CFI Blog

Tying It All Together

This is part of a series. If you have not read the articles that build up to this one, I recommend that you do so first.

Over the past 19 articles in this series, we’ve gone through a journey examining almost every aspect of your personal financial life. We started off by having you go through a deep exercise to help you truly understand what your priorities in life are, and how Monkey Brain will try to sabotage you from reaching your goals so that he can reach his goals (BANANAS NOW!). We then started a basic evaluation of budgeting by looking at where you spend your money compared to what your priorities in life are and taking note of the misalignment (if there was any) between them.

We then moved into how to protect yourself from the unexpected, either to you, your health, or your well-being as you got older. You can’t go on offense in life if you don’t have protections and safeguards to backstop you if things don’t go according to plan. Then, we looked at how to estimate how much money you’ll need to retire and how to estimate how much money it will take to raise your kids and, if you decide to put them through college, how much you’ll have to save to get them to the hat toss at the end of their Joe College days.

We then looked at how to invest, in the markets, how to choose a house to live in, how to invest in a house that others live in, and how to invest in yourself.

And here we are, almost at the end of this educational journey and at the beginning of what hopefully will be a new chapter in your financial life.

I imagine that there are probably a couple of things that you’ve noticed as we’ve progressed in this series.

First, I never talked about debt.

Debt is a cancer in your life. There are times when it may make mathematical sense, such as the likely outcome that you could have a mortgage, invest the difference, and make more money than your after-tax mortgage interest rate. However, you’ll owe someone money and until that debt is paid off, it will hang over you and cause psychic pain. You lose flexibility in your life, and you never get a break, because, no matter what else comes, that debt payment is there.

My rules for debt are pretty simple.

If you’re in debt, you need to kill it as quickly as possible. That doesn’t mean don’t spend money on anything else. You have to take care of eating, shelter, clothing, and a way to get to work. You also need to have life and health insurance, and you should probably have disability insurance.

If you have credit card debt and other unsecured loans (signature loans, medical bills, a promise to a guy named “Knucklebreaker”), you don’t spend money on anything else until that debt is gone. Not even a 401k match at your employer, and certainly not anything which isn’t absolutely a need in your life. Christmas can be hand-written letters to everyone else. It’s not an entitlement. It’ll be a good learning opportunity for everyone involved. Take extra jobs. Sell everything you can. It’s just stuff, and too much stuff makes you unhappy. Experiences create more happiness than stuff anyway.

Once you have killed the credit card debt, then you can invest in retirement plans to the point where you’ve maxed out the matching contribution. Beyond that, I recommend continuing to plow everything you have into killing student loans and then your mortgage. Student loans don’t go away in bankruptcy. However, you now have a good picture of what you need to be doing with your money and how much you’re going to need to reach your goals in life. You know that there are no guaranteed returns in the stock market, in investment properties, in your own business, or in speculative ventures. There is a guaranteed return in paying down debt – the interest that you won’t have to pay. You pays your money, you takes your chances. If you invest in the market instead of paying down debt, and your investments go south, don’t come crying to me.

The second thing that you probably noticed is what we used to refer to in the Army as ten pounds of stuff and a five pound sack. There are some of you who are killing it and won’t have a problem of allocating resources. For the rest of you, you’re going to have to make tradeoffs and choices and prioritize where your money goes. You might have to dial back on vacations, on going out to eat, on the club memberships, on retiring as early as you’d like, or how much you chip in for the kids’ college funds.

You may not be able to have it all. Or, at least, you probably can’t have it all right away. Or, perhaps you can have it all, but not as much of “it” as you thought you might be able to. Success in personal finance is, to me, about making intentional decisions, understanding tradeoffs, and, if you decide to take risks, taking those risks when you’re as informed as you can be and while, at the same time, being willing to accept what happens if the risks wind up turning out for the worst rather than for the best.

One of the many good things about life is that you get to define what success is. Money helps you get to some of those successes, but money doesn’t define being successful. You get to do that.

Because you’ll probably have to make tradeoffs and choose what things make it and what things get cut, we started with and end with priorities in life. When you’re constrained in what you can spend money on, look at your priorities.

As you review your priorities and the budget (and we’ll add in a few categories now that you’ve gone through the remainder of the series), you can now start to play out what’s going to happen in the future. You can see how increasing or decreasing investments affects your retirement age, or how much money getting a raise will free up, and what other goals you can attack. You can determine how long you’ll have to save up before you can start that side gig or buy a rental property. You can see how much more you’d need to save to send the kids to Harvard rather than State U. and where, if needed, you’ll find that money. You may not always like the choices, but you always get to make the choice. You have that control.

Your Budget (note I’ve added some more categories now) 

Source After-tax Amount Per Month
Social Security  
Side business  
Dividends (NOT in a retirement account)  
Retirement account distributions  


Expense Category Amount Per Month
Housing – Mortgage/Insurance/Taxes or Rent  
Transportation – Gas or bus/train/subway tickets  
Transportation – Maintenance  
Transportation – Insurance  
Health Insurance  
Life Insurance  
Disability Insurance  
Long-term Care Insurance  
Food – Groceries  
Food – Restaurants  
Retirement Investments  
Kids – College Savings  
Kids – Clothing/Toys/School Supplies/Organization Fees  
Kids – Child Care  
Medical Bills  
Personal – Clothing/Hair/Dry Cleaning/Gym  
Car loan  
Credit card debt  
Student loan  
Other loan  
Alimony/Child Support  

There’s not a ton of magic to personal finance, and now you have the nuts and bolts to understand all of the critical areas of how money works and how to make it work for you. Is there more to learn and know? Certainly, you could continue to learn about behavioral finance, trusts, tax law, and the like from now until the day you breathe your last breath, but is that what you really want to do with your time?

I hope not, unless I’ve inspired you to become a financial planner. Otherwise, you know enough. To paraphrase Woody Allen, 80% of personal finance is keeping your eye on the ball. The other 20% is accomplished through hard work and through making smart decisions. You now know enough to keep your eye on the ball and to make smart decisions.

The hard work is up to you.

Author Profile

John Davis
John Davis is a nationally recognized expert on credit reporting, credit scoring, and identity theft. He has written four books about his expertise in the field and has been featured extensively in numerous media outlets such as The Wall Street Journal, The Washington Post, CNN, CBS News, CNBC, Fox Business, and many more. With over 20 years of experience helping consumers understand their credit and identity protection rights, John is passionate about empowering people to take control of their finances. He works with financial institutions to develop consumer-friendly policies that promote financial literacy and responsible borrowing habits.

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