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👋 Hey Money Peeps,

Someone replied to my email last week with the following:

“I’m 20 years old, just started a job after leaving uni, and have zero in savings…How do I set myself up for financial success”.

I’m paraphrasing their message slightly, but you get the gist!

And it made me think, if you were a complete blank canvas like the situation above, what is the optimal order of things to do with your money to set you up in as strong of a financial position

Here’s the three-step process I came up with:

STEP 1: Contextualize

This section helps you understand what position you are currently in:

1. Analyze Your Spending

I don’t know how you do it, whether it’s pen and paper, or a spreadsheet which you can get for free here (I also have the pro version below), you need to write down how much you are spending in every category of your life.

2. Calculate Your Needs

Next split these categories into three buckets; needs, wants, and savings. The needs are the most important section and should ideally sit below 60% of your total expenditure.

3. Reduce, Reduce, Reduce

This step is particularly important if you're finding that number sitting above the 60%. But even if you don’t, try digging into those numbers and see if there are some savings to be made. More home-cooked meals? Time to call your insurance providers? Cancel some subscriptions?

Step 2: Consolidate

This section secures your financial position so that you can start to grow it in the next section.

1. The Oh-shit Fund

Now you know how much you need to survive (your needs category), it’s time to build a fund that contains 1 month worth of these expenses. This will build your confidence moving forward with money and cover you when something unexpected happens.

2. Bye Bye Debt

We want to aggressively pay off as much high-interest debt as possible, which is anything over 7%. No point thinking about investing to try and get 10% returns when you owe money on a credit card with 20% interest. This also isn’t an excuse to go shopping instead of paying off low-interest debt.

3. The Emergency Fund

Time to completely secure yourself from a psychological perspective and increase the oh-shit fund from 1 month all the way up to 6 months (or more if you are of the nervous type).

Step 3: Create

Time to grow your wealth

1. Pensions Ain’t Boring

At the minimum, maximize whatever your employer match scheme allows, it’s literally free extra money. If you don’t get one, then the rule is to contribute half your age as a % of your income towards your pension. e.g. If you’re 20, your total pension contribution including company matching and tax repayment should be 10% of your salary.

2. Short-term Thinking

Write down all the short-term financial goals you want to achieve in the next 5 years, then make a plan. For Example: you want to build up a £20k house deposit over 4 years, that means you need to start putting away £417 per month and find somewhere with high interest to store this.

3. Long-term Thinking

For money that you don’t need over at least the next 5 years, investing is your best friend when trying to grow it. For me, a well-diversified global index fund on a low-cost platform is ideal!

Did I miss anything out?

👀 Question Time

Ask me anything!

The first question I receive will be the entire content of next week's newsletter!

Whenever you're ready, there are ways I can help you.

1. ​Hit reply to this email: I respond to every single question I get from these newsletters, so please don’t be shy!

2. ​The Budgeting Template PRO: Most of you have probably tried the lite version, but the PRO is what I use in my day to day life. (use the code ‘letstalkmoney’ for 30% off)

^{DISCLAIMER: None of the above is financial advice. This newsletter is strictly education and should not be taken as investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and always do your own research.}