, insurance can help ensure you’re covered.
- Talk to a financial planner to make sure you have all your bases covered. A financial planner can help you identify everything you’ll need to take care of.
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