“Someone's sitting in the shade today because someone planted a tree a long time ago.”
― Warren Buffett

Step 1. Create a financial plan

The hardest part is actually getting started!

We recommend to all of our readers and consulting clients that the path to financial freedom starts with a solid road map.

Technology has evolved quite a bit in the last several years, and now we’re at the point where creating a robust, objective, meaningful financial plan has never been easier.

Here’s a few options:

  1. Use Personal Capital, a 100% free web and mobile app platform that allows you to consolidate and view all of your checking, savings, credit, 401(k), brokerage and other accounts all in one place.
  2. Utilize a financial planner (recommended only for people with “complex” financial planning or tax needs) – you can use our tool to find someone in your area by clicking here.
  3. Use a robo-advisor, like FutureAdvisor or Betterment – the robo option can make sense if you’re somewhere between a do-it-yourself type and someone who legitimately needs a personal financial advisor. These services have some of the same aspects of Personal Capital, but they actually invest for you and do things like tax-loss harvesting and automatic rebalancing that you’d have to do on your own if you use Personal Capital.


Sign up for free financial planning from Personal Capital

Manage assets and investments, get objective advice and strategies, all at PersonalCapital.com.

Step 2. Automate your savings and investing

Once you’ve created a financial plan, you’ll have some goals to be saving towards:

  • Retirement (or early retirement!)
  • Wedding ring
  • Wedding
  • First home
  • New car
  • Vacations
  • Kids college
  • Charity

You can automate much of your saving and investing by doing the following:

  1. Set up direct deposit with your employer – typically you can have your check divided into multiple bank accounts. We recommend having some of your paycheck deposited directly into a high yield savings account (American Express Bank has a 0.90% yield – check it out!)
  2. If your employer doesn’t have direct deposit, or its not an option to deposit your check into multiple accounts, you can schedule automatic deposits to be made from your checking into savings
  3. Contribute into your 401(k) to meet your employer’s match (if provided) – for more on the wonders of the 401(k), read this article on the 7 things you need to know about your 401(k)

Step 3. DON'T TOUCH ANYTHING!

We’re serious.

Don’t. Touch. ANYTHING!

Take advantage of compounding interest on your high yield savings and 401(k) accounts. The longer you have to accrue interest, the greater your returns will be, historically speaking.

You’ll want to have saved up 3-6 months (or more) of your living expenses covered in case of sickness, disability, layoffs, or doing something you can’t take back at the company Christmas party… you get the point.

Once you’ve got a cash buffer in savings, dial up your 401(k) to max it out. The guidelines for 401(k) contributions can be found at the IRS Official Website.

Once you have an emergency fund in liquid savings, and you’ve dialed up your 401(k) contributions, we recommend checking in on your financial plan again.

Introduction to Personal Capital