Money can be a lot of things. It can be scary or confusing, it can be freeing or limiting. It can create stability and confidence. It can generate feelings of guilt or greed or shame or envy.

For me, money is a path to freedom of time. Budgets and debts and monthly payments take up space in my head that I would love to dedicate to…literally anything else. The more I have a plan for my money and debts and monthly payments that I can automate, the less I worry about these things and the more confident and stable I feel about my finances.

So I’m including a prioritized list of where to emphasize your money so you can get some peace of mind and free up some space in your head as well.

Step 1 – The Desperate Times fund. This covers insurance deductibles. Literally something catastrophic has happened and you need care. This is bare minimum.

Step 2 – Employer Retirement Match – If you have a 401k or similar account that matches your contributions you want to take full advantage of that. This is free money – your company is congratulating you for being a responsible adult and is rewarding your good choices with money you otherwise wouldn’t be entitled to. Take advantage.

Step 3 – High Interest Debt – I heard this term a lot before anyone clarified what “high interest” actually meant. Basically, anything with an interest rate higher than you could expect to receive if you invested your money. This is around 8% loosely. So if you have any debt in the 7-8% range, that would be priority three.

Step 4 – Life Stability Fund – a lot of people call this an emergency fund. This is basically the “what happens if I lose my job?” fund. Most financial gurus advise keeping 3-6 months of living expenses (presumably you know how much it costs to keep your life on the rails. If not go figure that part out immediately.) If your job is super stable and you rent your home and your car is paid off and you don’t have dependents and you do have another earner in the home, probably closer to 3 months makes sense. If you’re the sole breadwinner and you have a mortgage and young kids and health issues in the family, you likely want closer to 6 or more months in this fund. ** Pro tip: put this fund in a High Yield Savings Account through an online bank like Capitol One or Ally and you’ll earn noticeable interest to beef up the fund or use for other things.

Step 5 – Roth IRA. This is a personal retirement account you’re able to open through any brokerage (Fidelity, Vanguard, Schwab etc.) and fund up to a maximum amount per year. In 2024 it’s $7,000. You pay taxes on this money now and then when you retire and take distributions out, those distributions are tax free. The easiest way to do this is to just set up an auto-pay from your main bank account to your IRA account every month. You also have up until tax time (Usually April 15) to max out the payment for the last year. So we have until 4/15/24 to max out our IRAs for 2023. Thanks to the beauty of compound interest your money grows really quickly and the longer it’s in there the more it compounds. ** Pro tip: you have to actually invest the funds you put in there. The brokerage is like a bucket. The stocks you buy (we like index funds and it’s easy to google or learn about those) are like the apples in the bucket. If you leave your bucket empty because you never got around to buying stocks, you’ll have no apples to retire on and you’ll go hungry.

Step 6 – Health Savings Account. This is another account that has a lot of financial benefit. There’s a maximum amount you can contribute per year ($4150 in 2024 for a single person) but it’s tax free when you withdraw it later. You can use it for health expenses if you choose, but if you don’t use it or don’t use all of it, you can invest those funds and use them as a tax-advantaged retirement account later. This is different from a flexible spending account (FSA) that is common with certain insurance plans and expires at the end of each year if you don’t use it. Be sure you know what you have at your disposal if you are going to look into this option.

Step 7 – 401k max. If you still have money left over after all the prior, more advantageous options, putting it into any tax-advantaged retirement account like a 401k is your best plan. In 2024 401k contributions max out at $23,000 per year. Achieving that goal is a big success and you deserve a pat on the back.

If you’ve made it all the way through to Step 7, you’re doing well. Your finances are solid and you should have absolute mental freedom where they are concerned.

Follow these basic steps – do more research and get more specifics about each one if you’re even a little bit concerned about logistics or whether it’s the right fit for you. The reality is that money doesn’t have to be scary or stressful. It can, and should, be logical and rational and honestly quite boring. Having a plan for your money and a hierarchy of what comes next helps take away the worry and stress about whether you’re making the right choice or doing the right thing. There is a basic outline, but the answers that make sense for you will be different from everyone else. Maybe you want to keep a lot more in your HYSA because you’re expecting a job or home change. Maybe you don’t want to deal with a health savings account and you just skip that step.

Money is personal. There can be lots of advice and lots of people telling you what you should do with it, but at the end of the day it’s your money and your life. Make the choices that fit for you, but I’ve given you an outline to pull from when you’re deciding what comes next.

The most important part is that it frees up space in your mind to focus on more enjoyable things.

De-stress.