Hi, Check United States of America (USA), UK, Canada, New Zealand, Australia Personal Finance Flowchart.
The flowchart above will change based on a person’s priorities and the allocation of a person’s income will change as they reach certain financial goals. Future considerations may include the following:
- • Once the Individual saves their needed emergency fund amount, they can use the extra $100 toward paying off debt.
- • When the Couple pays off their debt, they can put more toward savings or retirement.
- • The Family may reallocate childhood expenses as the child grows. It’s important to have a financial plan and decide how to allocate your income in a way that allows you to be financially secure now and in the future.
Personal Finance Flowchart USA
Step 0: Budget and reduce expenses, set realistic goals
Step 1: Build a small Emergency Fund
Step 2: Automatic Enrolment Pension
Step 3: Build a full Emergency Fund
Step 4: Pay down debts
Step 5: Save for short-term goals
Step 6: Invest for long-term goals
Know where your money is going by creating a solid budget plan
Check your state supported entitlement at entitledto.co.uk
Pay essential bills:
- Council Tax
Find more advice on MSE
Pay Income Earning Expenses
(e.g. transport to work)
Make minimum payments on all debts
Insure what you can’t afford to replace such as:
- Home, Car, Life, Income, etc.
Read more about insurance
Pay non-essential bills in full
(Internet, Phone, TV)
Are you reliant on credit to make ends meet?YesNo
Seek debt councelling from a reputable charity.
Okay, what’s next?
Build a small Emergency Fund
(1-3 months of outgoings)
Ensure you are (auto)enrolled in company pension.
Take advantage of matched contributions or any other available company contributions.
Do you have any high interest (4%+ PA) debt?
(excl. student loans)YesNo
Pay off high-interest debt using a debt-management method such as Avalance (highest SPR debt first, more efficient), or Snowball (smallest debt first, less efficient but with possible psychological benefits)
Find out more on each method here
Sure, then what?
Build a full Emergency Fund
(3-12 months of outgoings)
Are you saving to buy your FIRST home?YesNo
Consider opening a Lifetime ISA (LISA)
I’ll look into it. What’s next?
Do you have other short term goals?YesNo
Find highest-interest-paying savings account and keep short-term savings in cash
Great idea. Let’s keep going…
Do you have long term goals?YesNo (really?!)
Does your goal happen before you can spend pension funds?
(~58 years old)YesNo
Combine S&S ISA with pensions
Invest in low-cost global index trackers. Buy the same things in your S&S ISA but in a taxable account harvest dividend / CGT allowance
UK Personal Finance flowchart
- Step 0: Budget and reduce expenses, set realistic goals
- STOP: Are you reliant on debt to make ends meet?
- Step 1: Build a small emergency fund
- Step 1a: Invest in some reading material
- Step 2: Minimum contributions to your automatic enrolment pension scheme
- Step 3: Pay off expensive short-term debts
- Step 4: Build an emergency fund
- Step 5: Short-term (<5 year) goals
- Step 6: Longer term (>5 year goals)
- Side-note: How to achieve Step 6
- Step 7: Frivolity?
New Zealand Personal Finance flowchart
- Step by Step Guide to Handling Your Finances
- Step 0: Budget and reduce expenses, set realistic goals
- Step 1: Build an emergency fund
- Step 2: KiwiSaver
- Step 3: Pay down high interest debts
- Step 4: Save more for retirement
- Step 5: Save for other goals
Canadians Personal Finance flowchart
- What to prioritize / what to do with money
- Step 0: Budget, reduce expenses
- Rent/mortgage, utilities
- Personal hygiene and health
- Income earning expenses (such as transport)
- Minimum payment on all debts
- Step 1: Emergency fund
- How much money to have in an emergency fund
- Repaying high-interest debt
- Where should I put my emergency fund
- Step 2: Employer matched retirement funds
- Step 3: Pay down high-interest debt
- Step 4: Save for required large purchase or personal investment
- Step 5: Save for retirement
- Step 6: Pay down low-interest debt
- Step 7: Save for other goals
- Saving for children’s education
- Saving for property down payment
- Saving for vacation
- Increasing retirement savings to retire early
Personal finance flowchart Australia
Check: Personal Finance Flowchart For Any Country
Today i’m going to share with you something i found i read it years ago that has changed my life forever and that is a personal finance flow chart, that i’ve seen dozens of different versions and iterations of over the years the one.
So if you’re watching this thank you so much i love your flowchart this latest version is from late 2019 so some of the numbers might be updated since then but conceptually everything should be the same so this over here is the entire flowchart and it’s full glory but don’t worry i’m going to walk you through it step by step so let’s get to the flow chart don’t worry i’m going to zoom in and show you the different pieces of this but i’m going to walk you through each and every step and give you an overview of what each of these steps mean.
So first i do want to thank happy asian panda whoever you are on reddit thank you so much for this latest Personal Finance Flowchart usa i believe this version is from late 2021 and there might be newer versions out there so uh please keep a look out for those again these are just general guidelines to follow your circumstances might be a little bit different.
But overall i found that these best practices do apply to most people so section zero is just getting your fundamentals down including your budget and getting your essentials covered and the first step is to create a simple budget there’s many ways you can create budgets you can use different applications different methods different spreadsheets i’ll have a link to one of my videos right up here i must emphasize how important having a budget is at least a basic budget.
So you understand where your income is coming from and what all your expenses are next up pay your housing costs such as your rent and your mortgage for most people the maximum your housing cost should be is roughly 25 to 40 of your take-home income next up in this Personal Finance Flowchart uk is to buy your food and your groceries.
Then you gotta buy your essential items such as utilities your phone bill water electricity and then you’ll have other expenses such as your transportation and other necessities you need to live month to month and finally in section zero covers debt if you have any if you do make sure you’re covering all the minimum payments on your debt each month now.
Let’s move on to section 1 where it focuses on building your emergency fund and making sure you’re taking advantage of any employer match on your retirement accounts the first step in this section 2 is to build a small emergency fund in most financial literacy practices you want to make sure you have at least 1 000 saved up just for any emergency.
And this is the bare minimum and then if you’re just starting out this is part of your budgeting exercise but make sure you’re not spending too much on non-essentials every single month these can include subscriptions or recurring payments that you might not really need.
So cut those out if you actually do not need them the next step here is to keep track of all your expenses especially if you don’t have a good sense of how much you’re spending every month again this is part of your budgeting exercise i’m gonna skip over this one because i don’t know what ips means the next step is to consider your 401k accounts.
The next step is to build up a bigger emergency fund and the amount you put into this depends on whether you have a stable or unstable source of income whether you have a long-term job or just some contract work if your income is stable then this recommends that you have at least three months worth of living expenses saved into an emergency fund.
And most likely you want to have these funds in a high-yield savings account online if your income sources are less stable then the recommendation here is to build a six to 12-month emergency fund and keep that also in a high yield savings account then on to section 3 is all about reducing your debt as fast as possible to the point of becoming debt free.
So take a look at what debt or what loans you have and you have any bad debt and pay those off as fast as you can i’ve covered both the snowball and the avalanche method.
So next is to consider if your employer provides health care plans that do provide an hsa usually there’s a high deductible plan which then you can contribute to an hsa which you can then use to pay off your medical expenses but if you’re young and you’re healthy contributing to an hsa is a good way to put away some money for the future having a health savings account is one of the most beneficial tax advantage accounts.
You can have that’s because hsas are considered triple tax advantage that means it’s not tax going in the growth inside your aha site is completely tax-free and when you take money out of it it’s completely tax-free as well all right now let’s look at section four which covers your individual retirement accounts.
There’s a lot going on here but i’ll walk you through it the first checkpoint here is to decide if you have earned income which means if you have a job and the answer to that is yes there’s a couple different options based upon how much money you make now these numbers actually change every year.
So just use the numbers in these examples as guiding posts so if you as an individual or as a head of household make a lot of money it probably makes sense to max out your traditional ira and then move that to roth ira this is known as the backdoor roth ira there’s a lot of documentation out there on how to do this.
If you’re a middle income earner then the recommendation is still to max out your roth ira directly if you can but again make sure you do research on your irs limitations here and if you’re a lower income earner then the expectation here is to max out your traditional ira first feel free to pause this blog and read through this one more time before we move on now section 5 covers employee stock purchase programs.
And maxing out the rest of your retirement accounts now not all employers offer this but if your employer does offer an employee stock purchase program you should definitely look into taking advantage of that now the advantage of an employee stock program is often it’ll allow its employees to buy the company’s stock at a much lower price and because of that discounted price you’re effectively getting free money because you’re buying that stock at a lower price than market value.
Now if you think your finances are applicable to this section that means you’re already getting your full employer match through your 401k that means you’re maxing out your traditional or your roth ira and you have some extra money that you’ll figure out where to save it or where to invest it now the big question you need to ask yourself is if there’s any big purchases that you’re planning in the next three to five years.
This could be buying a new house which is a huge purchase buying a new car for work uh paying for education for yourself or starting to save for education and college for your kids.
So the answer to that question will lead you to either saving in a high-yield savings account and starting to build that extra savings towards your end goal now this is different than your emergency account so make sure the savings is on top and incremental to your emergency account in parallel to this if you’re saving for the short term but also want to maximize your retirement accounts you can also look to maximizing your 401k along with this step as well.
Now section six here is the end game it’s the final section covers after tax 401k contributions education accounts taxable accounts and other ways to save and invest money the first step here is to do some research over 400k allows for after tax contributions if it does then you can actually contribute more to your 401k up to 57 thousand dollars in 2020 and this is effectively called the mega bacter roth which is a video i just created just last week.
So check that one out now if you plan to have kids and those kids are planning to go to college then a good recommendation here is to look into 529s or esa’s which effectively are tax advantage savings accounts specifically for higher education now we’re almost at the finish line here so once you get to this point then you have a couple choices hey you can start making extra payments towards your mortgage to pay after house or b which is my recommendation is to start looking at taxable brokerage accounts to invest into the market.
The last couple things is if you have any remaining debt that are low interest pay those offers and finally if you’re at this point in your financial journey make sure you are automating as much of your workflow as possible make sure you’re rebalancing your portfolio at least annually to make sure asset allocation is in the right spot and make sure you’re minimizing all fees along the way we’re finished.