Do This Every Time You Get Paid. Accountant Payday Routine
Nischa
11 min, 6 sec
Nischa, a qualified accountant, provides an eight-step guide on how to manage finances effectively on payday.
Summary
- Know your reference point to avoid the ostrich effect and aim for essential expenses to be below 60% of net income.
- Create a quick solution fund equal to one month of living expenses for peace of mind and to cover emergencies.
- Pay off high-interest debt with any savings, as the cost of debt usually exceeds savings earnings.
- Contribute to employer-matched retirement plans and build a 3-6 month emergency fund after clearing high-interest debt.
- Invest in self-improvement for higher ROI through pay raises or side hustles before other investments.
- Utilize tax-free accounts for investing and earn interest on uninvested cash through platforms like Trading 212.
- Consider the opportunity cost when investing additional income, aligning with personal goals and risk appetite.
Chapter 1
Nischa discusses the importance of knowing your financial reference point to manage expenses and the ostrich effect.
- Identify essential living expenses and ensure they are below 60% of net income.
- Use a template linked in the description to list costs and calculate the reference point.
Chapter 2
A quick solution fund should be created equal to one month's essential living expenses for emergency situations.
- Save one month of living expenses in a high-interest, easily accessible account.
- Pause building the fund after reaching one month's expenses before focusing on other financial goals.
Chapter 3
Chapter 4
Maximizing employer retirement contributions and building a 3-6 month emergency fund after clearing debt.
- Opt into employer retirement plans and maximize matching contributions.
- Build an emergency fund equivalent to 3-6 months of living expenses.
Chapter 5
Chapter 6
Making use of tax-free accounts like Roth IRA or ISAs for investing and earning interest on uninvested cash.
- Invest through tax-free accounts to benefit from capital gains and dividends.
- Consider platforms like Trading 212 for investing with as little as one pound.
Chapter 7
Balancing opportunity costs and personal goals to make informed investment decisions.
- Consider personal goals and risk appetite when allocating additional income.
- Decide between paying off mortgages, student loans, or investing in various financial opportunities.
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