Summary

A 26-year-old emphasizes the importance of prioritizing financial stability and building a strong foundation, including an emergency fund and an FU (F*ck You) fund, before focusing on investing.

Abstract

The author of the article, a 26-year-old with a keen interest in personal finance, shares their approach to managing finances effectively. They stress that while investing is crucial, it should come after securing a financial foundation. This foundation includes having an emergency fund capable of covering three to six months of expenses, which provides a buffer against unexpected financial challenges. Additionally, the author advocates for an FU fund, which offers the flexibility to make life changes without financial constraints. The article also touches on the importance of continuous learning in personal finance, suggesting that self-investment yields long-term benefits. The author practices 'lazy investing' by putting money into ETFs, crypto staking, and roboadvisors without actively monitoring them, preferring to focus on personal interests like content creation. The overarching message is to ensure basic needs and financial security are in place before venturing into higher-risk investments.

Opinions

Investing is important but should not precede establishing a financial foundation.
An emergency fund is essential, particularly for those living paycheck to paycheck.
An FU fund provides financial independence and the ability to exit unsatisfactory situations.
Continuous learning, especially in personal finance, is a valuable investment in oneself.
'Lazy investing' is a viable strategy for long-term growth without the stress of active management.
High-risk investments should only be made with expendable income.
Financial advice should be tailored to individual circumstances, with a general guideline of allocating 60% of income to living expenses and debt, 20% to savings and investments, and 10% to discretionary spending.

Investing is Sexy But Basic Needs Matter More

Here’s how I prioritize my finances as a 26-year-old.

Photo by Famous Artist Painter Ortega Maila on Unsplash

People advise to start investing while we’re young.

And while that is true and very important, investing without securing your foundation might lead to more debt, a lower credit score, and missed opportunities.

In this post, I’ll share how I prioritize my finances to make the most out of my money. And perhaps, you can too.

But this isn’t financial advice. I’m not an expert, I’m just passionate about personal finance.

I have been trying to learn more about personal finance and growing wealth, but for years I just haven’t been able to reach closer to my financial goals.

I know investing is important. I know to live a frugal life. I know all about the 80/20 rule. I know about compound interest.

I know all of that and more.

But why am I still in a bad place financially?

Why are my financial goals still out of reach? Why do I feel like there’s just nothing left to cut on my expenses or no way to squeeze more money out of my income?

And after years of trying to do all the right things, I realized one thing I missed: prioritizing my finances to build a strong foundation first.

Once you have a strong foundation, you won’t get knock down to square one by every financial curveball.

Here’s how I’m prioritizing my finances.

Building an Emergency Fund

An emergency fund is important for everyone, but is especially crucial for people who are living paycheck to paycheck.

When you have an emergency fund, you don’t have to worry about going into debt if something unexpected happens.

You can use your emergency fund to cover expenses such as car repairs, medical bills, or home repairs.

You should have enough saved up in your emergency fund to cover three to six months of expenses. If you can’t save that much, start with whatever you can and work your way up.

You may also want to consider setting up a rainy day fund instead of an emergency fund. A rainy day fund is a savings account that you use specifically for emergencies

This is my top priority because I’m 26 this year with no emergency fund saved up.

Building an FU Fund

FU fund or f*ck you fund is the money you use to get out of an unhappy situation. I believe life is way too short to be miserable. With an FU fund, you don’t need to worry about working to survive.

That’s why it’s my 2nd highest priority.

If one day, I decide to quit my job and travel the world, I can do that. If I get laid off from work, I can take a gap year or 2 before looking for a new one.

An FU fund allows you to do what you desire without burning a hole in your pocket.

Learning New Things

I believe you never stop learning.

And that every dollar you invest in yourself is never wasted.

When it comes to personal finance, having new skills can help to build a strong foundation. For example, learning about budgeting and compound interest can help you to make the most of your money.

By investing in yourself, you are making an investment that will pay off in the long run.

That’s why I’m investing in myself.

Lazy Investing

This isn’t a financial advice.

Lazy investing, to me, is where you put money in something and don’t touch it for at least a year. I decided to put in money every month into ETFs, crypto staking and roboadvisors.

I don’t want to be on my phone or laptop watching the price go crazy.

I’d rather spend my time on things I love doing — creating content for you!

I said you should cover your basic needs before investing. However, it is important to put your money to work and let it grow, even if it’s a little.

That’s where lazy investing comes in. With the right balance, it’s something we should build alongside our basic needs.

Building a strong foundation for your finances is one of the most important things you can do for yourself.

Once you have your base settled, you can start buying high risk, high reward assets like NFTs, meme stocks, etc. But make sure you only spend money you can afford to lose.

One last thing before you go, we have to discuss how much of your income should go towards each category. The general rule is 60% for living expenses and debt, 20% for savings and investments, and 10% for fun money.

However, I believe that everyone has different financial situations. If you have bigger debt to clear, then you should put more money into debt repayment. If you’re saving up for a down payment, then you should save more money.

The most important thing is to find what works for you and stick to it!

Remember: Investing is important, but don’t forget about your basic needs. Make sure you are putting the majority of your income towards living expenses, debt repayment, savings and investments.

Have some fun money too! Just make sure you are being smart about how you’re spending it.

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