Action Steps for Your Awesome Finances Plan

By Leo Babauta

Last week we went over the Awesome Finances Plan, and if all is well, you’ve read it and started putting it into action.

If you haven’t put it into action yet, not to worry — let’s take the next 2-3 days to do that!

Here are your action steps — depending on whether you’re in the debt reduction or savings/investments track.

Debt Reduction Action Steps

The steps you actually need to take will depend on where you are, but here are steps you should be taking if you haven’t yet:

  1. Set up a savings account for your emergency fund.
  2. Set up automatic transfers to this savings account every month so that you build up your fund. The amount of your transfer should be your Power Amount.
  3. Set up a reminder for the day when your emergency fund should hit the minimum amount you’d like it to be (for example, if you have $200 per month and want it to be at least $600, then set a reminder for 3 months from now) … to switch your Power Amount from savings to debt payments.
  4. List your debts in order from smallest to largest, along with the monthly minimum payments for each and the total amount you owe for each. You’ll be applying your Power Amount to these in order of smallest to largest.
  5. Figure out how long it will take you to pay off your debts if you continue with the same Power Amount, using the Debt Snowball method. Here are two calculators you can use: first one, second one.
  6. Continue to look for monthly or daily expenses you can cut, so you can add to your Power Amount.

Most of these steps can be done in 5-10 minutes, so take time over the next few days to work on these!

Savings/Investments Action Steps

  1. Set up a savings account for your emergency fund.
  2. Set up automatic transfers to this savings account every month so that you build up your fund. The amount of your transfer should be your Power Amount.
  3. Set up a Vanguard account (or other investment account that has low-cost index funds).
  4. Set up a tax advantaged account within Vanguard (or other investment company), such as a Roth IRA or SEP-IRA.
  5. Set up a reminder for the day when your emergency fund should hit the minimum amount you’d like it to be (for example, if you have $200 per month and want it to be at least $600, then set a reminder for 3 months from now) … to switch your Power Amount from savings to investments. At this time, you should set up automatic transfers/purchases into several low-cost index funds each month.
  6. Continue to look for monthly or daily expenses you can cut, so you can add to your Power Amount.

Most of these action steps are easy, but a couple of them might seem a bit complicated or intimidating. Take your time with these and just make incremental progress on them for the rest of this month and next month, so you don’t have to work too hard on them but you’ll gradually get them done.