Five Financial No-Brainers

The following is a reprint from a piece I initially wrote for the TurboTax blog. If you enjoy this post and would like to receive free, daily suggestions on how to grow your net worth, you can subscribe to Free Money Finance using your feedreader and this link.

Much of personal finance is just that -- personal. And as such, tips that work for one group of individuals often don't work for another. However, there are a handful of money management suggestions that are beneficial to nearly everyone. In fact, they're so good that they can be listed as financial no-brainers. They are:

Financial No-Brainer #1: Spend less than you earn

Reason: If you don't, everything else you do financially is for naught. (And if you think this is "common sense, think again. 70% of Americans are close to if not completely ignoring this advice.)

Key step: Pretty simple: income must be greater than expenses -- and the bigger the gap, the better.

Financial No-Brainer #2: Grow your career

Reason: Your career is your most valuable financial asset. The good news is that what you do with it can make it even more valuable. If you make the right moves in growing your career, the difference will be millions of dollars added to your income over your working lifetime.

Key step: Work so you deserve raises by setting expectations and then over-performing against them.

Financial No-Brainer #3: Take the full employer match on a 401k

Reason: What other investment guarantees you a 50% to 100% (depending on your plan) automatic return on your money immediately after you invest? We thought so.

Key steps: Sign up early, make investments automatic, and invest appropriately for your age and financial goals.

Financial No-Brainer #4: Invest early

Reason: Investing early is the best way to maximize your investment return. Added plus: it's totally within our control.

Key step: Start yesterday. Today is ok too.

Financial No-Brainer #5: Pay off credit card debt

Reason: Not even great investments regularly return the 18% to 25% you'll save by paying off your credit cards. Plus, these returns are GUARANTEED!!!!

Key step: Set up a debt snowball to get rid of all your consumer debt.

How are those for financial no-brainers? Did I miss any?

Comments

[Broke Wall Streeter]

My employer just took away 401(k) match and profit sharing, so I stopped my contributions. Now the negative return on my investments will be all my money.

[Darren]

Those are all excellent basics of personal finance.

Some people may not get an employer match on their 401k. But I would still suggest contributing the most you can, just so you can reduce your taxable income.

The only other no-brainer I would add is the "pay yourself first" mantra. But that can also be achieved by following your No-Brainer #3.

[Budgeting in the Fun Stuff]

Great points! I wish everyone at my company would pay attention to #3...we get 100% matching up to 6% and a bunch of people aren't taking advantage.

[Squirrelers]

This is a solid snapshot of the basics. Always good to have this put in front of us from time to time.

I suspect that among many personal finance mavens, saving gets so much attention (and deservedly so), that people can get sidetracked from #2 - growing one's career. For many, if not most people, their career represents the engine that drives their financial situation. Think about it - you could save dilligently and invest at a nice rate of return, but if your income stream stops, there can be a world of hurt. You don't want to lose money. Managing a career smartly can preserve this income stream and possibly grow it later into life, which is no small feat in this environment.

[iGrad - Resources for life after college]

All are great points, but I like #4 the most. Investing is very similar to building your credit score in that TIME is one of the most crucial elements.