Level Up Your Finances: A Step by Step Guide For Your Money
Created by Pineapple Finance Co.
Untangle Money is proud to present this step by step course created by Pineapple Finance Co. From time to time Untangle Money takes a different approach to finances. When this happens we’ll put a little asterisk and you’ll see UM’s interpretation at the post. This shows you that there are many ways to tackle your finances and finding a style that resonates with you is the most important thing!
“The hardest part is starting. Once you get that out of the way, you’ll find the rest of the journey much easier.” – Simon Sinek
But where should you actually START when it comes to improving your financial well-being?
And once you’ve got that first step out of the way, what DOES the rest of the journey look like?
We are proud to present Level Up Your Finances, a new blog series that will walk you through how to get your financial house in order, one step at a time.
Think of it like a hierarchy of financial needs – we start with the core must-dos you need to survive, and gradually walk you through the personal finance practices that can help you thrive.
Recognizing that personal finance is personal, we’ve designed this program so you can figure out the right starting place for YOU. We explain why each level is important and the goals for each level that will let you know when you’ve mastered it. Take a look at the summary below to get a sense for what level would be the best fit with your current situation.
We’ll be publishing [one] level a week for the next few weeks, so sign up for our newsletter so you don’t miss an update!
Level 1: You know how your money is going to help you do more of what’s important to you.
Why it Matters: Managing your money can be boring, challenging, and confusing. It will be much harder to create and stick to your plan if you don’t have a clear reason why you are going to the effort in the first place. To make money easier to manage over the long term, we need to think of it as a tool to support what matters most to you, and give your money a specific purpose. Vague, boring goals that lack meaning are much harder to keep. We need specific, mission-driven ambitions.
Goals for this Level:
You know what is most important to you,
You know how your money can get you more of what’s important to you
Level 2 – You have a plan for your income and expenses, a system to track them, and are routinely spending less than you make .
Why it Matters: If you are spending more than you make each month, it’s going to be very challenging to improve your financial well-being.
Having a plan for income and expenses can help make sure you are set up for success, and having a system to track your hypothesis about income and expenses can help you course correct if necessary.
Goals for this Level:
In Level 2 we want to make sure three things are in place:
You have a plan for your income and expenses (also known as the dreaded budget)
You have a way to track your income and expenses to stay on plan
You are routinely spending less than you make
BONUS – you have looked at some painless ways to reduce spend to see if we can ‘juice’ your budget at all
Level 3 – You don’t have any high-interest debt (any interest rate over 10%).
If you do have high-interest debt, you have a plan to pay it off as quickly as possible.
Why it Matters: High-interest debt (any debt with more than 10% interest) is very expensive. All that interest could be getting you closer to your Big Ambition instead of going to the lender. You want to look at paying high interest debt down as quickly as possible so that instead of paying interest, you can further your financial well-being by saving for emergencies and your other long-term goals.
Goals for this Level:
In Level 3 we want to make sure two things are in place:
You know if you have any high-interest debt
You have a plan to pay it off as quickly as possible
Level 4 – You have at least $500 in a dedicated high-interest savings account for use in case of emergency.
Why it Matters: Many Canadians tap into high-interest debt like payday loans or credit cards when they run into an unexpected expense that they can’t pay off. Having even $500 can make it easier to respond to emergency repairs or required purchases. The high-interest savings account is important to make sure you are earning something on the funds, and a separate account will force you to be mindful of what counts as an emergency (e.g. NOT a super sale at your favorite store.)
Goals for this Level:
In Level 4 we want to make sure two things are in place:
You have at least $500 for use in case of emergencies
The $500 is sitting in a high interest account
Level 5 – You are maxing out your employer’s retirement matching program, and you know where the money is invested.
Why it Matters: Canadians are missing out in $3 billion (with a b) in free money from their employers because they aren’t maximizing their company’s retirement savings match (you can read the full article here).
Retirement savings matches, also known as Employer Retirement Matching Programs, are like free money – your employer will offer to match your contributions to your own retirement savings. For example, they may match 50% of your contributions, up to a maximum of 3% of your salary. If you put in $100, they give you $50. For free. It’s very hard to make a 50% return in the stock market, which is why you want to prioritize this form of savings over any you do yourself.
You also want to make sure you know where the money is invested to make sure it’s working as hard as it possibly can for you. If you don’t know where it’s invested…how do you know you aren’t missing out on even more free money?
Goals for this Level:
In Level 5 we want to make sure two things are in place:
You are maxing out your employer’s retirement matching program
You know where the money is invested
BONUS – You know what to check on your regular statements
Level 6 – You have at least 4-6 months of my monthly expenses saved in a high-interest savings account for use in case of an emergency (e.g. job loss).
Why it Matters: Emergency Funds make sure that small bumps in the road don’t turn into massive derailments.
Most financial advisors recommend saving between 4 – 6 months of your monthly household expenses, which can seem like a lot. But Workopolis found that most people took 4 months to find their next gig.
Goals for this Level:
In Level 6 we want to make sure two things are in place:
You know how much you should have in your emergency fund, and a plan to save up for it
Your emergency fund is in a high interest savings account
Level 7 - You have calculated how much you need to retire, and you have a savings plan in place
Why it Matters: Retirement is probably going to be one of the single biggest purchases you make. Buying more than a decade’s worth of relaxation and leisure isn’t cheap!
A good rule of thumb is to be saving at least 15% of your annual salary before tax, but everyone’s vision for retirement is a bit different, so it’s important to think about your unique situation and how that could impact your savings plan.
Goals for this Level:
In Level 7 we want to make sure three things are in place:
You have a rough idea of how much you need to save for retirement
You have a rough idea of how much you need to save by what age milestones to get there
You have a rough idea of how much you need to save each month
Level 8 - You have written down your financial goals, and you know how much you need to save for how long to reach them.
Why it Matters: Remember in Level 1 where you got clear on what you wanted your money to do for you? Now that we’ve tackled debt, emergency savings, and retirement, we can think about how your can help you enjoy what you are most passionate about. This could be saving for a down payment, a big trip, a child’s education, a house, a sabbatical. Writing it down and being clear on what amount you are saving at what frequency can help you stay on track to realize your goals.
Goals for this Level:
In Level 8 we want to:
Make sure that you’ve written down key financial goals in a SMART format
Make progress on this goal in the next 48 hours
Level 9 - You have updated your Powers of Attorney and Will within the last five years.
Why it Matters: Who’s going to be in charge of your affairs if something were to happen to you? Do you really want to default to the laws of your province to divvy up your assets? Don’t make an already stressful situation even more stressful – make sure you have up to date Powers of Attorney and a will to help your loved ones understand your wishes.
Goals for this Level:
In Level 9, we want to do two things (and we bet you can guess what they are based on our super uncreative title…):
You have Powers of Attorney and a Will that have been updated in the past 5 Years
Someone you know and trust (ideally your Attorneys and your Executor) have a copy of your Powers of Attorney and Will, and know where the originals are stored
Level 10 - You have calculated your needs for life insurance, disability, and critical illness insurance needs and reviewed your policies within the last five years.
Why it Matters: Imagine there is a machine in your basement that generates over $50,000 per year. You would probably want to make sure that if the machine broke, you had money to fix it, or replace the money it was generating for you, right?
Surprise! That machine in the basement is a lot like YOU earning a salary. And having insurance in place to fix it if anything happens if exactly what life insurance, disability insurance, and critical illness insurance do.
Goals for this Level:
In Level 10, we want to:
Make sure you understand your needs for life insurance
Make sure you understand your needs for critical illness
Make sure you understand your needs for disability insurance
We aren’t saying you necessarily need to buy each of these types of insurances. You may or may not be a good fit for them based on your current financial situation, and we’ll talk through below how to calculate your potential needs. The bigger goal for this level is to consider the possibility that these types of insurances might be helpful for your overall financial well-being.
Level 11 - You have your retirement savings, and savings for any goals longer than 5-years away, invested in the market.
Why it Matters: The rate of return in the market is typically higher than even a high-interest savings account. Making sure long-term goals are invested with the right asset allocation will increase your growth rate without taking on too much risk.
Goals for this Level:
In Level 11, we want to get you started investing by:
Understanding how much you can invest
Understanding what investing approach makes sense for you
Understanding what platform to use
Understanding what account to put it in
Level 12 - You have all your financial records and account details organized
Why it Matters: There’s nothing worse than needing that important statement NOW and not being able to find it. Thankfully, 9 folders are standing between you, and always being able to find that thing that you need for that other thing.
Goals for this Level:
In Level 12, we want to get you organized by setting up an easy-to-use, 9-folder system for paperwork that will likely come your way.
Level 13 - You complete regular check ups on your finances to stay on track
Why it Matters: Congratulations! You’ve made it to the final level! You’ve done a lot of heavy lifting to set yourself up for financial success.
Now how do we keep it that way? We make sure you have a system to regularly review the different components of your financial health, and that they still align with your overall financial goals.
What's next?
Stay tuned every Thursday for a new level in the series!
Pineapple Finance Co is a collaboration between Emily and Elizabeth with a goal to answer one simple question: could they use Instagram to improve Canadian's financial literacy.
You can follow Pineapple Finance Co. over on Instagram, and we've linked two other blog posts written by Emily and Elizabeth here:
You can also follow Untangle Money over on Instagram, Facebook, and LinkedIn, and check out our other blog posts here!
Financial independence is a huge part of being a strong, independent person, and it is our mission to help women, and anyone who doesn't feel safe or welcome in financial spaces typically dominated by cis men, set themselves up for financial success.
At Untangle Money we help women understand their (real!) financial picture, and obtain financial guidance from people that actually, really, get it. We would love to help you, too! Join the community of hundreds of other women looking to strengthen their financial well-being. You can check out our products and plans here or get in touch for a free consultation!