A Cheat Sheet For Your Financial Life
From LifeHacker’s Two Cents:
Why do I love this chart?
Too often in personal finance, we focus on curricular “units” instead of taking a more holistic approach to finances. So, we talk about savings in one unit, investing in another and credit in another when our lives are much more integrated than this approach would suggest.
I love this graphic because it helps students see a fuller picture on how to prioritize savings, debt, investing for retirement and just plain investing. It also makes for a great quiz question, where students are given each of these financial vehicles and told to prioritize them and provide a rationale for why they ordered things in a specific way.
For more details (from LifeHacker):
Here’s a basic explanation of each line, and if you want more detail, just hit the links in each.
- Emergency fund: You should have a safety net before anything else.
- 401(k) contribution match: This is almost like free money, so you want to take it if you can.
- Debt: Obviously, paying off debt is important. Those interest rates will kill your finances.
- Individual Retirement Accounts (IRAs): Max these out if you can. Saving for your retirement is important.
- 401(k): Still have cash left over? Congrats, moneybags. Now go back to saving in your 401(k). Your don’t have as much flexibility as an IRA, but at least you have the tax advantage.
- Savings/Investments: If you STILL have cash after maxing out your 401(k), then stash it in your personal savings or a taxable investment account.
About the Author
Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.
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