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The 3 Most Important Steps in Personal Finance

I spend a lot of time reading and studying personal finance. I’ve learned a ton over the years and the things you actually need to do to be successful with money can be boiled down to 3 important steps.

There is a lot of noise in the world of personal finance. All of the information out there can be overwhelming. That’s why it’s important to stay focused on what really matters.

Here are the most important steps you need to take to be successful with your money.

1. Have clear goals for your money.

I talk to new Tip Yourself members every week and they often tell me their goal is to “save more money”.

That’s not a goal.

Why do you want to save more money? Be more specific.

If you’re living paycheck to paycheck and feeling like you can’t get ahead, then I agree saving more money is going to change your life, but you need to be more specific in what you want to achieve. What exactly do you want to change in your life?

Here’s an example of a specific goal.

I want to save $500 as an emergency fund. This will allow me to pay for an unexpected expense without having to also pay an overdraft fee or take out a payday loan.

Here’s another example,

I want to save $1800 to go visit my best friend in Europe.

That’s a clear goal with a clear dollar amount.

Specific goals are clear and easy to know when you’ve successfully achieved them. If you say your goal is to “Save more money”, how do you know when you’ve achieved that goal?  You don’t.

Goals help you focus and help you stay motivated. They give you a clear choice when you’re tempted to spend money on something.

Do I want a new pair of shoes or do I want to go on an amazing trip to Europe?

That’s a clear choice that you can make, and one of the main reasons why you need to set savings goals.

Another example:

I want to pay off my student loans in the next 5 years so I can save my $300 a month student loan bill toward a downpayment on a new home.

They’re your goals. It’s up to you what you want to do with your money.

What’s important is to be clear and honest with yourself. What are your goals? What do you want to change in your life?

2. Know where your money is coming from and going to.

Do you know your monthly income?

For many folks these days their monthly income varies depending on the hours they get each week. If your income varies, do you know your average monthly income?

If you’re ever going to get control of your money, you need to know your money.

How much do you make each month, and what do you spend it on?

This is the foundation of budgeting and its critical to understanding what decisions or actions you need to take to reach your goals.

If you can’t tell me how much money you make each month and how much you spend each month on average, then you need to sit down right now and make a spending plan.

A spending plan is the Tip Yourself approach to budgeting. We focus on where you’re spending your money instead of how much you can budget.

It’s a more motivating way to approach the classic task of making and keeping a budget. Everyone likes spending money!

Create your own spending plan to know that you’re spending in a way that helps you achieve your goals.

3. Make saving money a habit

Last but not least, make saving money a habit. You brush your teeth every day. Personal finance should also be a habit.

Add saving money to your list of weekly habits. Even if it’s just $1.00, make savings some money every single week a compulsive habit.

At its core, that’s what makes Tip Yourself different. We recognize that the real secret to success with money is much more about our habits and mindset than it is about dollars and cents.

You need to feel empowered. You need to feel in control. Focusing on building a regular habit of saving money every single week is an incredible foundation of success that’s going to get you where you want to go!

Don’t worry about how much you are saving. Stop waiting for “enough” money to save. Tip Yourself at least $1.00 every week. Make saving money a habit.

So that’s it…

Those are the 3 most important steps in Personal Finance. Next time you feel overwhelmed with money, revisit this article and refocus on what matters.

  1. Have clear goals
  2. Know where your money is coming from and going to.
  3. Make saving money a habit

What do you think? Did I miss anything more important than these 3 steps?

Let me know in the comments below or start a conversation in the Tip Yourself Members Group on Facebook.

A lifelong student of habits and behavior change. Mike is the CEO and co-founder of Tip Yourself, a mobile app and community focused on saving money through positivity and small shifts in habit.

2 thoughts on “The 3 Most Important Steps in Personal Finance

  1. These 3 steps helped me because I’ve never really set down and figured up our total income and out going expense. I would just pay bills, spend and try to have enough for everything. This I will get started.
    I will start having specific goals.
    I’ve never thought about making a savings habit. Just saved as I could.
    Thank you for your tips!

    1. Great! I think you’re going to be surprised what you learn when you sit down and figure out step #2. Take a look at the Spending Plan article and let me know if you have any questions! You can also post questions in the Facebook group.

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