It’s something I’ve preached in department meetings and coached to coworkers a lot over the past year. We all work to make money. That money doesn’t mean a thing, though, if you don’t know how to manage it properly. It’s the great dichotomy of wealth building: Make more and spend less.
I mention this as an aside because I’ve seen many web professionals, all of whom were smart, creative, all-around fantastic individuals, who struggled financially despite their earnings. What is the point of growing your expertise, your career potential, and your paycheck if you never get ahead because of poor financial management?
There isn’t one. When it comes to getting ahead in life, career advancement and personal finance go hand in hand. Here, then, are 7+1 personal finance tips for my fellow web professionals. Remember, this isn’t rocket science. As some of the smartest people on earth, learning this should be a piece of cake for you.
1. Get Your Credit Under Control
Credit cards are useful for their rewards and for tracking expenses. Beyond that, credit card debt is toxic. Pay off your credit cards every month. Period. If you’re carrying a balance, pay it off as soon as possible. If you can’t keep your credit cards under control, you’re better off not using them at all.
2. Track Your Expenses
Start tracking your expenses, down to the penny if possible. Financial software can help with this. I find that an ordinary spreadsheet works just fine. Figure out how much you spend, what you spend it on, and where, every month. You may be surprised to find how much those little expenses add up over time.
3. Reduce or Eliminate Unnecessary Expenses
Now that you know how much you’re spending, it’s time to reduce your expenses. Figure out what you can afford to trim from the budget. DVD collection getting out of control? Limit how many you buy, or, better yet, stop buying them altogether. Eating out for lunch every day? Brown bag it instead. Ask yourself which you’d rather have, prosperity and security, or stuff. You’d be surprised what sort of expensive luxuries you can live without, and a little effort goes a long way toward turning your budget deficit into a surplus.
4. Save Up an Emergency Fund
Unexpected financial troubles crop up from time to time. Medical bills, car repairs, computer trouble, job loss, etc. To keep them from putting you into debt, save up an emergency fund of at least $1,000. If you can, beef it up to three to six months worth of expenses. Keep it all in a high-yield online savings account.
5. Save for Retirement
Especially in the IT industry, many employers offer retirement accounts with matching. The sooner and more you start contributing, the better off you’ll be later in life. You should always contribute up to your employer match, if not more. Think you’re too young to worry about retirement? I’m 25 and plan to contribute 12% by the end of the year. Yes, it’s that important.
6. Pay Down Debt
Credit card debt is terrible, but any sort of debt is bad to have in the long run. Now that you’ve got an emergency fund established and retirement savings in place, your next priority should be debt repayment. For this, you use a debt snowball. Arrange your debts in order from highest to lowest interest rate. Pay as much as possible on the top debt and minimums on all others. Once you have that debt paid off, take what you were paying toward it and apply it to the next highest debt on the list. Rinse and repeat until you’re debt free.
7. Save for Goals
If you can get to this point, you’re in great shape. You have an emergency fund, retirement savings, a clear budget plan, positive cash flow, and no debt. Congratulations; you’re better off than some of the highest-paid web professionals out there no matter what your salary is. What you do with your money after this is a matter of goals. My wife and I are saving up for a house and our next car. A former coworker of mine (one who helped inspire this article) dreams of sailing around the world. Decide what’s important to you, then direct your wealth toward achieving that goal.
Bonus Tip: Read
And finally, read, a lot. I learned every word of what I just wrote on my own from the personal finance blogs listed below. Like I said before, it’s not rocket science. Take the time to self-educate and it’ll pay off for the rest of your life.
- Consumerism Commentary
- Frugal Dad
- Get Rich Slowly
- I Will Teach You To Be Rich
- My Money Blog
- Smart Spending
- The Simple Dollar
Just remember, excelling in your career is only one piece of the wealth puzzle; personal finance is the other. Earn more, then make sure every dollar is working for you. I practice every word of what I just preached, and my family is in great shape because of it. Here’s to hoping you’ll do the same.