Financial Planning: Getting Started

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1. Understand Your Gross vs. Net Income:
   
   • Gross Income: This is your total pay before taxes and deductions.
   • Net Income: This is what hits your bank account after taxes, health insurance, retirement contributions, etc.
   • How to Find It: Look at your paystub (or ask HR if you don’t get one). Write both numbers down—it’s important to know what’s coming in and what you actually have to work with.

1. Savings Check:
   
   • Log into your bank account(s) or grab a physical statement to see how much you have saved (if anything). Even $5 matters right now. Write it down as your starting point.

1. Review the Last 2 Months of Transactions:
   
   • Print or download your bank/credit card statements (if available).
   • Highlight where your money has been going—categorize spending into buckets like rent, groceries, eating out, subscriptions, transportation, etc.
   • Don’t skip cash purchases. If you don’t have records, think hard about how you typically use cash.

1. Ask Yourself:
   
   • Which purchases were needs (rent, food, gas)?
   • Which were wants (eating out, entertainment)?
   • Were there any surprises or impulse buys?

Goal: Spot patterns. For example, “Wow, I spend over $200/month on fast food without realizing it.”

• Average Fast Food Spending: Millennials, which include 25-year-olds, report spending an average of $213.87 each month on fast food.

1. List Your Debts:
   
   • Credit cards, personal loans, car payments, student loans, or medical bills. Write each one down, including:
     • Balance owed
     • Monthly minimum payment
     • Interest rate

1. Add Them Up:
   
   • Calculate your total monthly debt payments. Compare it to your net income.

1. Identify Shortfalls:
   
   • Are you running out of money because of overspending, low income, or high debt payments? (Probably a mix.)
   • Example: If your net income is $2,000/month but your expenses are $2,200, you’re short $200/month.

1. Boost Income:
   
   • Pick up extra hours or a part-time job.
   • Offer small services (e.g., babysitting, tutoring, yard work) that don’t require up-front costs.
   • Side Note: This is a hustle, so find something you enjoy; otherwise, you’ll burn out faster than a candle in a hurricane.

1. Reduce Fixed Costs:
   
   • Negotiate bills (call utilities, insurance, or credit card companies).
   • Consider sharing expenses (e.g., carpooling, splitting rent).

1. Reduce Everyday Costs (Practical Ideas):
   
   • Cook meals at home instead of eating out (e.g., $3 pasta > $12 takeout).
   • Use public transportation instead of driving (if feasible).
   • Cancel unused subscriptions (gym, streaming, magazines).