4 Steps I’m Taking To Fix My Finances After Years Of Neglecting Them

  • Two years after law school, I moved back in with my recently widowed mother, recently leaving.
  • I didn’t get my personal finances in order while I lived there, but now I regret it.
  • I’m going to save, invest for retirement, cut extra expenses, and use a budgeting app to get by.
  • Read more from Personal Finance Insider.

After law school, I found myself, like many millennials, living with my parents again. At the time it made financial sense: I was waiting for the results from the Bar and my old childhood bedroom was still there waiting for me.

Two years later, I found myself in a new career and in a new city, living with and taking care of my recently widowed mother. I was with her until last November, when various personal reasons led me to move.

Before I moved, I didn’t really care about money. My salary as a public defender was adequate for most of my short-term needs.

It gave me enough to buy something from Starbucks every day and takeout for dinner whenever I wanted. I was able to go out for drinks with co-workers on Fridays, or go to the movies or a disco with my girlfriend. I didn’t shop often, but when the annual sales rolled around I used my credit card to buy new clothes and shoes for work and Christmas gifts for my loved ones. My mom covered most of the purchases and our shared utilities.

I didn’t live a luxurious lifestyle, but I felt comfortable during that time. I was complacent about saving money and planning for the future, which I now regret.

Maybe I didn’t take financial planning seriously before because I’m lucky I’ve never been in a really desperate financial situation. Maybe it’s because I’m a trans woman and frankly I never expected to get this far when I was younger.

Regardless of why I didn’t start sooner, there are four things I’m doing now to get my finances in order.

1. Get some modest savings

If you’re going to do something, you need to know why you’re doing it, so I’m wondering why I want to save money. My main concern right now is just setting aside some extra money for furniture and moving costs for a new, bigger place my roommate plans to move to in a few months, starting small.

To do this, I plan to set aside the money I will receive from an upcoming pay raise, a one-time stimulus payment, and my tax refund.

Since I am already living without that money, it will be easier for me to just set it aside with each paycheck and have that money for the future.

2. Invest for the first time

I have never been one for the stock market, because I am a very risk-averse person.

At the beginning of the pandemic, I had some money from my late father’s life insurance in the market and I took it out when things got real in March 2020. I mean, it was the beginning of the lockdown, a new virus was wreaking havoc around the world. , and no one knew how bad it would get or when it would end.

My sister, meanwhile, kept her share in the stock market. After the initial dive, she did it all over again, and then some. I’ve since put that money back in, but I’m still kicking myself for the missed opportunity.

On top of that, I have been living with a more financially savvy friend for the past few months and have seen how well she has done with investing. I have overcome my doubts and have decided to start saving money to invest.

As part of my job, I have the option to contribute pre-tax dollars to our Deferred Compensation Plan. Until now, I have only been contributing the bare minimum of $10 per paycheck. But now, I’m going to increase that to the maximum allowed per year, and I’m also considering opening a Roth IRA.

Based on my research, Roth IRAs are ideal for someone like me who is still early in their career, with a couple of decades ahead of retirement. They receive money after taxes, so there are no immediate savings benefits, but they can be withdrawn tax-free in retirement. Also, the maximum of $6,000 per year is something I can easily afford with my current salary.

For money I might want to use in the short term, I’m also looking to set aside a portion of each paycheck (about 5% to start) for a

index fund

as they are less volatile than trying to pick individual stocks, which helps with my risk aversion.

3. Cut extra expenses and go out to dinner less

This one is hard for me. I’m a professional and I work long hours, and sometimes I have a hankering for a non-frozen Pad Thai with chicken that I didn’t have to cook, even if it costs me twice as much to get it delivered.

But takeout is a massive and unnecessary expense for me, so I’m cutting back and trying to cook more meals at home. Also, when I order now, I try to pick it up myself and save on delivery. When I order, I save it for the weekends or special events, like movie night or a particularly bad day. I’ve also been using my roommate’s DashPass to save on shipping.

I’m also trying to eat healthier and save more money by taking lunch with me to work instead of going to the local coffee shop for a latte and pastries. A cup of yogurt, a can of bulk-bought iced coffee, and a package of dried fruit aren’t nearly as expensive as a $15 coffee-and-sandwich lunch from Starbucks.

4. Use a budget app

As a child, I would often see my mom reviewing her finances at the kitchen table with a checkbook, a calculator, and a stack of receipts and bills, writing everything by hand. She still budgets like this to this day.

I never developed that skill, simply paying for vibes and checking my bank account from time to time. The good news is that you don’t need the old school anymore, and there are apps for this. Connect your bank accounts and credit cards, set spending limits and savings goals, and try to meet them.

I started using Mint on the recommendation of a friend, and it was amazing to see how much money I was wasting on various expenses, like takeout.

As I’m getting started with all of this, I realize that having a clear plan and tracking my spending already gives me a sense of control over my life. I hope that by this time next year I will have less debt, the start of a nice retirement fund, and more cash on hand for emergencies.

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